SBP’sRefinancingSchemeforRenewableEnergy(Revised)DrMuhammadSaleemAdditionalDirectorStateBankofPakistan

Pakistan’sEnergySupplyandDemand

§ Installedpowergenerationcapacity:22,928MW§ Heavyrelianceonnonrenewableresources.§ Lessthan2percentfromREsources

§ Verylowcomparedtoregionalandinternationallevel§ Expensiveandnotenvironmentfriendly§ Shortageofaround6000MW

§ According to the National Energy Conservation Center(ENERCON), annual energy savings of up to 25 percent arepossible in all sectors, which equates to approximately $3billion per year.

S.No.

Source EstimatedPotential(GW)

1. Wind 340

2. Solar 2,900

3. Hydro:

Large 50

Small 3.1

4. Bagasse Generation 1.8

5. Waste 0.5

Total ≈3,300GWSource:IFC

RenewableEnergyPotentialinPakistan

RateofelectrificationinPakistan

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

200220032004200520062007200820092010201120122013

Off-Grid69milOff-grid,Unserved

75milOn-grid,Underserv

ed

53milOn-

grid,Served

144milfacingEnergyCrisis

Source:PakistanOff-GridLightingConsumerPerceptionsStudy2015byLightingPakistan

RoleofCentralBankinPromotingClimateInvestment

EnablingRegulatoryFramework• GreenBankingGuidelines

MarketDevelopment• CreditGuaranteeFacility

PublicFinancingMechanism• Refinance/CreditLineforCleanEnergy

Awareness&CapacityBuilding• Workshops/Seminars/Conferences

FinancingSchemeforRenewableEnergy

• ObjectivesofSBPFacility

• Eligibility

• FeaturesoftheFacility

• GeneralProcedures

FinancingSchemeforRenewableEnergy

– FacilityhasbeenrevisitedinJune2016.

• Objectives:§ Meeting Growing Electricity Demand throughRenewable Energy in the country

§ PromoteGreenBankingandClimateInvestment§ To provide concessionary financing for renewableenergy projects

FinancingSchemeforRenewableEnergy–Categories

• The Revised Scheme comprises of two Categories (I & II)

• Category I: large renewable energy projects ranging from(1 MW to 50 MW). Maximum refinance allowed is Rs 6billionper project.

• Category II: small scale renewable energy solutions (04KW to 01 MW) to promote renewable energy uptakeamong domestic, commercial & industrial consumers – inlinewith NEPRA’s netmetering regulation.

FinancingSchemeforRenewableEnergy–Eligibility

• Eligibility:§ Projects falling under category I and category II§ Subject to Fulfilling of Requirements of:

§ AEDB/ Provincial Energy Dept§NEPRA & Government Regulatory authorities

§Projects achieving financial close before June 2019§Refinance provided against 100% of bank lending toprojects subject to Rs 6 billion cap.

10

Mark-UpRates

FinancingSchemeforRenewableEnergy– Terms

Max.tenor Max.graceperiodCategoryI 12years 2yearsCategoryII 10years NIL

PeriodofFinancing

RateofRefinance Banks’/DFIs’Spread

EndUsers’Rate

2.0% 4.00% 6.00%

Repayments

• CategoryI:

– Principalrepayableinquarterlyorhalfyearlyinstallments

– Mark-uprepaymentonquarterlybasis

• CategoryII:

– Principal&Mark-uprepayableinmonthlyorquarterlyinstallments

• Bank/DFIshallbeentitledtochargemarketmark-upfordelayedperiodinrepaymentofprincipal

FinancingSchemeforRenewableEnergy–Features

• FinancingavailablethroughallCommercialBanksandDFIs• AvailabilityofFunding:

– Under Category I: The banks/ DFIs are required to confirm availability offunds after their internal approvals.

– SBPconfirmationoffundswillbevalidforaperiodofsixmonths.

• FinancingasperlendingpoliciesofFIstocovercreditrisk

• BankstoevaluaterequestwithintheirlendingpoliciesandtermsandconditionsofSBPFacilityinmaximumthreemonths

• FinancingbasedonFirstComeFirstServedBasis

FinancingSchemeforRenewableEnergy– OtherFeatures

• Secondhandmachineryshallnotbeeligible

• Banks/DFIsshallensurethatfirmcommitmentsof

fundsnotfinancedunderSBPschemeareavailable

• Banks/DFIsshallmakedirectdisbursementsto

manufacturers/suppliers/contractors

• RefinancetobeprovidedonthebasisInternalAudit

Certificateoffinancingbank/DFI

FinancingSchemeforRenewableEnergy– OtherFeatures

• ExpectedtoincreaseinvestmentinRenewableEnergysector

• Willreducepowershortfall

• PromotionofREatconsumerleveltosupportNEPRA’sNetMeteringRegulations

• Environmentfriendlyenergyprojectsreducingimpactonclimatechange

• Moreincentiveforlendingbanks(higherspread)andendusers(lowrate)

• Likelytoreduceelectricitytariffwhichwillincreasebusinessactivities

BenefitsofRevisedScheme

ImpactofSBPRefinanceSchemeTotalSize(MW) Technologies TotalCost(Million

Rs)RequiredAmount

ofRefinance(MillionRs)

AmountSanctioned(MillionRs)

618.1Solar,wind,biomass122,118.0 59,448.0 7,111.0

IdentifiedREInvestmentPotentialinMajorSectors

16

Sectortype Sub-SectorPotentialInvestment MainEquipmentforinvestment

RE(MPKR) RE

Industrial

Textile 133,500Solarwaterheaters(“SWH”),windpower,photovoltaics (“PV”)

Sugar 16,700 Biomass, PV

Leather 12,000 PV,SWH

Paper 1,400 Biomass, SWH

Cement 33,000 Windpower,concentratedsolarpower

Fertilizer 10,800 PV

Othersectors 52,000 Varioustechnologies

Non-industrialAgriculture 647,600

Directcombustion ofbiomass, biogas,solarwaterpumping

Residential 166,000Biomassfrommunicipalwasteandanimalmanure,SWH

TotalInvestmentPotential 1,073,000 Source:IFCStudyonSEFinPakistan

OperationalMechanismoftheRevisedScheme(Category-II)

1• BanksgetrequestfromclientsforfinancingundertheRevisedScheme• Bankscarryoutduediligenceprocessandapproveorrejectloan

2• BanksapproachSBPforsanctioningoflimitforapprovedloans• SBPreviewseachcaseandapproveslimitsforbanks

3• Banksdisbursefundsforsolarhomesolutionsetcasperterms• BanksapproachrespectiveSBP-BSCofficeforrefinanceagainstdisbursedamount

4• SBP-BSCofficestodebitbanksaccountasperrepaymentschedule

Thankyou