76171 CASE STUDY 41: THAILAND – SUSTAINABLE ENERGY FINANCE PROGRAM Barriers Lack of long term financing; financiers’ high risk perception; lack of track record Instrument Portfolio Guarantee Application Guarantee covering part of the potential losses of a energy efficiency/ renewable energy portfolio Amount US$70 million equivalent (of which a portion covered by the guarantee) PROJECT BACKGROUND AND OBJECTIVES energy solutions by collaborating with major equipment suppliers. Main barriers preventing the uptake of sustainable energy lending in Thailand are (i) the high risk The project is part of the Clean Technology Fund (CTF) perception by local financial intermediaries (FIs) Thailand Sustainable Energy Finance Program. towards this asset class, due to the lack of track record INSTRUMENTS USED with sustainable energy lease financing with Thai local companies; and (ii) lack of adequate long term financing The financial mechanism used in this project is an to support SE because the financing provided by local FIs unfunded portfolio risk sharing facility (denominated in is limited in tenor despite the liquidity in Thailand’s local currency). Under this mechanism, IFC pledges to financial markets. cover a percentage of the losses that may arise on an up to US$70 million portfolio of sustainable energy leases In order to increase funding for energy efficiency, small- originated by the partner FI. Funds from the CTF are scale renewable energy, and ESCO lease projects in used to provide first loss coverage. Thailand, IFC provided a portfolio risk sharing facility to a leasing company, covering a portion of the potential INSTITUTIONAL ARRANGEMENTS losses from loans to eligible projects. By sharing credit Under this project, IFC agrees to guarantee sustainable risk in a sustainable energy lease portfolio, the project energy leases originated by a leasing company. The will encourage the partner FI to provide long-term lease portfolio is expected to target mostly energy efficiency financing, and will eventually reduce the perceived risks projects (including ESCO business), but it may also with this asset class. include small-scale renewable energy projects. Furthermore, while most energy end-users are still OUTCOMES unaware of the economic benefits of introducing new EE/RE technologies, the leasing company will seek to The project will support the financing of $70 million of address this lack of awareness by estimating lessees’ sustainable energy projects, and contribute to energy efficiency potential and provide sustainable increasing efficiency in industry and reduce operating costs. Further reading IFC, MUL EE Thailand: Summary of Proposed Investment – click here Climate Investment Funds, Thailand Sustainable Energy Finance Program (T-SEF) – click here 1 | R E F I N e www.worldbank.org/energy/refine