ENERGY PERFORMANCE SERVICES

EPS
“Reg. U.S. Pat. & Tm. Off.”

“EE Financing in Indonesia”

Financing Mechanisms Workshop by:
MTRE3, GEF and UNDP
Presented by: Thomas Dreessen
Chairman & CEO, EPS Capital Corp.
Hotel Borobudur – Jakarta
12 December 2017
EPS Capital Corp.
Indonesia Mobile:+62 878 7658 5005
Email: tkd@epscc.com SKYPE: tkdreessen
 Status of EE in Indonesia
• No major EE market penetration
• No Commercially-Attractive EE financing
• EE Project Development and M&V Capacity GAP
• Nascent ESCO Industry
• Market-wide ‘EE Knowledge Void’ with Facility
Owners and Banks:
‒ NOT aware of EE opportunities
‒ NO confidence in energy savings
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 EE Barriers with Facility Owners
“Gate Keepers”
In addition to EE Knowledge Void and lack of
available Commercially-Attractive financing:
• Energy Efficiency Projects (EEPs) are viewed as low
priority Infrastructure versus Core Business
investments (don’t fix if not broken)
• Don’t want to use current ‘Credit Capacity’ needed in
‘Core Business’ to borrow for EEPs
• There is Lack of Confidence in EE Technologies
working and in the estimated future Savings being
achieved or measured and verified
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 Why no Commercially-Attractive
EE Financing?
• Problem is NOT a lack of available funds!
• Problem is that the available funds cannot be
accessed by Facility Owners from local banks
(Banks) on ‘commercially-attractive’ terms
• Caused by a ‘DISCONNECT’ in current lending
practices of Banks versus needs of Facility Owners
(and Developers) in funding EEPs

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 What is Bank DISCONNECT?
• Banks offer asset-based, corporate lending limited
to 70% of EEP capital cost requiring:
– 30% equity investment in EEPs and
– 100% Collateral or Guarantees on loan amount
• Banks do not have confidence in savings of EEPs,
thus no increased credit capacity to Facility Owners
• Only “Collateral Value” of EEPs is the Savings
• Limited interest in EEPs due to small transactions,
complexities and inability to evaluate risks/benefits
• ESCOs are an optimum solution to aggregate EEPs,
but most are SMEs with limited financial capacity
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 Challenges for Banks to provide
‘Commercially-Attractive’ EE Project-
Based Loans
• Limited EE Knowledge and project lending capacity
• Not Appealing (small and complex transactions)
• Not ‘Business as Usual’ (Project-based)
• Insufficient Collateral
• No confidence in future cash flow
• Inadequate loan applications and IGAs, due to lack
of EEP development capacity
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 SOLUTION to EEP Bank Finance and
Facility Owner Barriers:
Project-Based Finance Products
Implement existing EEP Finance Products that are:
• Attractive to Facility Owners
• Reduce risks and transaction costs for Banks:
1. EEP Loan Product
2. Energy Savings Insurance Product

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 EEP Loan Product Summary
(ADB’s EEP Finance Program implemented at
Indonesia Export/Import Bank)
• EEP Loan provided as additional debt to current
lending capacity of creditworthy Facility Owners
• No collateral required beyond EEP equipment
• Extended repayment term (IRR 40%-60%)
• EE Savings and Capital Costs must be supported by
a properly-prepared Investment Grade Audit (IGA)
• EE Savings must be Measured & Verified (M&V)
using industry-accepted methods complying with
International Performance Measurement and
Verification Protocol (IPMVP)
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 Energy Savings Insurance (ESI)
(Chubb in US 1997; IDB Pilot in Mexico;
INDONESIA: ADB (Eximbank) and CPI possibility

• Guarantees savings of EEPs (not Credit Risk)

• ESI specifically insures against any performance-
related financial shortfall in savings versus debt
service payments to Bank on an EEP loan.
• ESI eliminates risk and instills confidence in
Facility Owners and Banks that future EEP savings
(cash flow) will be achieved at sufficient level to
repay related Bank loan.

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 Benefits of New EEP Finance Products
• Creates a new EE lending product for banks that is
‘attractive’ to Facility Owners
• Instills confidence in Facility Owners and Banks
that estimated EE savings will be achieved
• Reduces need for Facility Owners to use their ‘core
credit’ capacity for financing of EEPs
• Removes risk for Banks to increase credit capacity
and reduce collateral on EEP Loans
• Helps overcome the EE knowledge, technical and
finance gaps in market
• Facilitates ESCO’s ability to apply the industry-
preferred Guaranteed Savings financing structure
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Solution to EE Market Capacity Gap:
MASKEEI: “Energy Efficiency Training
and Certification” (EETC) Program
EETC Purpose:
Overcome Indonesia EE Capacity Gap through:
1. Global ‘best practices’ Training and Certification
programs to local individual professionals
2. Focus on EE Project-Based Development and
Financing skills.

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 EETC Modules

1. Certified Investment Grade Auditor (CIGA)

2. Certified Energy Savings Verifier (CESV)
3. EE Project Finance Professional (EEPFP)
4. ESCO Project Development
5. EE Market Awareness

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3. EE Project Finance Professional
(EEPFP)
a. Focus: Teach local Banks and ESCOs how to
evaluate benefits and risks of EEPs and structure
project-based financing that mitigates risks for
Banks that is still attractive to Facility Owners.
b. Benefiting Stakeholders: ESCOs and Banks
c. Length/Type: 2 Day/Hands-on Workshop
d. Curriculum: Lecture & Class “Role Playing”
• Day 1: EE Project-Based Loan Structure and Risks
• Day 2: a) Project-Based Finance Structures and Loan Applications
b) Group Case Study: Project-Based Loan Presentations
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