Power Finance Corporation: Leading Energy Efficiency Financing for a Carbon-Neutral India
Power Finance Corporation (PFC) is a financial powerhouse specializing in funding energy efficiency projects to make India carbon neutral. Established in 1986, PFC is a key player in the power sector, funding a wide range of projects from power generation to environmental initiatives. With a strong financial performance and a focus on energy conservation and sustainability, PFC is driving the transition towards a greener future.
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Power Finance Corporation F i n a n c i n g o f E n e r g y F i n a n c i n g o f E n e r g y Ef f i c i e n c y p r o j e c t s Ef f i c i e n c y p r o j e c t s Scaling up Energy Efficiency Scaling up Energy Efficiency Financing Financing A Step Towards A Step Towards Making India Carbon Neutral Making India Carbon Neutral A Maharatna CPSE Delhi Delhi 11 July 2023 11 July 2023 F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w
PFC PFC Financing Champion in Power & Allied Sector Financing Champion in Power & Allied Sector Estd. in 1986 as a dedicated Financial Institution for funding in power sector Accorded Nodal agency for Govt of India Schemes - RDSS, IPDS, R-APDRP, UMPP, LPS #365 in the world in terms of assets (Forbes Global 2021) & #29 in Fortune 500 India 2021 'Maharatna' status in 2021 only Maharatna in financial space Largest Power Sector NBFC in India F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w 2
Financial Performance Financial Performance Snapshot of Financial Performance ( upto 31 March 2023) Disbursements Loan Assets Networth Rs 85,756 cr Rs 4,22,498 cr Rs 68,202 cr Majority owned by Government of India F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w 3
Funding Focus Areas Funding Focus Areas PFC has decades of experience in funding a wide gamut of power sector projects Power Generation, Transmission & Distribution projects Though power is the focus sector for PFC, PFC funds projects in cogeneration, tri-generation, combined heat & power, waste heat recovery systems, Electric Vehicles, lift irrigation, sewage treatment plant, smart city, electrification of railways, airports, etc. Energy Conservation, Energy Efficiency & Environmental projects, Electric Vehicle Projects Electrical & Electromechanical systems - standalone or of large projects Projects with forward & backward linkages with power sector F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w 4
Energy Efficiency Funding by PFC Energy Efficiency Funding by PFC Scheme Type Project Cost (Rs crs) Sanction (Rs crs) Renovation & Modernization (including uprating & FGD) 44,252 28,941 E-Mobility 1,476 907 Energy Efficiency (LED Streetlights, Co-gen, Waste Heat Recovery) 1594 1419 Total 47,322 31,267 F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w 5
Net Zero Target for India Net Zero target for India by the year 2070 Achieving carbon intensity reduction of 45% over 2005 levels by 2030 Installing non-fossil fuel electricity capacity of 500 GW by 2030 India s Commitment at COP 26 for Climate Action Reducing 1 billion tonnes of projected emissions from now till 2030 Sourcing 50% of energy requirement from renewables by 2030 F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w 6
Unlocking National Energy Efficiency Potential Unlocking National Energy Efficiency Potential (UNNATEE) (UNNATEE) Energy Saving Potential by 2031 (Million ton oil equivalent) Energy Savings Investment Potential by 2031 (Rs cr) Sectors Agriculture 5.70 50,000 Commercial 4.90 80,000 Domestic 12.10 1,20,000 Municipal 0.90 8,000 Industrial 47.50 5,15,000 Transport 15.80 2,27,000 Total 86.90 10,00,000 F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w 7
Challenges in EE Financing Challenges in EE Financing Capital Intensity: Significant upfront capital investments due to the scale and complexity of operations. Lack of Internal Capacity: Lack of internal expertise and capacity to identify, develop, and implement energy efficiency projects effectively. Limited Access to Structured Financing: Non-availability of tailor made financial products to support plant operations pre and post implementation of EE technology. Risk Perception: Effectiveness of technology and complexity associated with implementation Inadequate Security: Non cooperation by existing lenders to share charge on assets/existing TRA Lack of Standard project documents: Lack of standard project agreements like ESPC contract stipulating PSM, termination payment etc. Incentives: No specific policy to incentivize EE projects. F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w 8
Strategy for Effective EE Financing Strategy for Effective EE Financing Adequate Security: Credit Guarantee (like PRSF) Adequate Risk Mitigation: Standard ESPC agreements stipulating PSM, termination payment etc. Tailor made Financial Products: Project specific products to meet their specific requirements during and after implementation of EE project Low Cost Funds for Onward Lending: Multilateral tie-up for attractive on lending On boarding Champions: Institutions/subject experts may be on boarded by FIs for third party vetting of projects to gain additional comfort Build Technical and Financial Capacity: Training programs/workshops to enhance appraisal capabilities for risk mitigated financing Create Awareness: Campaigning/showcasing successful EE project - funding to educate other members of lending fraternity about the benefits of energy efficiency financing Strengthen Policy and Regulatory Support: Implement supportive policies and regulations F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w 9
Thank You Thank You energy_efficiency@pfcindia.com F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w
Why PFC.. Long & flexible repayment tenure (structured as per projects requirement) Longer repayment tenure Moratorium of 6 / 12 months, post COD Ability to take large exposures & full debt tie-up with single loan for ease of operation Higher exposure limits Less financial stress during project implementation IDC funding F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w 11
Why PFC Flexible reset options 1 year or 3 years Simplified and standard documentation Easy documentation Easy, swift & cost-effective Simple and transparent fee structure with pre-defined timelines No hidden charges F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w 12
Why PFC Disbursement possible against specific bills Lower lifecycle costs Small ticket disbursements Long term relationship Other benefits Tailored financial products Funding throughout good and bad times F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w 13
Loan Lifecycle Support Application Appraisal & Sanction Documentation Disbursement Repayment DPR Application / Request letter Simplified & standardized Security creation Compliance Advance / Re- imbursement / Direct payment Extended tenure Flexible structuring Information exchange Appraisal Sanction Support by dedicated PFC executive throughout the loan cycle & beyond Support by dedicated PFC executive throughout the loan cycle & beyond F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w 14
Nationally Determined Targets (NDCs) Nationally Determined Targets (NDCs) Reduction of emission intensity of its GDP by 45% by 2030 50% capacity through non-fossil fuel sources by 2030 Achieve net-zero carbon emission by 2070 F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w 15
Product Portfolio Product Portfolio PFC offers a variety of financial products to suit the specific needs of different customers Term Loans & Re-financing of Loans Capex loans Corporate Loans Letter of Comfort/Buyers Line of Credit Non-fund-based products like Letter of Comfort, Buyers Line of Credit are also offered Short Term Loans Non-capex loans Medium Term Loans PFC Consulting Ltd, a wholly owned subsidiary of PFC, offers consultancy and advisory services Compliance of specific conditions required Multilateral loans F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w 16
Large Industries and Net Zero Large Industries and Net Zero Large Industrial sector mainly consists of Iron and Steel, Pulp and paper, Textile, Petrochemical, Aluminium, Cement, Chlor-Alkali, Fertilizer Industry and Transport 26% contribution to India s GDP by industrial sector Industrial sector accounted for more than 56% of India s total energy consumption CO2 emission highest among all sectors Energy consumption to reach 443 (Mtoe - Million Ton Oil Equivalent) for industry sector by 2031 50% of the total energy demand to come industry sector by 2031 F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w 17
Assistance in Deploying Energy Efficient Technologies in Industries Assistance in Deploying Energy Efficient Technologies in Industries & Establishments (ADEETIE) & Establishments (ADEETIE) Interest Subvention Scheme Interest Subvention Scheme Aim - Strengthen the financing in energy efficiency sector by creating conducive regulatory and policy regime through interest subvention Benefits Incentivise by offering interest subvention for eligible EE projects Target Group Industries including MSMEs Outcome Energy saving and increased bottom line/ contribution towards achievement of national commitment Status of Scheme In-principle approval received. Final Approval in process F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w 18
Criteria for Energy Efficiency Funding Criteria for Energy Efficiency Funding DPR/IGA report with identified savings/ anticipated benefits vis- a vis baseline consumption Proven technology with successful track record Loan size of more than Rs. 25 crs Security to be offered A) Charge on Assets by way of (a) Mortgage (b) Hypothecation B) Collateral Security a) Corporate Guarantee/Personal Guarantee b) Pledge of Shares F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w 19
Projects Appraisal Projects Appraisal Risk Mitigations Entity Appraisal Project Appraisal Analysis of Existing Project Analysis of Existing Project Operations Operations Financial Performance Financial Performance Stipulation of market linked Stipulation of market linked commercial terms in procurement commercial terms in procurement contracts contracts Feasibility of Technology Feasibility of Technology Third Party Verification Third Party Verification Market Standing Market Standing Vetting of Supply/ Vetting of Supply/ Implementation Contracts Implementation Contracts Robust Disbursement Mechanism Robust Disbursement Mechanism Order Books and Future Order Books and Future Cashflow Cashflow Cost and Savings Analysis Cost and Savings Analysis Tailor made repayment structures Tailor made repayment structures Equity Infusion Capability Equity Infusion Capability Analysis of Project Analysis of Project Maintenance Arrangements Maintenance Arrangements F u n d i n g F u n d i n g f o r f o r b r i g h t e r b r i g h t e r t o m o r r o t o m o r r o w w 20
Energy Efficiency Financing Domains PFC PFC funds funds energy undertaken undertaken by Vehicle Vehicle infrastructure infrastructure energy efficiency efficiency projects by ESCOs ESCOs as as well well as as Electric projects Electric PFC welcomes opportunities for debt funding efficiency projects in a wide variety of industries Fertilizer Fertilizer of energy Sugar Sugar ESCO projects ESCO projects Cement Cement Aluminum Aluminum Electric Vehicles (OEMs & Fleet Electric Vehicles (OEMs & Fleet operators) operators) Thermal Power Thermal Power Battery OEMs Battery OEMs Textile Textile Iron and Steel Iron and Steel EV charging infrastructure EV charging infrastructure Chlor Chlor Alkali Alkali Paper and Pulp Paper and Pulp F u n d i n g f o r b r i g h t e r t o m o r r o w 21
