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Chari Khola (80 Kw ) : Ramechhap District Thulo Khola (50 Kw) : Okhaldhunga District Swara Tap Khola (30 Kw): Khotang District Lumju Khola (20) : Khotang District Midim Khola (100 Kw) : Lamjung District
Banks Requirement
Cash Flow should justify cost saving and repayment capability The project should be identified and recommended by AEPC
We need to develop required technical manpower at the bank from concerned agencies.
Financing
Maximum 30 % of the total project cost Financing will be in Term Loan Only (however the bank will provide a moratorium period of six months during which the project will only pay interest) Repayment of Loan will be on EMI Basis Maximum 5 Years (Including Moratorium Period, If Any) Interest Rate : 10 % currently for projects under MHDF and for other projects as per the market condition. (In case of subsidy, the rate will be as per the contract)
Challenges Of Financing R E
Initial Cost for establishing such units are relatively high and thus its difficult to arrange for Renewable Energy Financing A major factor which will contribute to whether these projects are viable or not will also depends on the amount of subsidy from donor / government, built into the financing structure. Limited Capital Availability Loan Administration costs-The cost of monitoring Transaction costs of small projects are often a key issue Problem in follow up for repayment, recourse action Operation and maintenance is a weak link in rural sector
Banks Expectations
Partner Agencies to do thorough home work about the overall viability of the project before recommending for bank finance Preferably should have lower D/E. 30/70 is the best D/E Ratio for Renewal Energy Financing in Rural Sector
Cash Flow should justify the repayment of the loan The RE project should be self sustaining and should also promote/enhance the overall productive activities of the community instead of just lighting
Conclusion
Though Renewable Energy Financing is a relatively new sector for the bank. However we have a success story of managing C.P. Fund and financing in renewal energy, namely micro hydro and solar home system, where all the projects payment history are excellent.
Energy Sector is one of the most profitable sector across other sectors Chilime, Bhote Koshi, Khimti etc.
Conclusion
Recently Nepal Rastra Bank has made it mandatory for all commercial banks to invest 10 % of their entire loan portfolio in energy and / or agriculture sector.
As there is a market, this mandatory requirement by the central bank and government support, this sector can achieve attractive returns to all the stake holders, government, society, investors, financers and borrowers
Thank You!!