EU and Renewable Energy

EU Switch Asia funded HP Cogen Pak organizes Information Dissemination Seminars on the “Revised SBP Financing Scheme for Renewable Energy” with the collaboration with the State Bank of Pakistan

Al-Bab Report

 Lahore, September 17, 2016: The EU Switch Asia funded HP Cogen Pak Project organized two Information Dissemination Seminars on the “Revised SBP Financing Scheme for Renewable Energy” in collaboration with the State Bank of Pakistan. More than 70 participants from sugar mills and leading commercial banks attended the seminars in Karachi and Lahore.

Mr. Omar M. Malik (Project Director, HP Cogen-Pak Project) briefed the participants about project components and services. The main agenda of the seminars was to launch State Bank of Pakistan’s Revised Financing Scheme for Renewable Energy, and to brief banks and sugar mills about the process to apply for funding. The key speakers included Dr. Muhammad Saleem (Additional Director IH & SMED) from State Bank of Pakistan and Mr. Huzaifa Mazahir Ali (Director) from E&Y.

Dr. Saleem presented the salient features of the newly announced RE Refinancing scheme. He told that the response of commercial banks and RE project sponsors was overwhelming and SBP has received 11 applications under the revised scheme. Before revision only one project sponsor had applied to the SBP in past six years. He appreciated the role of HP Cogen-Pak Project and E&Y in undertaking an assessment of market demand, concerns of the banking sector, and proposing recommendations for the revision of the Refinancing Scheme. Salient features of the revised scheme are:

1.       The Revised Scheme contains two Categories (I & II)

a.        Under Category I: Financing will be provided for large renewable energy projects ranging from (more than 1 MW to 50 MW).

b.       Under Category II: Financing will be provided for small scale renewable energy solutions (less than 1 MW) in order to promote renewable energy among consumers following NEPRA’s Net Metering Regulations of 2015.

2.       The scheme is available for power generated by using alternative / renewable energy sources (solar, wind, hydro, biogas, bio-fuels, bagasse cogeneration, and geothermal as fuel).

3.       Financing for civil works has been allowed as well to promote project financing.

4.       Financing facilities under the scheme shall be provided through all commercial banks and Development Finance Institutions (DFls).

5.       Total tenor of loan has been extended from 10 to 12 years (for Category I) including maximum grace period of 2 years.

6.       Banks’ spread under the scheme has been increased by 100 bps (reaching 4.00%).

7.       The rate of service charge at which SBP will provide refinance to the Banks/DFls shall be fixed for the entire duration of the loan, provided the borrowers continue to repay on due dates as per repayment schedule. Service charges and rates for end users have been fixed as per the following,

Tenor	Rate of Refinance	Bank's/DFls' Spread	End User's Rate
Up-to 12 years	2.00%	4.00%	6.00%

8.       Principal amount of loans shall be repayable in quarterly or half yearly instalments after prescribed grace period, if any.

Mr. Huzefa Mazahir Ali, representative of Ernst & Young Ford Rhodes Sidat Hyder, presented the work undertaken by the HPCogen Pak Project, and the recommendations provided for the revision of the RE Refinancing scheme, in the light of other Asian examples and experiences, as well as consultations with banks and sugar mills.

Finance managers from sugar mills and corporate bankers from leading commercial banks/DFI’s were able to get their concerns and queries addressed by the State Bank of Pakistan’s Additional Director regarding the revised financing scheme.

At the end Mr. Omar M. Malik thanked all the participants for their valuable inputs and feedbacks.