EE Financing Capacity Improvements

Component 3: EE Financing Capacity Improvements

OVERVIEW
 
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DESCRIPTION
 
This component will address the lack of and poor accessibility of financing for investments in energy efficiency in buildings. It addresses the need to provide technical and financial assistance packages to EE building project developers. It will include technical assistance in facilitating the design, establishment and implementation of appropriate mechanisms for financing EE projects, in general, and EE building technology application initiatives, in particular. The expected outcome from this project component is the availability of financial and institutional support for initiatives on EE building technology applications.
 
One concern that has been raised is the relative inefficiency of existing tax incentives to increase investments in EE in buildings. Therefore the project will investigate and find solutions to improve the functioning of these existing mechanisms. The project will also engage in the pivotal task to develop and propose how a comprehensive energy efficiency promotion fund can be established by government to not only significantly increase the amount of funding available for EE investments but also offer more attractive conditions and better access to funds for interested building owners that today face great difficulties in getting access to financing from commercial banks.

The activities will also comprise training and opportunities for financial institutions and ESCOs to meet and develop ways to strengthen cooperation by exchange of ideas, develop new approaches and tools and generally build confidence between them.
 
OUTPUT
 
Enhanced availability and accessibility of financing for EE building projects
This output is expected to be realized from the implementation of several activities that facilitate more available, extensive and accessible financing for EE building projects.
 
ACTIVITY 3.1
Streamlining Processes for Financing Applications
 
Existing tax incentives to promote energy efficiency are perceived as slow, cumbersome and ineffective by the majority of the stakeholders consulted during the project design. To address this concern, this activity will focus on assisting the MEGTW in streamlining the procedures for applying for and getting financial incentives for building EE activities. Together with MEGTW and other pertinent stakeholders, a review and analysis of the existing procedures will be carried out to come up with pertinent recommendations on how to make better and more effective use of the already existing incentive mechanisms for promotion of EE.
 
ACTIVITY 3.2
Capacity Building on EE Building Technologies for the Banking/Financial Sector
 
This will involve the conduct of training workshops on evaluating the financial viability of EE building and EE building technology application projects. The workshops will also serve as campaigns addressed towards enhancing the banking/financial sector’s interest in providing financing to prospective EE building project developers/owners. This will also involve securing support from banks and financing institutions in the financing scheme that the project will help develop.
 
ACTIVITY 3.3
Development of an Action Plan for EE Building Project Financing
 
A study compiling details of all EE building demonstration sites, potential entrepreneurs, market conditions for EE building technologies and possible financing modalities will be conducted. Based on the study, an action plan will be prepared outlining the essential steps and actions to be taken to facilitate the provision of financing of energy efficiency initiatives. The study will also come up with recommendations towards reaching agreements on mobilizing local and international financial institutions and local industry resources through co-financing counterpart to the proposed. Financing will be carried out by engaging key parties (e.g., foreign EE equipment suppliers and local ESCO), businesses and end-users to implement EE building and EE building technology projects.

ACTIVITY 3.4
Design of Financing Schemes for EE Building Project Financing
 
This is targeted to assist potential: (1) EE building project developers/owners; and, (2) Local suppliers and/or manufacturers in locally producing EE building materials and products. A working group will be formed comprising of financing institutions (e.g. Association of Banks in Malaysia) and local ESCOs to carry out the review of the performance of the existing credit schemes in Malaysia to determine the most appropriate baseline scheme (or a combination of schemes) for the envisioned EE building financing, as well as the latest international literature and experience on similar financial mechanisms for building improvements and/or building construction investments. They will also assess how much financing is currently being extended to EE building projects by private financing institutions. The working group will also evaluate the viability of financing EE building projects, as well as the assessment of potential financing schemes. A report detailing the terms and conditions of each viable schemes will be prepared. Technical assistance will be provided in the design of appropriate financing schemes for such projects, based on government grants, and loans from financial intermediaries. The identification and assessment of sources of finance, tariff structures and fiscal aspects will also be covered. This activity will also involve the development of selection criteria for the financing schemes and the selection of eligible borrowers.
 
ACTIVITY 3.5
Promotion of EE Building Projects to Local ‘ESCOs’
 
This activity will entail the promotion of EE building project as viable ventures for ESCOs operating in Malaysia. This is targeted to local building services equipment (e.g., air conditioning) suppliers that are currently engaged in ESCO-type and/or EPC-type building system projects. It will facilitate information sharing and confidence building activities between ESCOs and financial institutions through the conduct a series of seminars/ workshops for financial institutes & ESCOs. At least four seminars are envisioned.
 
ACTIVITY 3.6
Capacity Building on EE Building Project Financing
 
This will involve the conduct of a series of seminar-workshops for the buildings sector on potential financing options, including a special course on CDM and ESCOs, for supporting their EE building and EE building technology projects. Also covered under this activity is the provision of technical assistance to prospective EE building project developers/owners in accessing and partnering with ESCOs (local and/or foreign).
 
ACTIVITY 3.7
Business Development Matching and Strategic Partnership Establishment
 
This activity will involve mobilizing local and international financial institutions and local building industry resources to promote the commercialization of EE building technology application. A designated EE Building Market Services Group (MSG), possibly under JKR, shall be organized in the first year of the project with the main function of identifying business opportunities through providing technical support to EE building project financing. As a means of capacity building in this respect, the MSG will be involved in the business planning and financial advice to the EE Building Demonstration Projects in order to ensure that these demonstration projects will be implemented as planned according to the purposes of the demonstration activity. Working through existing public and private sector partners, the MSG will work directly with private companies and FIs, responding to their individual needs to structure investments, develop products, build their capacity to deliver EE building and EE building technology application project financing, and market their projects and financing products. Within the five year project, the MSG will be evaluated for its capacity to engage key parties (e.g., foreign EE building equipment suppliers and local ESCO), businesses and end-users to implement EE building technology application projects in the long run.