Design of New Energy Efficiency Finance Structures for the Industrial Sector

Indonesia’s Eximbank (IEB) currently offers a number of financial products targeting export-import companies, small and medium enterprises (SMEs) and their transactions. These products include different types of credit lines, bank guarantees and insurance products, in addition to technical assistance, capacity-building and advisory services to Indonesian importers/exporters, local banks and other agents involved in export/import transactions.   To facilitate the development of new financing instruments and related advisory services on energy efficiency (EE) improvement in manufacturing and help enhance Indonesian exporters’ compliance with the ISO 50001 standard, ADB has allocated USD 30 million to be disbursed by Eximbank via various EE financing products.

The main objective of this assignment was to design new EE finance structures (loans, risk-sharing instruments and insurance products) and integrate them into the portfolio of products offered by IEB to help improve EE in facilities of Indonesian exporters and SMEs. The assignment’s focus was on corporate exporters (90%) and SME exporters (10%).   To fulfill its mandate, Econoler carried out the following activities:

• Completed an assessment of EE potential in Indonesia’s exporting industry and developed short-term, mid-term and long-term loan marketing strategies targeting energy efficiency projects (EEPs);
• Designed and implemented a new EEP loan product that was commercially attractive to hosts;
• Created and completed an EE Loan Product Manual and some other related materials to enable the bank to offer savings-based loans directly to hosts;
• Completed an investment grade audit (IGA) and concluded the first EEP loan contract for a USD 3 million EE project at the first of 14 plants of a prominent Indonesian food-processing company.
• Completed additional IGAs for EEPs to be implemented at the host sites with EEP loan contracts expected to be concluded soon after the assignment is completed;
• Conducted feasibility analyses that identified EEPs worth USD 50 million for possible funding through EEP loans;
• Completed the design of an EE savings guarantee product that provides a guarantee to hosts, local banks and financial institutions (LFIs) and other applicable parties that the savings achieved by hosts’ EEPs will be sufficient to pay back their related EEP loans.
• Completed an EE capacity-building program, which involved developing many training materials and presentations used by EE experts in training workshops and awareness-raising events.

  As a result of Econoler’s work on this assignment, IEB is now able to assess process and finance EE projects with well-structured financial products.