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This is a summary presentation. A full term sheet may be made available to prospective partner banks. Any implementation is dependant on full compliance with all ADB policies, including environmental and social safeguards and Approval by ADBs management and board.
ADBs Private Sector Operations Department And Office of Cofinancing Operations April 2011
The first wave of solar projects in India are likely too small for direct funding by ADB (average size of 5 MW)
ADB wants to build technical due diligence capacity in commercial banks for lending to solar projects in Asia
ADB is proposing a risk sharing scheme through partial credit guarantees (PCGs) to commercial banks to support such projects
Addresses lenders concerns both on credit risks and long tenors required for viability of solar power projects
Covers lenders against any non payment by the project on the guaranteed portion of scheduled principal and interest payments
Can be denominated in USD or INR Beneficiaries: both local and international banks
Replace half of lenders project risk (e.g., B-BB) with ADB credit risk (AAA); extend loan tenors >12 years
Addresses lenders capital constraints, single borrower limit, sector and country limit
Allows ADB to leverage support for projects too small for typical project financing
ADB Board approval expected 19 April 2011; first partner bank endorsed by investment committee (NORD/LB, Singapore branch)
Review of insolation data, site risks Commercial assessment of proposed solar technology Assessment of PV panel manufacturer and experience analysis of performance warranties, etc. Sensitivity analysis of energy yields and revenue variability
Grant of $1.25 million administered directly by ADB guarantee team, partly funded by the Government of Japan International solar engineers to be on board by May 2011 Program will also include regular solar training programs in India for commercial bankers (next scheduled for June in New Delhi)
The present value of the debt service obligations guaranteed by ADB cannot exceed 50% of the projects debt (e.g., 50/50 risk sharing with the commercial bank)
This allows the structuring guarantees to meet different banks needs, higher levels of guarantee cover in latter years of the loan tenor (see examples) Door-to-door tenors of guaranteed loans will be limited to 15 years for NSM projects, 12 years for GUVNL projects
Other limits no more than 5 guarantees per sponsor group; a single partner bank cannot consume more than 40% of the facility; limits on direct SEB exposure
Principal + Interest
Commercial Loan Tenor: COD: 1st P&I Repayment : ADB PCG Cover Year 1-7: 0% Year 8-11: 95%
PCG becomes effective provided no EoD exists
ADB PCG
YR 1 YR 3 YR 7 YR 9 YR 11
100%
YR 15
Standby Fee
8
Principal + Interest
Commercial Loan Tenor: COD: 1st P&I Repayment : ADB PCG Cover Years 1-15: 50%
50%
PROJECT RISK
ADB PCG
YR 6 YR 9 YR 12 YR 15
Day [45]
Day 75
Day 120
Waiting Period
Determination Period
Payment Period
International lenders
Keen to fund renewable / GHG mitigation in countries like India Capital constraints Tenor/risk constraints (e.g., SEB offtake) Country limit constraints for India
Guarantees facilitate raising of INR and USD debt at longer tenors than otherwise would have been available
Improved debt service capacity (especially in critical early years) Improves equity IRR (in light of challenging environment on capital costs) Reduce refinancing risk Sharing of technical risks on solar power technology
11
Bart Raemaekers Office of Cofinancing Operations braemaekers@adb.org +63-2-632-6918 Sujata Gupta ADB Resident Mission in India sgupta@adb.org +91-11-2410-7200