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AFD-Kasikornbank Credit Facility
: an opportunity for buildings owners to accelerate energy efficient rehabilitation investments
AFD-Kasikornbank Credit Facility: an opportunity for buildings owners to accelerate energy efficient rehabilitation investments
Accounting for more than 20 % of final energy consumption in Thailand, the sector of residential, commercial and office buildings represents an important potential for energy savings. In the last Energy Efficiency Development Plan 2015-2036 developed by the Ministry of Energy, Thailand is targeting that more than 17 % of the energy savings will come from the building sector. Besides, Prime Minister General Prayut Chan-o-cha stated in 2015 during COP21 that Thailand pledges a 20 to 25 percent reduction in its emission of greenhouse gases by 2030, which will require strong policy incentive to materialize.
Thanks to up-to-date technology, numerous solutions suitable for a wide range of budgets are available and well adapted to each building usage (both commercial and residential). For many building owners, the obvious advantages of energy efficiency and renewable energy include:
Reduction in energy bills and maintenance costs.
Improvement of quality of working conditions.
Reduction of environmental impact on its business.
Benefits can be substantial; a study developed by the French engineering company TERAO specialized in energy efficiency showed that through the application of several measures, the potential of savings in terms of electricity and fuel and/or gas costs in Bangkok could reach easily 29.9 % for an office building, 33 % for a 5-stars hotel and 26 % for shopping mall. In countries such as Thailand, air conditioning represents both the biggest item of expenditure and source of savings. Return on investments for upgraded equipment can vary between 2 and 8 years depending on current performances of the system.
Besides, committing to such projects can significantly contribute to the brand image which weighs more and more in customer decision, particularly for hospitality business. Then the main questions arising are the following: does energy efficiency investment really pay off? If so, would the banks be willing to finance such project? Is my organization and staff able to implement such project?
To finance energy efficiency projects in Thailand, most commercial banks use a traditional banking perspective which at times may become a constraint for the project to kick start. Always keen to venture into new green financing products, Kasikornbank has recently joined hands with the French Development Agency (AFD) in developing a credit line facility proposing an innovative energy efficiency financing targeting existing tertiary buildings (excluding factory and manufacturing facility) within Thailand. Any project aggregating at least three components from the following options would be eligible to the credit line facility:
energy efficiency (EE) solutions including chillers and/or pumps substitution, installation of VSD system for air conditioning, replacement of lighting bulbs for more efficient ones, etc.
renewable energy (RE) installations for self-consumption such as solar rooftop, biomass-fired boiler, etc.
In addition, this credit line also supports all investments leading to a “Green Building” certification (for example LEED or TREES) including EE and RE.
The minimum amount of investment per project is set at 5 million Baht.
Regarding the implementation, project owners can contract a third-party dealing with the technical aspects, called Energy Services Companies (ESCO). The way ESCOs get remunerated can be through 2 main contract models: (i) either Guarantee Saving Contract where ESCOs are paid for the energy efficiency works implemented and needs to compensate the project owner in case the actual saving is lower than estimated or (ii) Shared Saving Contract where there is no payment for works but actual savings are shared between project owner and ESCOs following a pre-determined percentage.
A strong added-value of this credit line comes with the AFD technical assistance which involves local and international consultants in assisting the building owners in conducting the preliminary assessments and feasibility studies, pre-screening the ESCOs proposal, ensuring that contracts such as Energy Performance Contracts (EPC), Guarantee saving contract, and/or shared saving contract are up to the international guidelines standard. To most project owners, the technical assistance has a strong appeal because it does the job of the in-house facility engineering team which either remains inexistent or too small in the organization.
Example of recent project benefitting from AFD-KasikornBank Credit Facility:
In July 2017, Boonthavorn (leading home improvement retailer with 12 flagship stores across Thailand), Kasikorn Bank and the Solartron, ESCO specialized in solar rooftop plants, have signed the financing agreement for the installation of a total of 7.7 MW of solar rooftop on 14 sites (including warehouses) for self-consumption for a total of 360 M THB (around 9.47 M€), assessments for energy efficiency are on-progress with different ESCOs. Boonthavorn benefits not only from Kasikornbank financing but also from advisory services and close supervision supported by AFD technical assistance team.
Kasikornbank is a major banking group in Thailand, established since 1945. Kasikornbank is the 4th largest commercial bank in Thailand as measured by total assets, loans, and deposits. The bank offers comprehensive range of financial products and services to all customer segmentations including retail, SME and Corporate customers. As part of the bank’s corporate lending business, Kasikornbank has been active in promoting investment in renewable energy and energy conservation projects. Kasikornbank is the first bank in Thailand and ASEAN that has been selected as a member of globally renowned Dow Jones Sustainability Indices (DJSI) family 2016, including the DJSI World Index and DJSI Emerging Markets Index
The French Development Agency (Agence Française de Développement – AFD) is a public financial institution implementing the French government development policy. It works to fight poverty and promote sustainable development. AFD is active in Africa, Asia, the Middle East, Latin America, the Caribbean and the French overseas territories where it finances and supports projects that improve living conditions for populations, promote economic growth and protect the planet. In 2016, AFD earmarked EUR 9.4 bn to finance projects in developing countries and for the French overseas territories, a commitment up by 13 % compared to 2015.
Upcoming event! : Those interested to learn more AFD-Kasikornbank Credit Facility, please mark your calendar during the week of 9th-13th October 2017 (tentative) as an event aiming to promote the energy efficiency project would take place. For more information please contact AFDBANGKOK(@)afd.fr
