TOPIC 4: INTERACTION BETWEEN PUBLIC AND PRIVATE FOR SCALING UP FUNDING AND INVESTMENTS IN CLIMATE RESILIENCE

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1 TOPIC 4: INTERACTION BETWEEN PUBLIC AND PRIVATE FOR SCALING UP FUNDING AND INVESTMENTS IN CLIMATE RESILIENCE GREEN TECHNOLOGY FINANCING SCHEME MALAYSIA LTF IN SESSION WORKSHOP UNFCCC Climate Change Conference 4 5 June 2015 WORLD CONFERENCE CENTER, BONN, GERMANY Copyright Reserved GreenTech Malaysia

2 GREEN TECHNOLOGY FUNDING MECHANISM GREEN TECHNOLOGY FINANCING SCHEME (GTFS) Loan Guarantee Scheme introduced in 2010 till 2015 with a total financing approval allocation of RM3.5 billion (USD1 billion). Objective is to promote private green investments by providing easier access to financing and at lower financing costs. Incentives: 60% Government Guarantee on financing provided by financial institutions. 2% rebate on interest/profit rate charged by financial institutions. PROMOTES THE USE OF RENEWABLE RESOURCES SAFE FOR USE AND PROMOTES HEALTHY AND IMPROVED ENVIRONMENT MINIMISE DEGRADATION TO THE ENVIRONMENT Products, equipment and systems used to conserve the natural environment and resources which minimize and reduce the negative impact of human activities GTFS GREEN CRITERIA CONSERVE THE USE OF NATURAL RESOURCES ZERO OR LOW GREEN HOUSE GAS EMISSION Copyright Reserved GreenTech Malaysia 2

3 IMPLEMENTATION MECHANISM AND KEY AGENCIES 1) Green Certificate GREENTECH MALAYSIA (Promotions, Green Certification, Monitoring) Coordinator, Regulator PROJECT COMPANY Producer: Max RM50 mil for 15 years max User: Max. RM10 mil for 10 years max 2) Loan 3) 2% rebate & 60% guarantee FINANCIAL INSTITUTIONS CREDIT GUARANTEE (Credit assessment, CORPORATION financing) (Administer guarantee & rebate) Copyright Reserved GreenTech Malaysia MALAYSIAN GREEN TECHNOLOGY CORPORATION 3

4 GTFS PERFORMANCE Breakdown of Financing Approvals By Sector As At April % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% , ENERGY WASTE & WATER BUILDING Number of Projects Secured Financing Amount of Approved Financing (RM' million) Amount Disbursed (RM' million) TRANSPORT TOTAL FINANCE APPROVAL: 185 projects amounting to RM2.24 billion (USD612 million) USER, 9% PRODUCER, 91% Copyright Reserved GreenTech Malaysia 4

5 GTFS: IMPACT THUS FAR Expected impact when all 185 certified green projects have commenced operation. GREEN J BS CO 2 GREEN INVESTMENTS: RM4.41 billion (USD1.2 billion) GREEN EMPLOYMENT: 2,898 jobs GHG EMISSIONS REDUCTION: 2.65 million tonnes CO 2 equivalent Copyright Reserved GreenTech Malaysia 5

6 BREAKDOWN OF PROJECTS SECURED FINANCE BY FINANCIAL INSTITUTIONS No. Name of Financial Institutions Number of Projects Secured Financing Amount of Financing (RM 'million) 1 MDV SME Bank Maybank UOB Bank OCBC Bank Bank Pembangunan HSBC Amanah AmBank Standard Chartered HSBC Bank Affin Islamic Affin Bank RHB Bank Hong Leong Bank Maybank Islamic Public Bank AmIslamic CIMB Bank RHB Islamic Kuwait FH CIMB Islamic Bank Rakyat Alliance Bank Agro Bank OCBC Al Amin Bank Islam TOTAL 185 2,235.7 (USD612m) 26 commercial and Islamic Financial Institutions out of 47 are participating in the GTFS programme Copyright Reserved GreenTech Malaysia 6

7 GTFS: TYPES OF PROJECTS FINANCED Type of Projects Green Project Certificate Number of Projects Percentage (%) Copyright Reserved GreenTech Malaysia 7 Projects Secured Financing Number of Projects Percentage (%) Financing Amount (RM) Biogas Power Plant % % 135,052,600 Biomass Power Plant % % 406,878,610 Compost % 4 2.2% 39,451,000 Dry Fiber % 4 2.2% 8,670,000 Energy Efficiency % % 44,441,052 Green Product Manufacturer % % 189,512,960 Hydro Power Plant % 8 4.3% 264,858,250 Pellet Plant % 5 2.7% 61,345,117 Pulp 7 1.8% 3 1.6% 97,500,000 Solar Farm % % 450,176,640 Solar BIPV System % % 409,223,010 Waste Recycling % % 128,608,106 TOTAL % % 2,235,717,345 (USD612m)

8 MARKET CONSTRAINTS TO GREEN INVESTMENTS GTFS Challenges and Issues Financial institutions and investors take a cautious stand in investing in the green sector which is considered new and high risks due to start-ups and minimal track record. Financiers are generally risk-averse in green investment, due to novel technologies and business models where they lack pertinent information and face information asymmetries. There is a knowledge gap in evaluating novelty green technology and involved high cost of due diligence checks. 195 GTFS Projects worth about RM3.5b or USD1b have yet to receive financing. Copyright Reserved GreenTech Malaysia 8

9 OUR COMMITMENT OUTREACH PROGRAMMES INDUSTRY INVESTORS FINANCIAL INSTITUTIONS Continue awareness raising and capacity building to address the still limited knowledge and unfamiliarity of green technology within financial institutions as well as investors and project developers TRAINING PROGRAMMES BUSINESS MATCHING AND PITCHING SESSIONS INDUSTRY FINANCIAL INSTITUTIONS Copyright Reserved GreenTech Malaysia 9

10 BUSINESS AS USUAL: MIND THE GAP Projected Demand And Supply of Funds For Green Investment RM76.2 b (USD23.4 b) GTFS will be discontinued end of 2015 Funding gap is projected to widen at an increase rate over time from RM3.4b (USD1 B) in 2013 to RM54 b (USD17 b) in 2030 representing a CAGR of 17.7% during the (widening gap of about 16 X by 2030) RM22.2 b (USD6.8 b) Source: Protégé Associates Copyright Reserved GreenTech Malaysia 10

11 BRIDGING THE GAP SCALING UP GREEN INVESTMENTS OPTION 2 OPTION 1 Continuation with the GTFS with added attractive features for the financial institutions Increase in financing limit for capital intensive projects Guarantee on all green component costs A specialised innovative financial mechanism such as a fund or financial institution be established to leverage and mobilise private financing narrowing the financing gap in accelerating the growth of green investments Copyright Reserved GreenTech Malaysia 11

12 Catalysing green technology deployment as Malaysia s strategic engine for socio-economic growth Malaysian Green Technology Corporation No. 2, Jalan 9/10, Persiaran Usahawan, Seksyen 9, Bandar Baru Bangi, Selangor Darul Ehsan, MALAYSIA T: F: / 0802 E: info(a)greentechmalaysia.my Copyright Reserved GreenTech Malaysia