PRGFEE

While we have established a strong market demand for energy efficient products and services, India’s sustainable energy goals need a broader necessary market ecosystem and capacity building for diverse stakeholders. Under the ambit of the National Action Plan on Climate Change (NAPCC), India’s National Mission on Enhanced Energy Efficiency (NMEEE) has identified a Framework for Energy Efficient Economic Development (FEEED) to create fiscal instruments promoting the uptake of energy efficiency projects.

FEEED focuses on developing fiscal and investment guarantee instruments to promote energy efficiency, including the Partial Risk Guarantee Fund for Energy Efficiency(PRGFEE)

What is PRGFEE?

As a risk-sharing mechanism, PRGFEE provides commercial financial institutions with a partial coverage of risk exposure against loans issued for energy efficiency projects, and directly supports financing of Energy Efficiency (EE) projects by

  • Addressing the credit risks and barriers to structuring the transactions
  • Engaging Financial Institutions and building their capacity to finance EE projects on a commercially sustainable basis.
  • Providing risk cover of upto 50% of debt in an energy efficiency project.

In July 2015, BEE appointed the consortium of Energy Efficiency Services Limited (EESL), REC Power Distribution Company Limited(RECPDCL) and Rural Electrification Corporation(REC) as the Implementing Agency for PRGFEE.

ROLES AND RESPONSIBILITIES

Bureau of Energy Efficiency REC RECPDCL EESL

Annually empanel Energy Service Companies (ESCOs).

To appoint an Implementing Agency and monitor its performance.

To empanel Participating Financial Institutions and M&V Agencies

Guidance Support & Supervision.

Legal Compliance of Guarantee Documents

Overall Management & Team Leader

Financial Appraisal

Furnishing PRGFEE Guarantees

Claim Processing

Technical Appraisal & Monitoring

Marketing & Promotion

Aggregation of EE Projects

The scheme, notified by The Ministry of Power on May 26, 2016, covers energy efficiency projects across Government Buildings, Municipalities, SMEs and industries.

PRGFEE will act as a first-loss and subordinated recovery guarantee, to be placed in a guarantee reserve account and paid out to empanelled participating Financial Institutions (“PFIs”) in case of loss or default in energy efficiency projects. The project must be implemented by BEE empaneled ESCO on performance contracting mode

FEATURES OF THE GUARANTEE

  •  Guarantee Duration period: Maximum of 5 years per project
  •  Guarantee coverage: Upto 50% of the sanctioned loan amount to a maximum of Rs.3 Crore (USD 462,450) per project, whichever is less
  •  Application fee: 0.1% of the maximum guaranteed amount at the time of application.
  •  One-time Guarantee Fee: 1% of the amount guaranteed if borrower is a Male entrepreneur & 0.5% if borrower is a Women entrepreneur, payable after approval and before signing of Guarantee Agreement.
  •  Loan amount of upto a minimum Rs. 5 Lakh (USD 7,707) can be considered for guarantee under PRGFEE
  •  In case of default, the fund will
    •  Cover the first loss subject to maximum of 10% of the guaranteed amount
    •  Cover the remaining default (outstanding principal) amount on pari-passu basis up to the maximum guaranteed amount.
  •  Financial Institutions to be empanelled with BEE will participate in PRGFEE.
  •  Projects implemented by BEE empanelled Energy Service Companies(ESCO's) or a JV of ESCOs with at least 50% share capital of BEE Empanelled ESCO, will be covered under PRGFEE.
  •  Guarantee coverage to be provided before disbursement of loan by PFI to ESCO.
  •  70% of the eligible loan amount should be towards implementation of EE project.

How does PRGFEE work?

  • 1.Submission of loan application by ESCO to PFI
  • 2. Scrutiny and analysis d application Form by PFI
  • 3. Approval or rejection of loan proposal by PFI
  • 4. Sign FE loan agreement with ESCO
  • 5. Sign for establishment of Time and Retention Account (TRA)
  • 6. Submission of guarantee application form along with fee by PFI to IA
  • 7. If the guarantee application form is approved by IA. The guarantee agreement shall be signed between IA and PFI
  • 8. Submit a quarterly MIS report to IA
  • 9. Monitor the TRA for every EE loan account
  • 10. Submit guarantee claim to IA in cad of default
  • 11. Comply with directions as may be issued by supervisory committee/BEE from time to time

PRGFEE therefore has the potential to unlock the energy efficiency market’s potential and address specific barriers.

Click on the title to download/open related links
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1. PRGFEE- Operations Manual 26 October 2016