Bangkok Mitsubishi UFJ Lease Ltd (BMUL) Risk-sharing Project

Location: Bangkok, Thailand

Population: 10.7 million (city population)

Climate: Tropical monsoon climate

Duration: 2011-2023 (source)

Sector: Cross-cutting

Funding sources: Public – private

City networks: C40

Savings: N/A

Solutions: Through BMUL, establish a facility to provide finance for energy efficiency (“EE”), renewable energy (“RE”), and ESCO lease projects.

Multiple benefits:   To boost industrial efficiency, reduce its operational expenses and reduce pollution by promoting more efficient technology.

The International Finance Corporation (IFC), a member of the World Bank Group, is cooperating with Bangkok Mitsubishi UFJ Lease Ltd to increase energy efficiency and renewable energy financing in Thailand (source). Furthermore, since its inception in 1993, BMUL has been one of Thailand’s most active leasing organizations, particularly in auto leasing (source).

Objective – The project’s goal is to create a risk-sharing facility to help the energy efficiency, renewable energy, and ESCO sectors.

Solutions – The mechanism is intended to search through the market for viable energy efficiency projects in which various pieces of efficient equipment replace older and inefficient equipment. By definition, the equipment serves as sufficient collateral for the transaction. While leasing may not address the total energy efficiency market potential, it does target a sizable portion of it and has a distinctive market transformation effect. By assisting in developing new markets and product lines with high growth potential, the program will contribute to the development and diversification of the financial sector. The IFC’s risk-sharing Facility will provide comfort to financial institutions, particularly those entering new markets in Thailand for the first time.

Funding – The Facility’s total size is estimated to be $70 million, with an IFC investment of $36.81 million. BMUL would be in charge of developing a portfolio of energy efficiency leases. IFC will bear a portion of the risk associated with that leasing portfolio, which the Clean Technology Fund will aid.

Innovation – With over a decade of expertise supporting EE financing globally, IFC is uniquely positioned to assist local financial institutions in combating climate change. The Facility, through which IFC and CTF will offer risk mitigation, will assist BMUL in gaining a better understanding of the EE financing market in Thailand and building BMUL’s EE financing capacity. Based on IFC’s know-how and experience from previous projects, the Facility will be integrated with an effective greenhouse gases (GHG) emission monitoring process (source).

Success factors – Leasing is a viable alternative to bank loans. The diverse range of regulations that regulate the leasing industry makes leasing companies more adaptable and particularly well-suited to financing energy-efficient equipment. The critical hurdle addressed by the Bangkok initiative was the high perceived risk of energy efficiency investments by local financial institutions and the high collateral and company cash flow requirements from borrowers.

Significant outcomes:

• The project is intended to significantly contribute to increased efficiency in the industry sector as well as lower operating costs;
• The project will contribute to pollution reduction by boosting more efficient technologies with less detrimental side effects.

Synergies with local policies:

• Bangkok Master Plan on Climate Change 2013-2023. The report describes the “Bangkok Master Plan on Climate Change 2013-2023”, the BMA’s core policy document to cope with climate change implications. The plan focuses on (1) environmental sustainable transportation; (2) energy efficiency and alternative energy (source), among other objectives;

Political alignment:

• Thailand 20-Year Energy Efficiency Development Plan (2011 – 2030). The Energy Conservation Development Plan attempts to lower energy use and intensity. Reducing energy intensity by 25% by 2030 is one of the energy efficiency targets (source).
• Climate Change Master Plan (CCMP) 2015-2050. Thailand’s National Climate Change Master Plan (2015-2050) aims to help the country achieve low-carbon growth and resilience to climate change by 2050. Long-term goals (2020-2050) include: Reducing energy intensity by at least 25% by 2030 vs a business-as-usual scenario (source);
• Thailand Energy Efficiency Development Plan 2015-2036 sets a target of 30% reduction in energy intensity by 2036 (baseline 2010), up from the 2011 EEP’s target of 25% reduction by 2030.

Additional fees on excessive electrical consumption (based on a Ministry of Energy norm) are part of the plan, encouraging energy conservation in factories, buildings, and public buildings. For new structures, it also necessitates reporting of energy use per area.

 Marketability: N/A