Adaptation
Building resilience
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Mitigation
Moving towards
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REDD+
Reducing Emissions
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and forest Degradation
Finance
New finance models
for the green economy
 
 
 

Energy Saving Programme in Egypt (MEDREP Finance PROSOL)

Energy Saving Programme for the Tourism sector

The Energy Saving Programme (ESP) for the Tourism Sector is being implemented through UNEP. This Energy Saving Programme would implement a finance mechanism that is intended to help local financial institutions (FI) build loan portfolios in the Renewable Energy (RE) area by covering part of the financial costs of the installations. This project will help to partially reduce the "equipment cost barrier".

Financing mechanisms

UNEP through its Mediterranean Renewable Energy Programme in cooperation with the Italian Ministry for Environment and Territory (IMET) are planning to allocate a fund of US$ 500,000 to support the diffusion of solar water heaters and energy efficiency technologies in hotels and resorts in the red sea and south Sinai. Using the available fund necessitates developing a suitable financial mechanism which should take into account the following criteria:

  • Market barriers
  • Maximum possible leverage by the local financial institutions
  • Customers needs
  • Suppliers prequalification
  • Economical feasibility of the targeted technologies
  • Equipment lifetime
  • Technical support

The Leasing Mechanism

This mechanism is targeting a category of the customers on operation and has no credit problem, yet they would like to acquire SWH with soft payment terms. Through this mechanism, they could acquire a collective SWH through a capital leasing contract where they can pay the cost through installments over five years. These leasing contracts normally need a down payment not less than 30%. It is then proposed that the targeted customers pay only 20% for the down payment and the facility will provide a subsidy of 15%. Accordingly, a total down payment of 35% will be given to the bank.

The Loan Guarantee Mechanism

This mechanism is targeting customers who may have a problem to access finance as well as customers who have facilities under construction, in other word all types of customers whom could not benefit from the leasing mechanism. The customers will get a loan guarantee as well as partial interest rate subsidy for the cost of the SWH. The current bank interest rate is around 11% plus 2% guarantee fee. Therefore, a total of 13% will be charged by the bank but the facility will subsidize 6%. This makes an interest rate of 7% to be paid by the customer. The loan contracts would have a term of five years and the down payment will be negotiable.

Market Development Barriers

The main barriers limit the use of solar water heaters are:

  • Relatively high initial investment;
  • Bad previous experience with the locally manufactured systems;
  • Absence of institutional support;
  • Low quality installation and after sales services and lack of training programme;
  • Limitation in some cases due to the contradiction with the architectural design of the building or space availability;
  • Lack of Awareness Raising Programme.