Shanghai, May 17, 2006—The International
Finance Corporation, the private sector arm of the World Bank Group, today
signed an agreement to provide Industrial Bank with risk-sharing coverage
of RMB 200 million ($25 million). This will help Industrial Bank
establish a loan portfolio of RMB 460 million ($58 million) of energy efficiency
equipment loans to small and midsize energy users in China. The risk coverage
will be provided under IFC’s China Utility-Based Energy Efficiency Finance
Program (CHUEE). The program is expected to have a significant developmental
impact in promoting energy efficiency, reducing pollution and greenhouse
gas emissions, and expanding lending to small and medium enterprises in
China. The program is also supported by grant funding from the Global Environmental
Facility and Finland’s Ministry of Trade and Industry.
“IFC’s energy efficiency program in China provides a great opportunity
to develop market-based solutions that address environmental issues,”
said IFC Executive Vice President Lars Thunell, who signed today’s agreement.
“IFC is proud to partner with Industrial Bank and to help the Chinese
government achieve a key policy objective--reducing energy consumption
through energy efficiency and conservation measures.”
IFC’s program brings together, for the first time, three key players--utility
companies, suppliers of energy efficiency equipment, and commercial banks
– to create a new financing model for the promotion of energy efficiency.
Industrial Bank will provide commercial lending, while utility partners
and equipment suppliers will act as marketing agents and service providers.
Overall, IFC’s program will support over $150 million in energy efficiency
projects and equipment investment, which in turn are expected to achieve
greenhouse gas reductions of about 5 to 10 million tons.
Industrial Bank’s President Li Renjie stated, “Industrial Bank has been
focusing on financial innovation. The new program is a successful
example of partnership to create a new financing model for energy efficiency.
This model is a win for all of us, and Industrial Bank can use the
market-based financing model to leverage IFC’s risk-sharing facility on
a more scalable basis. It not only solves the problem of SME energy
financing, but also supports China’s energy conservation business. It
achieves both social and economic benefits.”
The new financing model is a result IFC’s energy efficiency experience
in other countries and its experience in China’s financial sector. IFC
found that utilities, such as gas or electricity distributors, can be effective
agents for marketing and delivering energy efficiency projects. Utilities
can act as a “one-stop shop,” offering advice on reducing energy consumption
and pollution, and providing equipment, such as gas boilers and heating
systems, to realize these improvements. At the same time, utilities can
partner with commercial banks that provide loans for the equipment.
The International Finance Corporation is the private sector arm of the
World Bank Group and is headquartered in Washington, D.C. IFC coordinates
its activities with the other institutions of the World Bank Group but
is legally and financially independent. Its 178 member countries provide
its share capital and collectively determine its policies.
The mission of IFC is to promote sustainable private sector investment
in developing and transition countries, helping to reduce poverty and improve
people’s lives. IFC finances private sector investments in the developing
world, mobilizes capital in the international financial markets, helps
clients improve social and environmental sustainability, and provides technical
assistance and advice to governments and businesses. From its founding
in 1956 through FY05, IFC has committed more than $49 billion of its own
funds and arranged $24 billion in syndications for 3,319 companies in 140
developing countries. IFC’s worldwide committed portfolio as of FY05 was
$19.3 billion for its own account and $5.3 billion held for participants
in loan syndications. For more information, visit www.ifc.org.
IFC fulfills three functions related to environment and social development:
managing environment and social risks associated with the projects it finances
via environmental and social standards that are required of its client
companies; collaborating with client companies to find business opportunities
arising from the protection of the environment and social development;
and exploring and developing new financial products to create new business
opportunities linked with the environment and social development.