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Guarantee mechanism |
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This sub-project activity provided support for Core Country Groups to
undertake an analysis of local circumstances relevant to the formation and
operation of guarantee funds. One of the key issues faced by many ESCOs, or industrial or commercial enterprises, seeking financing for energy efficiency investments is that banks are unfamiliar with the nature of the cash flows and credit risks involved, and hence are reluctant to make loans. In addition, many of the ESCOs or other smaller companies involved in developing energy efficiency projects may not have well-established track records or strong equity positions, even if they have solid business plans. In order to help commercial banks to become more involved in the energy efficiency industry, and to help jump-start smaller companies, Governments, local development banks, and international organizations, are developing partial loan guarantee programs to provide banks with some additional security to enter the energy efficiency business.
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