Related News

New solutions needed to boost trade finance for women-owned firms, IFC says

DBS and IFC sign global trade deal for emerging markets

ECA-backed lenders spark up Baltic wind farm funding

Eksfin puts wind in sails of UK renewable energy deal

IFC joins Taulia as supply chain finance funder

The International Finance Corporation (IFC) has urged trade financiers to capitalise on the growing need for climate-friendly produce.

GTR was present at a gathering of bankers and exporters in Washington at which Ajay Narayanan, the IFC’s head of sustainability, global financial markets, said that the rewards of supporting climate-friendly initiatives are great and that the market is crying out for liquidity.

The IFC is currently extremely active in the “climate-smart” market, but without the advanced support of commercial funders, there are big-ticket transactions that are unable to attract finance.

Earlier this year, for instance, the IFC guaranteed a US$13.5mn letter of credit (LC) import issued by JP Morgan to Yapi Kredi bank in Turkey for the import of solar-powered gas turbines. It’s a typical transaction for the corporation in this sphere but isn’t big enough to meet demand, particularly in emerging markets.

“The opportunities are in the hundreds of millions, if not billions,” Narayanam told the audience, adding that there is an “enormous amount of value” available to those offering working capital and trade finance facilities in places such as Sub-Saharan Africa, where green vendors have been increasingly active since the onset of the eurozone crisis.

Also, with diesel and other fuels unaffordable in some developing countries, there has been a convergence between renewable energies and mobile technologies. In order to accommodate the rise in consumer demand, Naraynam suggested that demand for solar energy could be about to rise dramatically. Again, though, a lack of working capital and trade finance facilities may prove to be insurmountable without direct commercial involvement.

At the Export-Import Bank of the United States (US Exim)’s annual conference, green exporters also lamented the reluctance of the private sector to fund their activities, but praised US Exim for helping to bridge the gap.

Richard Walker, CEO of Zero Motorcycles, an exporter of electric-powered motorbikes, said there is “no better guarantor” than the US government and that prior to involvement with US Exim, his company had major receivables trouble and often had to request payment upfront from customers.

The exporters again referred to the opportunities in emerging markets – particularly in India and Sub-Saharan Africa – but nodded to the difficulties they face in financing them. In Nigeria, for instance, there is a population of 160 million and while the country is rich in natural energy resources, there is a real challenge in power distribution. This, said James Brown of First Solar, creates a space for companies like his, but access to local capital is nigh on impossible to come by.

Inderpreet Wadhwa, CEO of Azure Power, recently started operating a 35MW solar facility in Rajasthan. The company is able to sell the electricity for 15 US cents per KW/hr. In Liberia, a 25MW plant would be sufficient to power the entire country and he could sell the electricity generated for 50 cents per KW/hr, Wadhwa said. Getting access to the finance to construct a solar plant in Liberia, though, would be extremely tough.

The emerging markets’ green energy sector currently sits around the US$400mn mark. The potential is there to grow it exponentially. There needs to be a willingness of the commercial banking sector to become involved, or the industry may never pass this critical inflection point.