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The Bureau of Energy Efficiency will soon launch its venture capital fund.
The proposal for starting the Venture Capital Fund for Energy Efficiency (VCFEE) will be considered at the next meeting of the management advisory committee of the BEE, Ajay Mathur, Director-General, BEE told Business Line today.
The fund will start with a corpus of Rs 70 crore that comes from Government of India, Mathur said.
The Indian market for energy efficiency is estimated to be worth Rs 74,000 crore. The National Mission for Enhanced Energy Efficiency aims to avoid creation of 19,000 MW of fresh power capacity by promoting energy efficiency. However, energy efficiency projects basically lag because of unfamiliar risk profiles.
The VCFEE intends to address this problem. BEE’s documents say that the fund doesn’t mind settling for lower returns, compared with private equity or other venture funds, and says the central idea is to create “volumes in energy efficiency deal flow’. It would act as a ‘leveraging fund’ that would leverage private venture capital investments in the energy efficiency sector, by identifying co-investment opportunities for other venture funds.
The BEE has also started a ‘partial risk-guarantee fund’ that would stand guarantee for debts raised for energy efficiency projects. If the borrower defaults, the fund will pay the lender 50 per cent of the outstanding loan. This would address the debt part of funding the projects, while the VCFEE would chip in with equity, said Mathur.
S Raghupathy, an energy efficiency expert at the Confederation of Indian Industry, said that the venture capital would be of big help particularly to the country’s fledgling ‘ESCO industry’. The energy saving companies implement energy saving measures in the client organisations and get paid out of the savings. ESCOs are unable to secure bank funding, though their business models can give attractive yields, Raghupathy said.
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