‘Water (em)powers our future’

A country that accommodates part of the mighty Himalayan mountains possesses vast sustainable energy resources, as the world’s greatest mountain range is a hydropower treasure trove. Even so, electricity is scarce in Nepal. Two-thirds of the population has no access to the electricity, which is essential for modern education, transportation, health care and unbiased information. Even for the lucky few who do have access to electricity, the quality is lamentable and the supply is unreliable, as the country suffers from prolonged power failures.

Manoj Goyal and several other bankers, and energy specialists decided that something should be done about the substandard energy provisions. When they discussed the future of Nepal in 1998, they concluded that the country needed a specialized financial infrastructure and a superior knowledge network for promoting sustainable energy, and they believed a specialised bank could cater for both those needs. However, they were unable to realise this until 2006, once stability in the country had increased following a turbulent political period. In that year they founded the Clean Energy Development Bank Limited (CEDB), and Goyal took upon himself the task of getting this initiative up and running. Upsides.com interviewed him about his exceptional bank that focuses on sustainable energy.

What was the main reason for setting up CEDB?
‘We thought that our country should begin by addressing the most basic need, namely energy, in the most sustainable manner. We are convinced that hydropower is the key to our future, as this is a clean source of energy that is close to the users. Our potential for hydropower is enormous. We have the second highest exploitation potential in the world, after Brazil. With a minimum of 42,000 megawatts of exploitable energy, we could provide electricity for the entire country and even become an energy exporter. At present we import electricity. The dream of sustainable development by harnessing this enormous hydropower potential of the country required a very specialized financial institution determined to live the dream, for this very purpose CEDB was established.’

According to modern standards Nepal has a somewhat underdeveloped energy supply, with 87 percent of the country’s energy coming from burning wood. Why has your country invested so little in its own energy provisions?
‘We have never had any fossil fuels. Furthermore, our country had been politically closed for a very long time, and consequently energy provision had not been a high priority. Political wrangling created a situation in which government, banks and investors ignored the energy sector. If you compare the economy with a house, we were already occupied with building the first floor before laying firm foundations. And when energy finally seemed to become a priority, at the end of the nineties, our country entered a period of serious political unrest. Things have improved in recent years and moving from here you will see a sea change in the energy situation of Nepal.’

Why have the existing banks never tackled energy seriously?
‘In order to finance energy projects, access to funds and energy know-how are required. But that’s not all. You have to be active on so many levels: creating energy awareness, persuading politicians to adopt stimulating policies, and training bankers in energy financing. You then have to convince customers to invest in the future of their country. That is too much for an ordinary bank, but not for a focused bank such as CEDB.’

What characterises your investment approach?
‘We have been pursuing proactive investment approach for promoting small and medium-sized hydropower projects by channelizing both local and international funds in form of debt and equity financing. For debt financing, we have a special in-house due diligence unit, consisting of highly qualified and experienced hydropower experts, for conducting technical and financial feasibility of the projects. We have also played leading role in arranging consortium financing for even several hydro projects. For equity investment, we have set up CEDB Hydro Fund (CHF) which has been created together with local investors. With this fund we help projects through the initial start-up phase. Within three years we have not only financed the new projects but also breathed life into a number of dormant projects through our share capital and expertise. We bring these projects to a stage in which banks and other shareholders are prepared to step in. In the process, we have been working for creating systematic and investor friendly environment to attract further investments into this sector and to ensure the security of the investments.’

Do you work only with local financial backers?
‘We understand that the dream of realising hydropower potential of Nepal to fullest extent is not possible only by working with the local financial backers. We have managed to interest international parties in hydropower projects. However, it is difficult to find investors of a suitable size. Large investors often find our projects too small to justify the effort required. Moreover Nepal has been struggling to improve its economic position. Fortunately the economy looks far more promising in the coming years. In the prevailing context where government and international agencies are concerned about this sector like never before, we are working with both local and international backers.’

I understand that you also offer normal banking services, such as lending and saving. Why?
‘In order to finance sustainable energy we need a healthy balance, so we are trying to attract as many customers as possible who want to deposit their savings in our bank. We do this by emphasizing that if they are getting the same services, they might just as well bring their money to a bank that is investing in their future. This is a fine balancing act. Not everyone is persuaded by this, as energy awareness is still fairly low. However, we still want this “less aware” group of people as our customers, and for this we need well publicised banking activities.’

Are you managing to do this?
‘Yes, definitely. We have now established a good reputation and the Nepalese citizens are gradually getting to know us. This gives us growth potential. We are the right bank in the right place at the right time.’

Your organisation wants to generate energy awareness among the common citizens of Nepal and is active in other areas besides hydropower projects. What are these other areas?
‘We are trying to draw people’s attention towards energy conservation and sustainable energy. For this, we have been organizing awareness programs related to energy-efficiency, climate change, and many others. This is something the other banks did not do before in Nepal. We also support solar and biogas projects and we help with the provision of microcredit for the replacement of paraffin stoves or for micro hydropower projects (less than 1 megawatt, Ed.). We do the latter together with development financial institutes such as FMO and GIZ.’

Your bank won the ‘Best development bank’ award in 2010. Does that help?
‘It is nice to receive recognition, of course. However, we won this prize because of our unique initiative and contributions. This means that we do not have any readily available references from the past. We have to learn everything by doing it ourselves. Our talent lies in building bridges between local needs and international technology and funding. Fortunately we receive plenty of support in this from our joint-venture partner FMO and development partner Triodos Bank. This cooperation gave our partners confidence in us, especially in the early days. FMO also has a fantastic international network. We badly need this, especially for finding investors for medium-sized hydropower projects. The hydro-electric plant that we are financing close to the Mount Everest base camp is a good showcase.’

http://www.cedbl.com/