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CASE STUDY 9:                CHINA – UTILITY-BASED ENERGY EFFICIENCY FINANCE
                            (CHUEE) PROGRAM
 Barriers                Lack of access to credit, lack of experience in sustainable financing

 Instrument              Guarantee – pro-rate / pari passu

 Application             Guarantee covering part of losses made for energy efficiency projects

 Amount                  US$197 million (guarantee cover)


PROJECT BACKGROUND AND OBJECTIVES                             efficiency packages to their customers and providing
                                                              finance.
The CHUEE Program was established in 2006 by IFC and
partners. The Program provides risk sharing facilities        INSTRUMENTS USED
and technical assistance to support energy efficiency
                                                              The key financial mechanism in the Program is a risk-
measures in China. The identified barriers to the uptake
                                                              sharing facility provided by IFC to commercial banks.
are difficulties in marketing energy efficiency products
                                                              Under this mechanism, IFC pledges to bear part of losses
and in accessing credit for energy efficiency projects.
                                                              that arise on energy efficiency loans that are advanced
Access to credit is particularly difficult for small and
                                                              by the bank.
medium enterprises, and in addition commercial banks
lack experience in sustainable financing. By reducing         Loans provided under the Program have a maximum
these barriers the Program aims to reduce greenhouse          duration of 5 years. Borrowers are required to cover at
gas emissions.                                                least 20% of the project costs themselves.

The CHUEE Program was designed to target energy end           INSTITUTIONAL ARRANGEMENTS
users in the multi-family residential, commercial,
                                                              Under the CHUEE program, IFC has an agreement with
industrial, and institutional sectors. Direct recipients of
                                                              local bank partners to provide load guarantees when the
support under the Program would be commercial banks,
                                                              banks lend to market partners, such as ESCOs, utilities,
energy management companies, energy efficiency
                                                              vendors, or end customers.
equipment suppliers, and utilities.
                                                              The banks provide loan to the market partners along
The Program also aimed to assist the development of
                                                              with a cooperation agreement – which can involve
partnerships between commercial banks and suppliers
                                                              joined marketing efforts, customer awareness etc.
of energy efficiency equipment. By working more closely
together banks and suppliers are better able to market        OUTCOMES
loans, coordinate to diversify risk and lower costs.          Lending supported by the Program has expanded
Other support provided under the Program include              very quickly, to US$630 Million by December 2010,
technical and financing support to energy management          of which $402 Million was covered by loan
companies, which provide a package of design,                 guarantees. The Program has helped established an
financing, implementation and management services to          institutional setup for EE lending in partner banks,
end-users, and support to utilities in marketing energy       introducing     loan     products    different  from
                                                              conventional practice based on corporate assets and
                                                              facilitate access to finance for key market players –




1 | R E F I N e www.worldbank.org/energy/refine
ESCOs – through technical assistance for building              Three banks have participated in the CHUEE program:
their capacity and by brokering relationship with              the Industrial Bank (with two risk sharing facilities), Bank
banks.                                                         of Beijing and Shanghai Pudong Development Bank.

However, according to IEG’s Evaluation of the
Program, there are areas of improvement to
increase the level of additionality. The review found
that the Program should have focused more on
market segments that did not have access to other
forms of energy efficiency finance already in place in
China. In particular, it had focused on large
enterprises (cement, steel, chemicals factories)
rather than the SMEs, housing and commercial
buildings that were originally envisaged as targets
recipients. IFC has launched in 2011 a new CHUEE
SME program targeting EE SME lending only.




Further reading
IFC Independent Evaluation Group website – click here
IFC Sustainable Energy Finance, Experience of IFC and our Partner Banks, 2007 – click here
Global Times, World Bank's IFC offer more help in China's energy efficiency efforts , 2010 – click here




2 | R E F I N e www.worldbank.org/energy/refine