$500,000 energy fund fails to electrify investors...
Published:Sunday | July 17, 2011 | 12:00 AM
... DBJ launches demand study to find out why
Avia Collinder, Business Reporter
The Development Bank of Jamaica (DBJ) has commissioned a demand study on energy products and services needed by small and medium companies even as its half-a-billion energy loan fund is snubbed by borrowers.
The DBJ set up a J$500-million line of credit open to businesses for energy retrofitting and conversion to alternative energy sources close to three years ago, but less than one-third of the fund has been distributed.
The loans, which are capped at J$15 million per borrower, are priced at 9.5 per cent interest - down from 12 per cent since May 2010.
Carmen McDonald, loan-origination manager with the DBJ, said Monday that 27 applications from small and medium-size entities, valued at a combined J$250 million, are awaiting approval.
But of the 70 projects financed by the DBJ in fiscal year 2009-2010, across all business lines, only two, or 2.86 per cent, were energy related.
Emily Lewars, general manager institutional strengthening and research at the DBJ, said most companies want guarantees that retrofitting their businesses would result in savings.
Despite the DBJ's assurances, said Lewars, some remain sceptical.
Since the launch of the energy line in October 2008 — funded from the PetroCaribe oil facility — just J$157.46 million, or 32 per cent was disbursed to 14 companies.
"Of the J$500-million PetroCaribe line, we have J$343 million available," said McDonald.
Individual borrowers or groups must provide 10 per cent of the project cost, which include a compulsory energy audit.
The DBJ on June 22 hired Research Strategy & Solutions Limited (RSSL) at a cost of J$72 million (US$807,000) - J$53 million of the cost is funded by a grant from the Inter-American Development Bank — to survey SMEs and determine their energy efficiency and needs. The demand study should be concluded by September.
The study, according to information provided by the DBJ, will review a sample population of SMEs to determine their borrowing trends related to energy projects.
The DBJ managing director Milverton Reynolds says the study is being done in the context of poor demand for the development bank's energy-retrofitting loans, even as "Jamaica's energy bill over the last five years has skyrocketed", and with it, the country's foreign-exchange expenditure.
"High electricity bills have also stymied the ability of businesses - from micro to large enterprises - to grow their operations," Reynolds said in a DBJ press release.
For the current research project, RSSL's report is expected to analyse demand trends for energy- efficiency investments, as well as the issues or challenges that could be affecting the demand for energy-related investment.
The DBJ will roll out a public education campaign under the SME energy programme in November 2011 to hammer out the economic benefits of energy conservation, renewables, and energy-efficient technology.