Technical Risks

RETs are often perceived by domestic financiers as new and unproven technology.

RETs service points are not available or not easily accessed for off-grid areas.

The gap between the projected and the actual:

•  Energy supply;

•  RETs' performance; and

•  RETs lifetime

may influence the cash-flow quality needed for loan repayment.

Adopt field-proven and cost-efficient technological options that have suppliers with good service (technical assistance/users training) and reliable after-sales warranties.

For electricity-producing RETs - excluding PV SHS - the uses of schemes like turn-key, BOT, and leasing can help to mitigate failure in engineering, procurement and construction. While for end-use RETs, leasing and rental can be a good scheme to reduce technical risks.

Good technical assessment is crucial for RETs implementation, especially relating to the availability of the source of energy. Having a hybrid system can become a good solution to address potential unsustainable supply of the respective energy sources.

Market Risks

Off-grid areas often perceived as an unviable market for electricity service as the result of lack of aggregated market/ consumers and lack of sufficient consumption, as well as the consumers' capacity to pay.

Products/services are vulnerable of price fluctuation and sales volume, which influence the level of cash flow, especially on the revenue stream. Without good cash flow, it is difficult for financiers to foresee the repayment of RETs investments.

An effective way to mitigate this risk is by securing a long-term product/service purchase agreement with potential buyer of products/services at least during the loan maturity period.

For the financiers, having a standing instruction of borrowers' revenue to the bank account of the financiers could help to increase their confident.

Business

Risks

RETs investment requires good governance on its operation, especially as it involves long-term pay back periods.

This risk may include lack of expertise/technical competence in operating the energy supply systems, as well as the overall business operation.

Involve those with expertise and experience in handling a similar kind of business, or carry out joint operation with a competent institution.

A minimum cash reserve must be secured to cover loan installment during reparation period if the RETs fail to operate.

If necessary, secure a loan credit facility to cover the credit risks.