On September 27, the thematic forum “Green Freight Starting from Guangdong” was held at Baiyun Hotel Guangzhou, with attendees coming from the transport expert team of World Bank, Guangdong Provincial Department of Transport, Guangdong Provincial Department of Finance, the Development and Reform Commission of Guangdong, the Environmental Protection Department of Guangdong, the Environment Finance Department of Industrial Bank (IB) Head Office, IB Guangzhou Branch, and green freight demonstration enterprises of Guangdong. At the forum, IB Guangzhou Branch and the Green Freight Project Office of Guangdong Provincial Department of Transport signed the Green Freight Cooperation Agreement. Depending on the carrier of Guangdong Green Freight Demonstration Project, Both parties will proactively promote the energy conservation and emission reduction in the freight industry and the entire transport field, so as to improve the overall efficiency of the industry and support the sustainable development of freight and logistics enterprises. World Bank and Guangdong Provincial Department of Transport jointly presented licenses for the first group of green freight demonstration enterprises.
IB indicated that, during the “12 th Five-year Planning” period, it would provide the energy conservation and environmental protection industry of Guangdong Province with special green financing up to RMB 20 billion, and give preferential loan terms and interest rates for the financing of key low-carbon, energy conservation and environmental protection projects.
The New Financing Model for “Green Freight” Broke Through
“IB has explored a brand-new financing solution for green freight”, the relevant person-in-charge of the Green Freight Project Office of Guangdong Provincial Department of Transport told the reporter at the forum.
It is said that Guangdong Green Freight Demonstration Project is the first energy conservation and emission reduction demonstration project that implemented in the global road freight industry by World Bank with the donation of Global Environment Facility (GEF). The project aims, resorting to information-based approaches, at improving the transportation organization model, reducing the empty-loaded rate of vehicles and improving the energy conservation and consumption reduction level of the entire road freight industry by making use of advanced technologies for energy conservation and emission reduction of road transporting vehicles both at home and abroad. It strives for fulfilling the objective of reducing 150,000 tons of carbon dioxide within 3-4 years.
The implementation concept of the project is, based on the donation of World Bank, to select a group of representative freight enterprises in the industry and first purchase and equip onboard facilities that helpful to improve the fuel efficiency for vehicle driving, such as low-resistance tire, side skirt and shroud, with the funds of enterprises, which may then have their early investment compensated with fuel-saving benefits and receive the subsidies donated by World Bank according to the follow-up refitting effect. Enterprises are required to make prior input, so additional cost increases, but the economic benefits generated by fuel conservation cannot be seen soon in a short time. As a result, this affects the enthusiasm of enterprises to make one-lump investment. Furthermore, owing to the “small, scattered and disordered” characteristics of China's freight industry, most enterprises can hardly receive financing for technical transformation from commercial banks. Therefore, the project is encountered with the problem of implementation in the process of promotion.
With the participation of IB this time, technical service suppliers will be introduced to function as the intermediate agencies by resorting to the energy performance contracting (EPC) model in the industrial field. From the technical perspective, technical service suppliers, serving as a bridge between equipment suppliers and freight enterprises, provide and carry out a package of integrated fuel-saving solutions for freight enterprises. From the financing perspective, the application for financing by technical service suppliers avoid the situation that a bank should face a variety of freight enterprises with varied strengths, qualifications and credit ratings, thus greatly reducing the operation cost brought by “one-to-many” situation.
For this reason, IB directly improves the operability of “green freight” project and settles the most important link from its design concept to market operation – availability of funds.
As noted by the reporter, the model also provides a good opportunity for freight technology suppliers, a group of emerging market entities in the freight industry, to grow strong with bank-supported financing.
“IB provides an additional path for small-sized suppliers like us to become rich”, said at the forum the person-in-charge of Dongguan Cai's Fiberglass Reinforced Plastic Products Co., Ltd., who served as a fuel-saving technology supplier in the green freight early demonstration project. Freight technical service suppliers purchase equipment and facilities through bank-supported financing to provide fuel-saving transformation services for freight enterprises, and thus share the economic benefits produced through fuel conservation. Therefore, they will embrace a broad market prospect.
“Exploiting Resources Available but not Real Property”
As typical representatives of the small- and mini-sized enterprises in China, freight enterprises are characterized by small asset scale, weak credit qualification and non-standard management, so they have to long face the problems of insufficient funds and financing difficulty during their development. Innovation in the financing model for “green freight” project is only a small part of the whole story that IB has committed itself to innovation in green finance and financial services to small- and mini-sized enterprises.
As learnt by the reporter, the expert team of World Bank led by the chief expert of World Bank in the area of transport witnessed the signing ceremony between Guangdong Provincial Department of Transport and IB. As disclosed by the Bank, after its participation in the “green freight” project, IB finally decided to introduce the energy performance contracting (EPC) model in the industrial field after communicating with the expert team of World Bank and the Project Office of Guangdong Provincial Department of Transport over and over again and holding several project coordination meetings with project related parties.
The principal of the Environment Finance Department of IB believed, the difficult financing of emerging industries and small- and mini-sized enterprise can be attributed to the insufficient understanding of financial institutions to the commercial models and risk points of enterprises after all. Thus, they cannot control the substantial risks. With the idea to approach the commercial models of enterprises based on actual market needs, the Bank adopts the principle of “exploiting resources available but not real property” (namely, not stressing on the guarantee by pledging real estate and land) in terms of risk control and devotes itself to providing enterprises with one-stop financial solutions from multiple perspectives by making in-depth research in commercial models and customer features.
It is reported that IB released the special solution of “Green Finance • Tactics (2013)” targeting at green industries in this year, comprising a number of characteristic products, e.g. the loan by using the future usufruct as the pledge for the financing of EPC projects, purchaser credit for the promotion of new energy automobile, and order financing for the promotion of LED green lighting.
By the end of August 2013, IB Guangzhou Branch has provided financing of RMB 18.626 billion in the area of energy conservation and environmental protection across the province, covering more than 500 projects in many industries such as electric power, coal, iron and steel, chemical, and papermaking. The projects supported are expected to reduce 2.92 million tons of carbon dioxide. The carbon emission reduced is equivalent to shutting off 7 thermal power plants of 100 MW or stopping running10,000 taxis for one year.