1 Eco-Crédito Empresarial Masivo Program September, 2018

2 Improve energy competitiveness in Small and Medium Enterprises (SMEs) sector through facilitating the massive replacement of obsolete or low efficiency equipment with new high energy efficiency equipment. General Objective of the Program

3  Helps SMEs to modernize their electrical equipment, in order to promote savings and efficient use of electricity.  Credits are granted based on very simple requirements and a parameterized study of savings.  The credits are paid with the saving of electrical energy, without putting at risk the economic situation of the companies. Characteristics of the Program

4 Background: Ministry Coordination Contributes resources to the Counter- Guarantee Fund Verifies integral management of polluting waste recovered from inefficient equipment, through the Collection and Destruction Centers Supervises the Program Authorizes the Guidelines of the Program Contributes resources to the Counter- Guarantee Fund Provides the resources of the Energy Incentive Structures the Financing Scheme Manages the Counter-Guarantee Fund Grants line of credit

5 GIZKFW  Technical Assistance in the preparation of the Program Eco- Crédito Empresarial  Development of Appropriate National NAMA Mitigation Actions for Micro, Small and Medium Enterprises  Financing at preferential interest rates to the Mexico Government through the Ministry of Finance (SHCP) for the Program Eco- Crédito Empresarial Background: Complementary Support

6 Multiple Benefits of the Program Energy Efficiency Actions Energy Savings Conservation of Energy Resources Liberation of Energy Infrastructure Energy Security Reduction of GreenHouse Gases Less Pollution Cost Reduction Productivity Improvement Job Creation Poverty Reduction Sustainable Development

7 Small and Medium Enterprises (SMEs) More than 4 million SMEs (98.8% of the Economic Units in México) Potential Beneficiaries of the Program 52% Gross Domestic Product (GDP) 73% National Employment 14% Electric Power

8 Counter-guarantee: 2.0 MDP Energy incentive: 4.6 MDP Counter-guarantee: 50.0 MDP Charge through electricity bill Credit line: MDP Maximum amount of credit: $250, Interest rate: % + IVA Simple recuperation period: 4 years Eco-Crédito Empresarial Masivo In 2012

9 Counter-guarantee: 72.0 MDP Energy incentive: MDP Counter-gurarantee: MDP Credit line: 2, MDP Maxumum amount of credit: $ 900, Interest rate: 16.45% y % + IVA Simple recuperation period: 4 and 7 years Eco-Crédito Empresarial Masivo In 2018 Charge through electricity bill

10 Operating Process of the Program Repayment through electricity bill Funds Manages and Operates MIPYME Receives financing for efficient equipment Contragarantía Energy Incentive Technical Assistance Verifies integrated waste management

11 Financed Technologies Initial Situation 2012 Electric Motors Commercial Refrigeration Air ConditionerLighting Electrical Substations

12 Financed Technologies Current Situation 2018 Electric Motors Thermal Isolation Commercial Refrigeration Air Conditioner Refrigeration Chambers Harmonic Filters Lighting Capacitor Banks Sun – Water Heating Electrical Substations

13 Avances del Programa

14 Equipment Replaced The total increase in Equipment Replaced from 2015 to 2018 jumped from 20,815 to 42,005

15 Program Evolution

16 Program Evolution

17 Program Evolution

18 Lessons learned  The current model of Ecocrédito Empresarial works very well for SMEs in the commerce and service sectors, but not in the industry sector. We are assessing the situation in order to provide a differentiated treatment to the industry sector. It is likely that industry sector would respond to different incentives, which we are currently evaluating  Dealers and sellers may require credits in order to boost the supply chain of the SMEs. The working capital of dealers and sellers may be not enough to diversify their portfolio of products and reach a more diversified market of SMEs  Low interest rates is not the main driver for SMEs to sign credits. Small changes in interest rates do not affect significantly the allocation of credits.  Publicity is a driver for Ecocredito. Placing the Ecocredit model at a greater number of local chambers of commerce may foster the allocation of credits in diversified markets

19 Lessons learned  It is very hard to integrate chain supply for SMEs for more than one technology. The trend is that dealers and sellers focus in ONLY ONE technology and not more than one.  It is necessary to find ways to support not only SMEs, but also dealers and sellers to diversify its portfolio of products and increase the amount of SMEs served.  The probability of default of SMEs gets lower if charged through electricity bill. Furthermore, SMEs appreciate being charged through their electricity bill.  The 65 to 70 years old SMEs owners tend to be low risk credits. While commercial banks leave this market unattended, it turns to be a good payer market.

20 Thank you