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Jacquelin Ligot Director, Energy Efficiency and Climate Change  Amsterdam  Sustainable Energy  Forum 25 April 2006 EBRD’s ...
What is EBRD? <ul><li>An Investment Bank with Public Shareholders: </li></ul><ul><ul><li>AAA-rated international financial...
A strong presence: 32 Offices in 27 Countries
A wide palette of financing instruments <ul><li>Loans </li></ul><ul><li>Equity, including combination of loan and equity <...
Setting the scene <ul><li>13% of global marketed energy consumption, and 13% of GHG emissions </li></ul><ul><li>Consumptio...
Primary energy consumption
Energy intensities
Projections of energy intensities
EE; Challenges and Barriers <ul><li>Subsidised energy prices, mostly in CIS </li></ul><ul><li>Inappropriate tariff structu...
Energy Efficiency: EBRD’s Strategy  <ul><li>Top priority of the Bank </li></ul><ul><li>Dedicated Energy Efficiency and Cli...
Energy Efficiency: EBRD’s Approach <ul><ul><li>Systematically pursue EE opportunities in all, but mostly industrial, proje...
Industrial Projects: Approach <ul><li>Screen  all  projects at concept review stage or earlier and identify those with EE ...
Industrial Projects: Results <ul><li>Since 2002, the Bank has financed over 35 projects with Bank-funded energy efficiency...
Taxonomy of Industrial Energy Efficiency Investments <ul><li>… energy savings </li></ul>
Example: Svilosa (Bulgaria) - 2005 <ul><ul><li>EUR 18 mln Loan, for restructuring and expansion of Pulp and Paper mill </l...
Svilosa; Energy Audit results
District heating modernisation <ul><li>DH is a distinctive feature of countries in Transition: 65%-70% share of heat marke...
District Heating Modernisation: Examples <ul><li>Sofia (Bulgaria - 2002) </li></ul><ul><ul><li>Toplofikacia Sofia is  larg...
Poznan DH + Cogeneration Privatisation (Poland) 2003-2004 <ul><li>DH company and CHP plant of Poznan were  privatised cons...
ESCOs: Energy Alliance (Ukraine) 2004 <ul><li>First privately-owned Ukrainian  ESCO ; Start-up company;   Sponsor is Weste...
UkrEsco (Ukraine): a Public ESCO <ul><li>State-owned ESCO created in 1998 through an initiative between Ukraine, EBRD and ...
City of  Łó dz (Poland): ESCO for public sector facilities <ul><li>Bank initiated and supported project development with T...
Bulgaria Credit Line #1: Industrial EE and  Renewable Energy - 2004 <ul><li>€ 50mln EBRD credit line framework with Bulgar...
Bulgaria EE and RE Credit Line –  Results so far <ul><li>38 sub-loans approved by PBs for an amount of loans of € 22 milli...
Bulgaria Credit Line #2: Residential Sector - 2005 <ul><li>€ 50 mln EBRD Credit Line Framework  with Bulgarian banks for o...
EBRD’s role in the Carbon Market <ul><li>Project financing based on Carbon Credit sales </li></ul><ul><li>Intermediary pur...
Carbon Finance: a project example <ul><li>Paper Factory Stambolijski: pulp & paper mill in Bulgaria </li></ul><ul><li>EBRD...
Characteristics of EBRD’s approach <ul><li>Public or private clients </li></ul><ul><li>Flexible and diverse instruments: s...
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Energy Efficiency at the EBRD [Venue, Date]

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  • Cos’e l’EBRD Nasce nel 1991 per promuovere i processi di trasformazione economica nell’Europa dell’Est e nelle repubbliche Ex Sovietiche E’ una banca d’investimento con 62 azionisti puibblici: paesi UE, 27 paesi d’operazione, UE, EIB, US, Giappone e altri Dotazione di capitale di €20 mld: questa rappresenta la massima capacita’ totale di finanziamento. E’ importante notare che non tutto il capitale e’ stato versato interamente dagli azionisti. Una parte di esso e’ generata tramite emissione di obbligazioni La banca ha un rating AAA presso le agenzie di credito internazionali: questo consente il reperimento di capitali a basso costo nei mercati obbligazionari
  • Presenza sul territorio : una rete di 35 uffici nei 27 paesi in cui la Banca opera (di cui 4 in Russia e 2 in Kazakhstan)
  • Esempi di modernizzazione dei sistemi di teleriscaldamento di Sofia e Surgut Esempi di progetti nel settore pubblico Sofia: sovereign guarantee (garanzia dello Stato) Surgut: prestito protetto dal cash-flow generato dalla Municipalita’, senza ricorso a sovereign guarantee
  • Esempio di progetto di cogenerazione : privatizzazzione dell’impianto di cogenerazione e rete teleriscaldamento di Poznan. La componente principale di risparmio energetico attesa e’ l’incrementata capacita’ d’utilizzazione del sistema (efficienza complessiva +20% circa)
  • ESCO - Esempio 1 : Lodz, ESCO nel settore pubblico mirato alla gestione dei sistemi energetici di edifici pubblici (soprattutto scuole e asili) Il piu’ grosso contratto ESCO nella regione Selezione della ESCO attraverso gara d’appalto (Il progetto non e’ ancora stato firmato)
  • Esempio di linea di credito dedicata a micro progetti di efficienza energetica e rinnovabili in Bulgaria. Esempio di promozione di metodologie di finanziamento (skill transfer) presso gli istituti di credito locali. Meccanismo di incentivazione: “success fee” per banche e beneficiari
  • Transcript of "Energy Efficiency at the EBRD [Venue, Date]"

    1. 1. Jacquelin Ligot Director, Energy Efficiency and Climate Change Amsterdam Sustainable Energy Forum 25 April 2006 EBRD’s Approach to Financing Energy Efficiency in Transition Countries
    2. 2. What is EBRD? <ul><li>An Investment Bank with Public Shareholders: </li></ul><ul><ul><li>AAA-rated international financial institution founded in 1991 </li></ul></ul><ul><ul><li>owned by 62 countries (including all countries of operation), the EU and EIB </li></ul></ul><ul><li>Mandate: facilitate the transition of 27 CEE and CIS countries to market economies </li></ul><ul><li>Capital base of €20 billion and Portfolio of €15 billion to date: </li></ul><ul><ul><li>Largest single private investor in the region, but can also finance public sector projects </li></ul></ul><ul><ul><li>75% debt / 25% equity </li></ul></ul>
    3. 3. A strong presence: 32 Offices in 27 Countries
    4. 4. A wide palette of financing instruments <ul><li>Loans </li></ul><ul><li>Equity, including combination of loan and equity </li></ul><ul><li>Guarantees, including credit enhancements (performance bonds etc.) </li></ul><ul><li>SME loans </li></ul><ul><li>Equity funds </li></ul><ul><li>Micro/small business programmes </li></ul><ul><li>Credit lines </li></ul><ul><li>Trade Facilitation Programme </li></ul><ul><li>Co-financings </li></ul>Direct Indirect
    5. 5. Setting the scene <ul><li>13% of global marketed energy consumption, and 13% of GHG emissions </li></ul><ul><li>Consumption has dropped during the first 10 years of transition but is picking up rapidly, and is expected to grow much more rapidly than in W Europe (+45% for EIA by 2025) </li></ul><ul><li>Energy intensities have fallen steadily, and will continue to do so. While NMS will converge towards EU-15, CIS and SEE will remain significantly above </li></ul><ul><li>There has been a shift away from coal towards gas, and this will continue in particular in central Europe </li></ul><ul><li>GHG emissions are down by 36% since 1990 but are expected to increase by 40% till 2025 (EIA) although they would remain 10% below their 1990 level </li></ul><ul><li>Contrast between a small set of resource-rich countries (Russia, Kazakhstan, Turkmenistan, Azerbaijan) and a vast majority of net importers (all EU-8) </li></ul>
    6. 6. Primary energy consumption
    7. 7. Energy intensities
    8. 8. Projections of energy intensities
    9. 9. EE; Challenges and Barriers <ul><li>Subsidised energy prices, mostly in CIS </li></ul><ul><li>Inappropriate tariff structures (e.g. DH billing based on norms; cost-plus tariff methodologies) </li></ul><ul><li>Lack of awareness, etc. </li></ul><ul><li>Lack of adequate legal/regulatory framework for ESCOs </li></ul><ul><li>Reluctance to prioritise investment to improve efficiency </li></ul><ul><li>EE opportunities everywhere but small projects </li></ul><ul><li>Banking system lacks interest or skills </li></ul>
    10. 10. Energy Efficiency: EBRD’s Strategy <ul><li>Top priority of the Bank </li></ul><ul><li>Dedicated Energy Efficiency and Climate Change (EECC) team </li></ul><ul><li>Reorganisation to further mainstream EE in Bank operations: </li></ul><ul><ul><li>The EECC team now operates together with the corporate planning function directly reporting to the First Vice President Banking. </li></ul></ul><ul><ul><li>A new Climate Change Advisory Board has been created to guide and sustain the implementation of the climate change objectives of the Bank across the organisation </li></ul></ul><ul><li>Target of €1 billion in demand-side EE and RE over period 2006-2010 </li></ul><ul><li>EBRD is currently preparing a Climate Change Initiative as its contribution to the IFI “Investment Framework” called for by the G8 at Gleneagles in 2005 </li></ul>
    11. 11. Energy Efficiency: EBRD’s Approach <ul><ul><li>Systematically pursue EE opportunities in all, but mostly industrial, projects </li></ul></ul><ul><ul><li>Make energy supply systems more efficient </li></ul></ul><ul><ul><li>Support providers of EE services, e.g. ESCOs </li></ul></ul><ul><ul><li>Reach out to small projects through wholesale financing instruments: equity funds or local financial intermediaries, e.g. credit lines </li></ul></ul><ul><ul><li>Use Carbon Finance as a co-financing source </li></ul></ul>
    12. 12. Industrial Projects: Approach <ul><li>Screen all projects at concept review stage or earlier and identify those with EE potential – ratings are given to projects ( E0, E1, E2 ) </li></ul><ul><li>Provide free energy audits funded by donors (TC), mostly in E2s </li></ul><ul><ul><li>E.g. Tacis €0.5 million for Russia </li></ul></ul><ul><li>Structure an “add-on” to direct debt or equity financing – enhances company cash flow </li></ul><ul><li>Energy Management training modules where appropriate </li></ul><ul><li>Next Step: develop benchmarking, in particular for E1s </li></ul>
    13. 13. Industrial Projects: Results <ul><li>Since 2002, the Bank has financed over 35 projects with Bank-funded energy efficiency components of circa to €340 million </li></ul><ul><li>Most of these projects involve clients in energy-intensive industries, such as steel (Istil in Ukraine, Air Liquide-Severstal in Russia, Mittal in Ukraine, Macedonia and Bosnia and Herzegovina), chemicals (Uralkaly and Togliatiazott in Russia), aluminium (Alcoa in Russia), pulp and paper (PFS and Svilosa in Bulgaria), cement (Central Asia Cement in Kazakhstan) </li></ul><ul><li>27 detailed energy audits have been conducted resulting in 16 projects signed by the Bank (with an other 6 projects on-going) </li></ul>
    14. 14. Taxonomy of Industrial Energy Efficiency Investments <ul><li>… energy savings </li></ul>
    15. 15. Example: Svilosa (Bulgaria) - 2005 <ul><ul><li>EUR 18 mln Loan, for restructuring and expansion of Pulp and Paper mill </li></ul></ul><ul><ul><li>EUR 14 mln to be used for modernisation of equipment and processes including a new 6 MW back-pressure steam turbine to recover wasted heat </li></ul></ul><ul><ul><li>Benefits: energy costs reduction (annual savings estimated at EUR 5 mln); productivity improvements </li></ul></ul><ul><ul><li>IRR range: 11% - 137%; average: 31%. Payback ~ 3 years </li></ul></ul><ul><ul><li>Environmental benefits: CO 2 emission reduction (>100 kton/year), reduced water and heat losses </li></ul></ul>
    16. 16. Svilosa; Energy Audit results
    17. 17. District heating modernisation <ul><li>DH is a distinctive feature of countries in Transition: 65%-70% share of heat market in Ukraine-Russia. Over-sized, derelict, inefficient systems with scope for efficiency saving ranging between 35% and 50% relative to best practice </li></ul><ul><li>The Bank has financed 11 district heating projects since 2001 with a total Bank investment of €265 million </li></ul><ul><li>The majority of these projects involve municipally-owned district heating companies. </li></ul><ul><li>Projects focused on infrastructure upgrading, including introduction of modern technology (individual compact heating substation, pre-insulated pipes, frequency controlled pumps) </li></ul><ul><li>as well as the improvement of overall operational efficiency and commercialisation of the municipal district heating companies through introduction of new tariffs (typically a phased move to full cost recovery), reform of subsidies and improvement of organisational structures </li></ul>
    18. 18. District Heating Modernisation: Examples <ul><li>Sofia (Bulgaria - 2002) </li></ul><ul><ul><li>Toplofikacia Sofia is largest gas consumer in Bulgaria (30%!) </li></ul></ul><ul><ul><li>€ 30 million loan to municipal company </li></ul></ul><ul><ul><li>Sovereign guarantee </li></ul></ul><ul><ul><li>Transition: move to cost recovery tariffs; private management contract </li></ul></ul><ul><li>Surgut (Russia - 2002) </li></ul><ul><ul><li>Senior loan to City </li></ul></ul><ul><ul><li>€ 27 million equiv. in Rubles (1 st municipal loan in Rubles!) </li></ul></ul><ul><ul><li>Secured by City’s revenues without sovereign guarantee </li></ul></ul><ul><ul><li>tariff reform and the introduction of service contracts </li></ul></ul>
    19. 19. Poznan DH + Cogeneration Privatisation (Poland) 2003-2004 <ul><li>DH company and CHP plant of Poznan were privatised consecutively by City and Polish Treasury resp. following competitive tender </li></ul><ul><li>CHP plant supplies heat to Poznan DH network, and electricity with 2 off-takers (National grid operator PSE and local Disco ENEA) </li></ul><ul><li>Buyer was Dalkia Int’al via its Polish subsidiary, Dalkia Polska </li></ul><ul><li>EBRD invested alongside Dalkia for a total of €50 m (equity) over the two operations </li></ul><ul><li>Exit via put option to Dalkia Int’al at fair market value or earlier via trade sale or listing of Dalkia Polska </li></ul>
    20. 20. ESCOs: Energy Alliance (Ukraine) 2004 <ul><li>First privately-owned Ukrainian ESCO ; Start-up company; Sponsor is Western NIS Enterprise Fund </li></ul><ul><li>Focus on leasing small (1-3 MW) co-generation and electricity generation engines to industrial clients </li></ul><ul><li>$10 mln EBRD loan; $5 mln syndicated to RZB </li></ul><ul><li>Lease payments calculated based on current grid heat and electricity prices minus a discount </li></ul><ul><li>1 st Project with KOEP, a large Ukrainian edible oil extraction plant in Kirovograd oblast; constr. of a 4 MW co-generation station fuelled by sunflower seed peels (natural by-product of the client) </li></ul>
    21. 21. UkrEsco (Ukraine): a Public ESCO <ul><li>State-owned ESCO created in 1998 through an initiative between Ukraine, EBRD and the EU </li></ul><ul><li>EBRD extended a $30 million loan to UkrEsco, secured by a sovereign guarantee </li></ul><ul><li>UkrEsco targets industrial & commercial clients </li></ul><ul><li>Not true energy performance contracting: payment to ESCO akin to a loan; is due regardless of actual savings </li></ul><ul><li>Follow on loan of $20 m to be signed in Q4 2005; conditionality includes privatisation of UkrEsco </li></ul>
    22. 22. City of Łó dz (Poland): ESCO for public sector facilities <ul><li>Bank initiated and supported project development with TC funds for preliminary assessment & preparation of tender </li></ul><ul><li>Scope: Circa 420 municipal buildings (mostly schools and kindergarten); largest single ESCO contract in the region </li></ul><ul><li>ESCO to be selected through int’al tender. Initial tender void because only one bidder. City still to decide whether to re-start tender </li></ul><ul><li>EBRD could provide loan or payment guarantee to ESCO on a limited recourse basis; or buy receivables (forfeiting) or share risk with forfeiting bank </li></ul>
    23. 23. Bulgaria Credit Line #1: Industrial EE and Renewable Energy - 2004 <ul><li>€ 50mln EBRD credit line framework with Bulgarian banks for on-lending to private sector for industrial energy efficiency and small renewable energy projects . </li></ul><ul><li>€ 10mln grant from Kozloduy International Decommissioning Support Fund for: </li></ul><ul><ul><li>Cash incentives to local banks and sub-borrowers (80%) </li></ul></ul><ul><ul><li>and a technical assistance package: project preparation and project validation (20%) </li></ul></ul><ul><li>6 loans signed in 2004 for the full €50 mln amount </li></ul><ul><li>22 projects already approved </li></ul>
    24. 24. Bulgaria EE and RE Credit Line – Results so far <ul><li>38 sub-loans approved by PBs for an amount of loans of € 22 million; 19 completed </li></ul><ul><li>Estimated emission reductions on current portfolio: 267,000 tonnes CO2 / year </li></ul><ul><li>Estimated benefit in power generation equivalents on current portfolio is 92 MWe; about €37k grant for each MWe saved or added from a renewable source </li></ul><ul><li>141 sub-projects in pipeline representing more financing than remaining; evenly split between industrial energy efficiency and small renewables </li></ul>
    25. 25. Bulgaria Credit Line #2: Residential Sector - 2005 <ul><li>€ 50 mln EBRD Credit Line Framework with Bulgarian banks for on-lending to individuals for EE investments in residential sector </li></ul><ul><li>35% of Bulgaria’s energy saving potential, owing to p oor insulation of dwellings and overuse of electricity </li></ul><ul><li>i) insulation ii) biomass efficient heaters/boilers, iii) solar water heaters, iv) efficient gas boilers </li></ul><ul><li>Average rebate of 20% of the investment cost </li></ul><ul><li>Potential borrowers 250,000 households - budget sized for circa 30,000 Sub-loans </li></ul><ul><li>€ 10 mln grant from Kozloduy Decommissioning Fund </li></ul><ul><ul><li>Preparation/ Marketing/Verification: € 0.7 million </li></ul></ul><ul><ul><li>Incentives to sub-borrowers and Participating Banks and : €9.3 million </li></ul></ul><ul><li>To date, Loan agreements have been signed with 4 Bulgarian banks for a total of € 30.1 million – RZB, DSK, Postbank and UBB </li></ul>
    26. 26. EBRD’s role in the Carbon Market <ul><li>Project financing based on Carbon Credit sales </li></ul><ul><li>Intermediary purchasing carbon credits for the account of buyers </li></ul><ul><ul><li>Netherlands JI Carbon Fund JI Fund (2003) </li></ul></ul><ul><ul><li>Multilateral Carbon Credit Fund: 2006 </li></ul></ul><ul><li>Mobilise TC for project preparation: </li></ul><ul><ul><li>e.g. CDM project preparation facility in ETC region </li></ul></ul>
    27. 27. Carbon Finance: a project example <ul><li>Paper Factory Stambolijski: pulp & paper mill in Bulgaria </li></ul><ul><li>EBRD was a shareholder </li></ul><ul><li>Investment of up to €12 mln in waste (bark) boiler & EE measures </li></ul><ul><li>energy costs reduction (annual savings estimated at €3.6 mln) </li></ul><ul><li>600,000 tons of CO2 reduction 2006 – 2012 </li></ul><ul><li>Buyer of carbon credits (ERUs) is EBRD for the account of the Netherlands </li></ul><ul><li>50% advance payment </li></ul>
    28. 28. Characteristics of EBRD’s approach <ul><li>Public or private clients </li></ul><ul><li>Flexible and diverse instruments: stand-alone debt or equity; indirect via equity funds or credit lines </li></ul><ul><li>Risk appetite: limited recourse to parent company; start-ups; high ratio of debt to equity; high % of project costs </li></ul><ul><li>Ability to mobilise and use grant funding </li></ul><ul><li>Catalyst for commercial co-financing </li></ul><ul><li>Ability to engage host Governments </li></ul><ul><li>Not below €10m in project costs; if below: equity fund or credit line, or DIF/DLF (ETC countries) are best suited </li></ul><ul><li>Can provide carbon finance, and lend against carbon cash flow </li></ul><ul><li>Market-related pricing reflecting risk </li></ul>
    29. 29. Contact us
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