1 Bulgarian Energy Efficiency for Competitive Industry Financing Facility Richard Jones Official Co-financing Unit, EBRD Sustainable Energy Seminar Brussels,

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Bulgarian Energy Efficiency for Competitive Industry Financing Facility

Richard Jones

Official Co-financing Unit, EBRD

Sustainable Energy Seminar

Brussels, 23 March 2011

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What is the EBRD?

International financial institution, promotes transition to market economies in 30 countries from central Europe to central Asia

Owned by 61 countries and two inter-governmental institutions

Capital base of €30 billion*

*At the Annual Meeting in Zagreb in May 2010, the Board of Governors approved the Bank’s capital increase from €20bn to €30bn authorised capital.

Cumulative commitments of €62.0 billion

Unaudited as at 31 December 2010

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1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

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Debt ABV Equity ABV Net Cumulative Business Volume

Invested over €62.0bn in more than 3,119 projects since 1991

Private sector > 79% of EBRD finance

Debt 83%, Equity 17% of EBRD finance

€9.0bn invested in 2010

€ billion

EBRD in 2010

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Reconciled as at 31 December 2010

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Sustainable Energy Financing Facilities (SEFFs)

Credit lines through partner banks for on-lending to investments in EE in the industrial sector, RE and residential EE

Donor funded technical assistance from specialised consultants to Sub-borrowers and Participating Banks

Incentive payments paid to Participating Banks and completion fees paid to Sub-borrowers upon successful implementation of eligible investments

Successful track record: SEFFs are currently at the implementation stage in Bulgaria (industry and residential); Ukraine (industry); Georgia (industry and residential); Romania (industry); Slovakia (industry and housing associations) Kazakhstan (industry), Western Balkans (industry and public buildings), and Turkey (IEE, RE, REE, BEE, EES).

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SEFFs: Main Achievements

SEFFs – One of main instruments for EBRD to achieve its Sustainable Energy Initiative (SEI) Phase II targets (EBRD investment of EUR 3 to 5 billion during 2009-2011 in SE sectors)

Since the first framework in Bulgaria in 2004, SEFF operations have now grown to 14 approved frameworks totalling EUR 1.3 billion supported by EUR 178 million donor funding

Under these approved frameworks, 49 SEFF credit lines have been extended to 35 participating banks in 12 countries in the total facility amount of EUR 724 million (o/w EUR 344 million already disbursed)

Aprox. 29 thousand sub-loans totalling EUR 281 million have been disbursed under SEFF credit lines, generating total expected energy savings of 3.9 TWh/year and CO2 emission reduction of 1.7 million tons/year

6 new SEFF frameworks currently under preparation. 2010 EBRD new commitments under SEFF expected to reach over EUR 350 million, almost tripled from preceding years

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Bulgarian Energy Efficiency for Competitive Industry Financing Facility (BEECIFF)

A financing vehicle created by the Bulgarian Ministry of Economy, Energy and Tourism and the EBRD (MoU signed on 02/03/2011) to promote energy efficiency investments among Bulgarian enterprises

Combines EBRD’s credit lines and grant financing from Structural Funds (OP Competitiveness)

Builds on the EBRD’s successful work with EE credit lines in Bulgaria where grant resources from Kozloduy International Decommissioning Support Fund were leveraged and combined with the EBRD commercial credit lines

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BEECIFF: Strategic Importance

This is a pilot project that brings together a number of innovative elements:

– The Ministry will leverage substantially the SFs with private sector funding (both commercial lending and SMEs own funds)

– The financial creditworthiness assessment is ‘delegated’ to the local financial institutions

– The technical appraisal of the project will be entrusted to local energy auditors (registry of auditors) and cross-checked by Project Assistant who will be part of the Evaluation Committee in the Ministry

This exercise should lead to the establishment of a sustainable model of operation between SME sector, energy auditors and local banks. If this is successful, this scheme may become a highly replicable model for other OPs and also in other member states.

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BEECIFF: Objectives

To boost competitiveness of SMEs through investments in energy efficiency and to strengthen the transition of Bulgaria towards a green economy

To help leverage the absorption of Structural Funds allocated to Bulgaria under OP Competitiveness

To strengthen capacities of local stakeholders involved in the implementation of OP Competitiveness

To raise awareness on energy efficiency and energy efficiency financing opportunities among Bulgarian enterprises

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BEECIFF: Main Challenges

Complex legal and administrative setting: necessity to comply with Structural Funds regulations, Bulgarian law, and internal policies and guidelines of the EBRD

A lengthy process of SFs grants approval and disbursement in Bulgaria: the Ministry took steps to simplify the grant payment cycle

Necessity to put in place a parallel financing scheme (a loan facility managed by the EBRD and a grant financing scheme managed by the Ministry) since the management of the SFs resources could not be delegated to the EBRD

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BEECIFF: the Role of the EBRD

To transfer the Bank’s expertise acquired during the implementation of Sustainable Energy Efficiency Financing Facilities

To secure financing and implementation of Programme Preparation Technical Assistance

To provide parallel co-financing (“the Facility”) and ensure participation of local financial institutions

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BEECIFF: Components of the Programme

Loan Component: credit lines provided by the EBRD through Participating Banks (PBs) for on-lending to eligible SMEs

Grant Scheme Component: resources provided from OP Competitiveness and managed by the Ministry of Economy, Energy and Tourism

Technical Assistance Component:

– Preparation support TA: financed and managed by the EBRD (in consultation with the Ministry)

– Implementation support TA: provided and managed by the Ministry

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BEECIFF: two implementation approaches

A technology-driven approach for small-scale energy efficiency projects: to be eligible for financing, projects must consist of the acquisition and installation of equipment specified in a list of eligible materials and equipment

An energy audit approach for larger and more complex energy efficiency projects: to be eligible for financing, each project will be analysed and screened against a set of requirements related to the ownership, type of activities, technical parameters, energy savings, environmental impact and financial viability

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BEECIFF: Structure of the Programme

Ministry of Economy, Energy and Tourism

(Managing Authority of the OP Competitiveness)

Ministry of Economy, Energy and Tourism

(Managing Authority of the OP Competitiveness)

TAProject

Assistant

TAProject

AssistantEnergy

Auditors

Energy Auditors

TAVerification

Assistant

TAVerification

Assistant

Technical Assistance Programme Preparation Consultant

Technical Assistance Programme Preparation Consultant

EBRDEBRD

Participating Banks

Participating Banks

Programme Steering CommitteeProgramme Steering Committee

Grant disbursement upon completion and verification

MoU

Credit lines to Participating Banks for on-lending to SMEs (“the Facility”)

SMEs – the final beneficiariesSMEs – the final beneficiaries

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BEECIFF: Loan Component (“the Facility”)

The EBRD will establish a finance facility under which the Bank will extend credit lines (up to a total amount of EUR 150 million) to local Participating Banks (PBs)

Under the loan component of the Programme, PBs will on-lend EBRD financing to eligible SMEs

PBs may participate in the verification of compliance with the requirements of the procurement procedures for the selection of the suppliers of services and equipment by the participating SMEs

The loan repayment period will be negotiated between PBs and individual clients

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BEECIFF: Grant Scheme Component

The grant scheme component will be financed with OP Competitiveness resources

Eligible projects will receive the grant financing subject to: (i) a project screening and verification of successful implementation to be carried out by consultants, (ii) obtaining financing from PBs under the loan component

Grant intensity in the total financing provided for the implementation of each project will be in the range of 30-50% of the eligible costs (progressive grant intensity will incentivise more comprehensive energy efficiency solutions)

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BEECIFF: Preparatory Technical Assistance

Preparation support technical assistance package will be financed and managed by the EBRD in consultation with the Ministry. The consultant will:

• Provide advice on the design and structure of the Programme (including technical aspects)

• Assist with the implementation of a marketing strategy and raising awareness in the market regarding the Programme

• Ensure transfer of skills and capacity building to all stakeholders participating in the Programme

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BEECIFF: Implementation Technical Assistance

Implementation support technical assistance package will be financed from the Structural Funds resources and will be managed by the Ministry. Among other tasks, the implementation consultants will:

• Verify technical eligibility of proposed projects and present their recommendations to the Evaluation Committee

• Identify an appropriate implementation approach (technology-driven or energy audit)

• Ensure continuous training of energy auditors

• Monitor projects’ implementation

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BEECIFF: the Project Cicle

Energy Auditors

Energy Auditors

SME(application

form)

ContractingAuthority (grant

agreement)

Project Assistant

(Technical Eligibility Confirmation Document)

Participating Bank

(Financial Eligibility Confirmation Document)

Participating Bank(loan

agreement)

VerificationAssistant(Completion Verification Certificate)

Contracting Authority

(Grant Disbursement)

Imp

lem

ent

atio

n p

hase

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BEECIFF: Next steps and draft timeline

• Programme preparatory support consultant to be selected in April

• Procedures and technical documentation of the Programme to be finalised by autumn. At the same time, the Ministry will proceed with the selection of the implementation consultant

• Possible start of the Programme by the end of 2011

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Thank you for your attention!

Richard JonesDirector

Official Co-financing UnitEuropean Bank for Reconstruction and Development

+44 207 338 [email protected]