Bulgarian Energy Efficiency and Renewable Sources Fund - EERSF

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1 Mdel 19 Bulgarian Energy Efficiency and Renewable Surces Fund - EERSF Bulgaria OWNERSHIP Prgram authrity Prgram Delivery unit Implementatin Mdel Operating Services Prjects Financed Ambitin/targets Beneficiaries Funding Vehicle Financial Instruments PUBLIC Gvernment f Bulgaria (Ministry f Ecnmy and Energy) EEE Cnsrtium Ecnler-EnEffect-Elana N/A Marketer Facilitatr Assessr Financier Energy Efficiency Renewable Energy Resurces T build a sustainable market-based capacity fr develping and financing EE prjects n cmmercial terms, demnstrate financial prfitability f investments in the EE sectr and prmte the develpment f a well-functining EE market in Bulgaria. Prject develpers, ESCOs, Prject cntractrs, husing crpratins, businesses, public entities e.g. municipalities, lcal authrities, hspitals and universities, residents Financial Institutins Investment Funds Prject/Prperty wners ESCOs Lans Equity Guarantees Summary The Energy Efficiency and Renewable Surces Fund (EERSF), frmerly knwn as the Bulgarian Energy Efficiency Fund (BEEF), is a revlving energy efficiency fund under the frm f an independent legal entity (it perates as a public private partnership) established in It gt initial funding frm the Glbal Envirnment Fund (GEF) thrugh the Wrld Bank s Internatinal Bank f Recnstructin and Develpment (IBRD), frm the Gvernment f Bulgaria, the Gvernment f Austria and frm the Bulgarian private sectr. It aims at prviding revlving prject finance and 1 P a g e

2 technical assistance fr public (municipalities, universities, hspitals) and private sectr (businesses and residential) energy efficiency prjects in Bulgaria. Since 2011 the Fund als prvides funding t demand-side ff-grid RES prductin prjects. The EERSF was part f a brader strategy by the gvernment f Bulgaria t align its plicies with EU directives, t enable the necessary institutinal develpment and t reduce the energy intensity f the cuntry which at that time was twice the average value f the Eurpean Unin and was ranking amng the highest in Eurpe. Thugh Bulgaria s lw energy efficiency situatin, bth in terms f cnsumptin and f prductin, ffered huge ptential fr energy savings in a cst-effective way, estimated t be abut 40% fr the existing building stck, 30% fr the district heating sectr and 30% fr the industry, there was an almst nn-existing r very deficient energy efficiency finance market bstructing the access t cmmercial financing f energy efficiency investments. This situatin prmpted the Bulgarian gvernment t include in its new Energy Efficiency Act (EEA) - adpted by the Bulgarian Parliament in February the creatin f the Bulgaria Energy Efficiency Fund. This dedicated energy efficiency fund had the missin t build a sustainable market-based capacity fr develping and financing EE prjects n cmmercial terms, demnstrate financial prfitability f investments in the energy efficiency sectr and prmte the develpment f a wellfunctining energy efficiency market. With this Fund the Bulgarian Gvernment had als the ambitin f reducing greenhuse gas (GHG) emissins and f cntributing t its intentin f halving the primary energy intensity f the cuntry by 2020 cmpared t 2005 levels withut reliance n cntinuing public funding. By the end f 2013 its prjects expected t have ttal energy savings f ver 95,000 MWH/year and reduced GHG emissins by 75 KT/year. Thugh the Fund des nt distribute prfits and is fully endrsed by the Bulgarian Gvernment it is perated as a cmmercially riented public-private finance facility and it serves three majr rles: it is a lending institutin, a credit guarantee facility and at the same time a technical assistance prvider. It prvides technical assistance t Bulgarian enterprises, municipalities and residents in develping energy efficiency and RES prjects and then prvides their financing r c-financing r acts as guarantr twards ther financing institutins r cmmercial lenders. Frm 2005 thrugh 2008 EERSF received funding frm its grantrs and dnrs f almst 21,9M BGN (Bulgarian Lev) which crrespnds t an apprximate amunt f 11,2M. Over 70% f that amunt has been granted by the Glbal Envirnment Fund (GEF). Funds were used t prvide first investment capital fr EERSF, t cver start-up and perating csts and energy efficiency capacity building until the Fund reached financial self-sufficiency. The funding has been used t create a revlving fund which by the end f 2014 has cntributed 45,8 BGN (23,4 M ) t 170 prjects with a ttal value f ver 67,6M BGN (34,6M ). It has gained internatinal recgnitin fr its innvative apprach t EE financing and cnsulting. 2 P a g e

3 Hw des it wrk? EERSF perates as an independent legal entity thugh manages and allcates its financial resurces t energy efficiency prjects in line with the Bulgarian Natinal Energy Strategy, the Energy Efficiency Act (EEA), the Energy frm Renewable Resurces Act (ERSA), current legislatin and agreements with the principal dnrs. Fur main surces r dnrs prvided capitalisatin t the EEFRS during the perid 2004 thrugh 2008: Glbal Envirnmental Facility (Wrld bank): 15,5M BGN r apprximately 8,0M Gvernment f Bulgaria: 3 millin BGN r apprximately 1,5M Gvernment f Austria: apprximately 3M BGN r 1,5M Private dnrs and cntributrs: 0,4M BGN r 0,2M The initial funds were used t prvide investment capital fr the Fund, t cver initial setup and perating expenses until the EERSF reached financial self-sufficiency and t partially cver fr capacity building expenses such as prject develpment and financial packaging. In 2013 the Fund has been secured with a 5M grant frm the Eurpean Bank fr Recnstructin and Develpment (EBRD) and the Bulgarian Ministry f Ecnmy and Energy t finance further partial credit guarantees fr ESCO prjects in public buildings and in 2014 anther 5M have been secured frm KIDSF (Kzlduy Internatinal Decmmissining Supprt Fund) earmarked t assist municipalities in reducing the energy ftprint f public buildings. EEFRS General Dnr Assembly, which is represented by the main surces f financing, frmulates regulatins related t the peratin, rganisatin and management f the Fund, the Fund s assets and verall activity f the Fund. It meets in principle nce per tw years. The Management Bard is the managing bdy f the Fund. It cnsists f 9 members, 5 elected by the General Dnr s Assembly and 4 represented by Bulgarian gvernment agencies. It is respnsible fr the verall strategic management f EERSF in cmpliance with its established bjectives and principles f peratins. It apprves, amng ther things, the Fund s financing and credit guarantee plicy, the Fund s strategy, the criteria fr assessment and selectin f the prjects, the financing f the prjects and the cntracts related t the credit guarantees. It als elects and releases the Executive Directr (leads the Fund manager). The Management Bard meets nce per mnth. Fund Manager EEE Cnsrtium, a Canadian-Bulgarian tri partite cnsrtium cmprised f an internatinal EE cnsulting firm and tw lcal Bulgarian businesses elected thrugh internatinal prcurement, is the executive bdy f the Fund. It is respnsible fr the entire day-t-day peratin f EERSF and fr ensuring the successful implementatin f the prject cycles. 3 P a g e

4 EERSF supprts nly prjects directly related t: Imprved energy efficiency in industrial prcesses Rehabilitatin f buildings in all sectrs including industrial, cmmercial, municipal and residential Imprvements t heat surces and distributin systems Rehabilitatin f municipal facilities such as street lighting Other energy end-use applicatins including energy management cntrl systems, pwer factr crrectin measures, air cmpressrs and fuel switching demand side ff grid RES small prjects and measures As a lender, the EERSF prvides lans at interest rates f between 4,5% t 9% fr up t 5 years. A minimum equity cntributin f between 10 and 25% is required frm prject develpers, depending n the prpsed financing type i.e.: minimum 10% equity requirement applies t c-financing prjects (EERSF and cmmercial bank lending), the maximum 25% equity requirement applies t prjects seeking EERSF-nly financing. EERSF fcuses n cmmercially viable prjects that use well-prven technlgies with maximum payback perids f 5 years, and applicants must underg detailed energy audits befre their prjects are cnsidered fr funding. EERSF prvides partial credit guarantees (PCGs) which can cver either 50% (first lss basis after the bank-creditr) r 80% (pari-passu basis) f a prject s ttal credit value. Individual guarantees are nrmally capped at 400K. The credit guarantees prvided by EERSF are recgnised as first rate cllateral equivalent t bank guarantees. The EERSF has als develped tw types f prtfli guarantee prducts: Prtfli guarantee fr energy perfrmance cntracting: Designed fr energy service cmpanies (ESCOs) and derived frm Energy Perfrmance Cntracting (EPC) this guarantee cvers up t 5% f ptential delayed payments f the cvered prtfli. The guarantee culd allw ESCOs t negtiate lwer interest rates frm cmmercial lenders. Residential prtfli guarantees: Designed fr cndminium buildings r a prtfli f cndminiums this guarantee cvers the first 5% f lsses (defaults) within the cndminium building r prtfli f cndminiums. EERSF als ffers targeted technical assistance in supprt f ESCOs in preparing prjects and prgrams fr investment and partner financial institutin prmtin and delivery f energy efficiency prjects with a view t stimulate deal flw and uptake f financing ffered. EEE Cnsrtium and the candidate beneficiaries fllw a fixed credit applicatin prcess including 8 steps: Step 1: Prject identificatin (results f detailed energy audit (DEA) r energy-saving measures implementatin prpsal) Step 2: Initial prject screening Step 3: Cmpletin f the Initial Prject Prpsal (IPP) 4 P a g e

5 Step 4: Submissin f IPP and accmpanying dcuments t Fund Step 5: Assistance in prject design and cmpletin f related dcuments Step 6: Prject appraisal and creditwrthiness assessment Step 7: Frmal decisin n apprval fr financing Step 8: Preparatin and signing f the cntract fr financing and disbursement f funds EEFRS prpses credit prducts at cmmercial-market interest rates. The fact that it des nt distribute prfits allws it t be very cmpetitive and ffer attractive financing cnditins t prject develpers. It des apply very lw credit fees r nt at all, it reimburses administratin fees when the credit agreement is signed r when the prject is disapprved by EERSF and it des nt apply charges fr early repayment f the lans. It als lwered its guarantee fees t 0,1% t keep its psitin in the guarantee market. At the end f 2014 Municipalities accunt fr 53% f the ttal lan prtfli in terms f EEFRS funding, 29% were crprates/enterprises and ESCOs and the remainder 19% included mainly universities and hspitals. The amunts reimbursed by the beneficiaries are being used by EEFRS t fund ther energy efficiency prjects. Since 2011, all its funds raised thrugh the initial capitalizatin have been fully invested in prjects. As EEFRS is a revlving type fund it has been nly relying n revenues frm the repayment f the lans. Fig 1. Operatinal and funding mdel f Energy Efficiency and Renewable Surces Fund - EERSF 5 P a g e

6 The prgram delivery unit EEE Cnsrtium, in its capacity as Fund Manager f EERSF, is the prgramme delivery unit f the Bulgarian Gvernment energy efficiency fund prgramme. It acts as marketer, facilitatr, assessr and financier. It perates in accrdance with the Fund s investment strategy and its apprved regulatins. The Fund Manager has been appinted fr a perid f 5 years. Its main bjective is t perate the Fund as a prfit-riented business in a way that prmtes EE investments and helps a sustainable EE market t develp in Bulgaria. The Fund Manager selects, develps and applies the apprpriate financing tls based n specific prject requirements and verall prject prtfli management cnsideratins. The Fund Manager is led by a full-time Executive Directr, prpsed by the EEE Cnsrtium and appinted by the Management Bard. The Executive Directr manages the day-t-day peratins and administratin and its main respnsibilities and tasks include: Representing and serving as the executive bdy f the Fund. Wrk ut the draft-strategy fr the Fund s peratin; 6 P a g e

7 selecting and develping cmmercially viable EE prjects and building their financial structures develping, managing, and evaluating the prduct prtfli; managing the Fund s financial resurces; perfrming the mnitring, reprting, and budgeting functins, and any ther required tasks The Fund management and staff cnsists f 6 peple, i.e. the Executive Directr, a Financial and Credit Analyst, a Technical Energy Efficiency Expert, a Technical and Business Plan Expert and 2 administrative staff. Legal structure Sharehlder descriptin Equity Sharehlders Prgram dedicated staff Prgram peratinal csts Legal entity N/A N/A N/A Lw Lw Organizatin and partnerships Gvernment f Bulgaria thrugh the Ministry f Ecnmy and Energy: prgram wner and plitical initiatr, initial dnr t the capitalisatin f EEFRS. Republic f Austria: initial dnr t the capitalisatin f EEFRS Glbal Envirnment Facility - GEF: initial and principal dnr t the capitalisatin f EEFRS thrugh its Implementatin Agency IBRD. GEF helps develping cuntries and cuntries with ecnmies in transitin fund prjects and prgrams that prtect the glbal envirnment and prmte sustainable livelihds in lcal cmmunities Private dnrs and cntributrs: private dnrs f EEFRS. Since 2004 the fllwing dnrs have cntributed t the capitalisatin Brunata Bulgaria, Lukil Bulgaria, DZI Bank (nw Eurbank Bulgaria AD), Enemna AD, EVN, Minev & Partners EOOD, Ena Optima EED. EEE Cnsrtium Ecnler-EnEffect-Elana : Fund Manager f Energy Efficiency Fund EEFRS and acts as the prgramme delivery unit. Offers the prgram delivery unit services: marketer, facilitatr, assessr and financier. Energy Efficiency and Renewable Surces Fund - EEFRS: The energy efficiency fund was established in 2005 by the Gvernment f Bulgaria t prvide revlving finance, guarantees and technical assistance t public (municipalities, universities, hspitals) and private sectr (businesses and residential) energy efficiency prjects in Bulgaria. 7 P a g e

8 Kzlduy Internatinal Decmmissining Supprt Fund (KIDSF): Set up with EU funds t supprt prjects related t the decmmissining f fur nuclear reactrs at Kzlduy pwer plant as well as t supprt prjects fr restructuring and upgrades in Bulgaria's energy sectr. Eurpean Bank fr Recnstructin and Develpment (EBRD): Acts as administratr f KIDSF. EBRD fsters transitin t market ecnmies, thrugh financial investments, business services and invlvement in high-level plicy dialgue, in cuntries frm central and eastern Eurpe t central Asia and the suthern and eastern Mediterranean. Internatinal Bank fr Recnstructin and Develpment: - IBRD (Wrld Bank): Is the Implementatin Agency f GEF. Prvides lans and ther assistance primarily t middle incme cuntries. IBRD is the riginal Wrld Bank institutin. It wrks clsely with the rest f the Wrld Bank Grup t help develping cuntries reduce pverty, prmte ecnmic grwth, and build prsperity. Lcal Financial Institutins: prvide financing and c-financing t the beneficiaries, t prject cntractrs and t the ESCOs. Beneficiaries Beneficiaries Type f prjects Operatinal supprt Financial supprt Prject develpers, ESCOs, Prject cntractrs, husing crpratins, businesses, public entities e.g. municipalities, lcal authrities, hspitals and universities, residents Energy Efficiency Renewable Energy Surces Technical Assistance t targeted beneficiaries (ESCOs) Technical assistance fr free, very lw guarantee fees, very lw credit fees r nt at all, reimbursement f administratin fees when credit agreement is signed r when the prject is rejected, n charges fr early repayment f the lans. Funding mechanism Prgram delivery unit funding Prjects Funding Funding Vehicle Fund size Fund type Fund surces PDU s (Fund Manager) start-up and capacity building has been initially supprted by initial dnr capitalisatin and later by wn resurces frm credits and guarantees granted. Prjects are being funded by the beneficiaries wn funds r by their financial institutins, by ESCOs, by prject cntractrs and by EERSF. Investment Fund Financial Institutins Prject/Prperty wners ESCOs Prject cntractrs Initially 11,2M, as f 31/12/2014 9,0M. Revlving fund Glbal Envirnment Fund (GEF), the Gvernment f Bulgaria, the 8 P a g e

9 Financial Instruments Gvernment f Austria, Eurpean Bank fr Recnstructin and Develpment (EBRD), Kzlduy Internatinal Decmmissining Supprt Fund (KIDSF) and frm the Bulgarian private sectr Lans Guarantees Achievements As f 31 December 2014 EERSF has funded r prvided guarantees t 170 energy efficiency prjects fr a ttal amunt f 45,8 BGN (23,4 M ) with a ttal prject investment value f 67,6M BGN (34,6M ). The 160 prjects funded by the EERSF as f 31 December 2013 (cmpared t 170 prjects by 31 December 2014) are estimated t have achieved 95,4K MWh/year energy savings and CO2 reductins f 75K tnnes/year. As f 31 December 2014 there were 17 active ESCOs with which EERSF had cllabratin agreements it has partnership agreements with 4 financial institutins and has general framewrk agreements fr jint peratin with 5 ther financial institutins. Despite significant changes in the market envirnment since 2005, affecting the EERSF prgram s design and perfrmance, the EERSF has prven t be a successful revlving fund in the energy efficiency market. The Fund has helped develp a new EE market in Bulgaria by identifying the credit demand frm municipalities, small and medium enterprises, hspitals and universities. Prject details are shwn hereafter: Type f Beneficiaries # Share Prjects Share EERSF funded Share prjects in % value in in % in millin in % millin BGN BGN Municipalities 98 57,6% 36,9 54,6% 24,2 52,8% Crprates/Enterprises 53 31,2% 18,6 27,5% 13,1 28,6% Other (Universities, Hspitals) 19 11,2% 12,1 17,9% 8,5 18,6% ,6 45,8 9 P a g e

10 Cntact details Energy Efficiency and Renewable Surces Fund 4 Kuzman Shapkarev Street 1000 Sfia-Bulgaria Phne: inf@bgeef.cm Factsheet General Inf Cuntry Bulgaria Mdel Name Energy Efficiency and Renewable Surces Fund - EERSF Date f creatin 2005 Mdel Descriptin Ownership Prgram authrity Prgram delivery unit Operating services Implementatin mdel Types f prjects financed Beneficiaries Gegraphical cverage Public-Private, majrity Public Gvernment f Bulgaria thrugh the Ministry f Ecnmy and Energy EEE Cnsrtium Ecnler-EnEffect-Elana Marketer Facilitatr Assessr Financier N/A Energy Efficiency Renewable Energy Prject develpers, ESCOs, Prject cntractrs, husing crpratins, businesses, public entities e.g. municipalities, lcal authrities, hspitals and universities, residents Natinal (7,4M inhabitants) Financial Mde Descriptin Prject funding Prjects are being funded by the beneficiaries wn funds r by their financial institutins, by ESCOs, by prject cntractrs and 10 P a g e

11 Prject funding vehicle Financial instruments Repayment mdel by EERSF Investment Fund Financial Institutins ESCOs Prject cntractrs Prperty wners Financial institutins Lans Guarantees Partially based n energy savings (smetimes guaranteed savings) Prject risk Prfile Perfrmance risk Recurse Financial risk Unknwn Unknwn Investment Fund Prject Owners Financial institutins ESCOs Prject cntractrs Mdel Requirements Staff Requirements Equity r funding Requirements Lw Abut 5 FTE Mderate Less than 5 millin Mdel Key indicatrs Investment vlume since creatin +/- 23,4M Size f prject (r prject 20K t +740K prtfli) Level f average energy savings As f 31/12/2013: 95,4K MWh/year energy savings and CO2 reductins f 75K tnnes/year Develpment maturity Develpment/implementatin stage Operatinal develpment maturity Financial develpment maturity Mature Mature Mature Mdel Qualificatin Level f establishment Grwth f ptential Scalability f the mdel Replicability f the mdel Impact n public balance sheet Well established Mderate Mderate Mderate Mderate 11 P a g e

12 Surces ABB, Bulgaria Energy efficiency reprt, available at ency%20reprt.pdf, April 2013 CCAP, Bulgaria s Energy Efficiency and Renewable Energy Surce Fund, bklet published by CCAP, Center fr Clean Air Plicy ( Washingtn USA, n date. Dukv Dimitar, The Bulgarian Energy Efficiency Fund Develpment f the lcal energy efficiency market, Energy efficiency supprt mechanisms in the Western Balkans awareness wrkshp Vienna, 1 December 2010 Dukv Dimitar, Energy Efficiency and Renewable Surces Fund partner in Prject Financing, 2 nd CA EED Plenary Meeting in Vilnius n 22 nd and 23 rd Octber 2013 Ecnler, Bulgarian Energy Efficiency and Renewable Surces Fund, SE4LL Energy Efficiency Hub Wrkshp, 2009 Ecnler, The Bulgarian Energy Efficiency Fund A Success Stry and Inspiring Example f Energy Efficiency Financing, August 2014 EERSF, Regulatins n peratin and rganisatin f the activities f Energy Efficiency and Renewable Surces Fund, available at ( 1 June 2011 EERFS, Annual Activity Reprt 2014 Eurpean Investment Bank, JESSICA helps t revitalise six majr cities in Bulgaria, press release 03 January 2012 ManagEnergy, Innvative energy efficiency financing in Bulgaria, available at Wang Xiadng, Stern Richard, Limaye Dilip, Mstert Wlfgang, and Zhang Yabei, Unlcking Cmmercial Financing fr Clean Energy in East Asia, Case study: Bulgarian Energy Efficiency Fund (BEEF), Directins in Develpment. Washingtn, DC: Wrld Bank, 2013 ODYSEE-MURE, BG15: Bulgarian Energy Efficiency and Renewable Surces Fund, available at June P a g e

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