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Market and Technology Developments in Small Scale Heat Generation International Workshop Baku, Azerbaijan, October 20, 2005. Energy Efficiency Fund as a Means for Financing Heating Network Improvements. Dr George Chavdarov Bulgarian Energy Efficiency Fund EnEffect Sofia, Bulgaria. - PowerPoint PPT Presentation
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Dr George ChavdarovBulgarian Energy Efficiency FundEnEffectSofia, Bulgaria
Energy Efficiency Fund as a Energy Efficiency Fund as a Means for Financing Heating Means for Financing Heating Network ImprovementsNetwork Improvements
Market and Technology Developments in Small Scale Heat Generation
International WorkshopBaku, Azerbaijan, October 20, 2005
District Heating Systems in Bulgaria• 21 commercial DH companies are
concentrated mainly in the district-center cities
• 20 of these companies were 100% state-owned
• The biggest company the District Heating Sofia SP JSCo. was 100% municipal property. Now it is 70% municipal property and 30% state-owned
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
District Heating Systems in Bulgaria
The Strategy for Development of DH during the period 2000-2005 takes into consideration the recommendations of the World Bank – “to launch a procedure for privatization and/or transfer of property rights on the DH companies, for which budgetary support will be ceased before the year 2004, to the local authorities”
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
District Heating Systems in Bulgaria• In 2004 the District heating companies
in the cities of Bourgas, Pleven, Veliko Tarnovo, Gabrovo, Lovetch, Pravetz and Rousse are offered for privatization
• The District heating companies in the cities of Vratza, Kazanlak, Lozniza, Razgrad and Yambol have been sold already
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
District Heating Systems in Bulgaria
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
DH in Gabrovo
Investment package “Residential buildings”
Investment package – “Substations”
Investment package – “Distribution network”
Example of Energy efficiency renovation of District Heating and Heating End-Use
Instruments for financing
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
Practical experience
Regular bank loans
Starting with interest rates of 16-18%
Rapid growth of number of project, when interest rate reaches of 6-10%
Current interest rate 6-8% and less
A growing number of banks offer credits for EE projects
A growing number of entities, including power plants borrow bank credits under market conditions
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
General municipal bonds
Municipalities of Varna, Sliven, Svishtov, Dobrich
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
The example of Varva (€ 3 mln):
- Street lighting project
- International credit rating
- Performance risk taken by the municipality
- Performance based calculations made as for revenue bonds
Leasing equipment (capital/financial leasing)The example of Dobrich:
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
About 30 schools and kindergartens equipped
Budget restrictions avoided
Fixed payments / interest rates
Repayment period of 3 years
Cost raised due to the risk coverage (if buying up rejected)
Energy Service Companies (ESCOs)
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
Financing of third party – usually a commercial bank
Repayment depends on the project performance
The ESCO guarantees the minimal performance
ESCO pays the difference if savings are below the estimated minimum
Combination of performance contracting with shared savings contracting
Shared savings contracts / Performance contracts
Energy Service Companies (ESCOs)The examples of Rousse and Sofia:
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
Various municipal buildings / schools
Third party financing
The ESCO company takes the performance risk
The municipality pays fixed amounts
Difficulties faced in Rousse and Sofia - financial and technical
Energy Service Companies (ESCOs)
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
Contract for provision of heat
Typically long-term contract – 20-30 years
ESCO ensures necessary maintenance and modernization of the heating system
Customers pay fixed (agreed) fee for the heat consumed
Applied for small hotels / applicable for municipalities
Heating contract / Chauffage contract
Carbon funds / Kyoto instruments
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
District heating modernization in Sofia and Pernik
World Bank Prototype Carbon Fund
Joint Implementation
District Heating modernization in Rousse (Japanese investors)
Gas distribution project for Gorna Oriahoviza, Veliko Tarnovo and Liaskovetz (Dutch investors)
Raising interest of foreign investors
Other financial schemes
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
Joint venture in the city of Stambolijski
What municipalities could offer to investors
Equity financing
Financing by utilities
Possible financing by the regional electrical distribution companies (municipal projects under negotiations)
Special funds
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
EE projects in municipalities
EE projects in industries
National Environmental Fund (established under a special low)
Special funds
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
National Eco Trust Fund(established under a special low)
Gazification projects in municipalities
Industrial EE projects
Special funds
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
To soften the consequences of the decommissioning of the first reactors of the Kozloduy nuclear PS
To encourage energy efficiency measures and the use of RES
Credit lines from EBRD to several Bulgarian banks
Volume: € 50 000 000
Period: 5 – 7 years
Technical assistance
Kozloduy Fund / EBRD(established by and agreement with the EU)
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
Market based interest rate
Subsidies of:
- 7.5% for energy efficiency projects
- 20% for RES projects
Types of credit lines:
- for public (municipal) buildings
- for residential buildings
Kozloduy Fund / EBRD
Special funds
Special funds
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
Main sponsors: GEF / World bank, Bulgarian government / donors / public-private partnership
Independent revolving self-financing instrument, created by the EE Act (2004)
Based on market competitive conditions
Co-financing / partnership with other financing institutions
Bulgaria Energy Efficiency Fund (BEEF)(established by a special law)
Special funds
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
Financial products:
- loans,
- partial guarantees,
- technical assistance for project development
Bulgaria Energy Efficiency Fund (BEEF)
Special funds
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
Types of projects:
- industrial projects
- building projects
- district heating projects
- municipal end-users’ projects
- other end-users’ projects
Bulgaria Energy Efficiency Fund (BEEF)
Special funds
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
Requirements to the projects:
- More than ½ measurable savings
- Implementation of proved technologies
- Project size: € 15 000 - € 1 500 000
- Project owners provide over 10% own financing
- Payback period: 3 - 5 years
Bulgaria Energy Efficiency Fund (BEEF)
Special funds
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
Bulgaria Energy Efficiency Fund (BEEF)
Donors’ assembly
Market players:FI / ESCOs / End-users
MEER
WB
GEF
Privatedonors
BEEFFund management
Econoler International (Canada) / EnEffect (BG) / Elana (BG)
TA Loans Guarantees Otherforeigndonors
Lessons of the implementation of various financial instruments for energy efficiency projects in Bulgaria
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
Local capacity building in Bulgaria
Training of managers and specialists on:
- energy auditing
- project development
- project financing
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
Competition or Collaboration
Energy Efficiency Fund as a Means for Financing Heating Network Improvements
Aggressive marketing policy of the BEEF Fund Management
Technical assistance for project identification and development
Best possible credit / guarantee policy, corresponding to the real market conditions
Strategic cooperation with other financial institutions to ensure co-financing of projects
How could BEEF survive?
Contacts:
Center for Energy Efficiencywww.eneffect.bg
E-mail [email protected].: +359 2 963 1714 or 963 0723Fax: +359 2 963 2574