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EFSE ANNUAL MEETING 2011Tirana, 6 to 8 June
Panel IIThe New Opportunity: Energy Efficiency and
Renewable Energy Lending
Panel II:The New Opportunity: Energy Efficiency and Renewable Energy Lending
Lloyd StevensDirector
Finance in Motion
Aleksandar MijailovicČačanska Banka
Yücel InanIK Banka
Olaf ZymelkaHead of Division,
Energy SEE & TurkeyKfW
Wolfgang KröpflENSO
Terry McCallionEBRD
Matthias HitzelMACS
Yücel InanGeneral Manager, IK Banka
Entering the Field of EE LendingChallenges & Opportunities
High dependancy on imports (42%)
Most energy is used for public, business & residential buildings (42%)
High use of electricity in heating solutions
71% of all energy consumed by residences are for heating / cooling
Inefficient insulation and heat distribution
83% of residences were built before 1991
Rising electricity cost – lifting of state subsidy
MACEDONIA ENERGY MARKET ASSESSMENT
energy consumption of the household sector to the number of electrified householdsthe ratio between the final energy consumption of the sector and the value added measured in constant PPP
CONCLUSION:HUGE POTENTIAL FOR EE IMPROVEMENTS
= OPPORTUNITY FOR EE LOANS
TARGET SEGMENTS: HOUSEHOLDS + MICRO & SMALL COMPANIES
SOLUTION:
PURPOSES: Renewable Energy - solar panels Improvements in Heat Supply Systems - new boilers Improvements in Insulation – double glazed windows, envelopes Improvements in Heat Distribution - thermostatic valves & pumps
FIRST MOVER ADVANTAGE: Brand association: IK Banka = Green Bank, Eko Kredit = IK Banka
CAMPAIGN
INTERNAL: STAFF UNDERSTANDING IS CRUCIALTRAINING (TECHNICAL ASSISTANCE)
What our staff learned: How to use the e-Save Tool & Calculation of the savings Increased awareness for energy savingsSales channels: direct or through sellers to individuals or companies
EXTERNAL: RAISE AWARENESSSTRATEGY:
INFORM - Multi Channel Campaign + Merchant VisitsEDUCATE - Simplify potential loan purposes through examples
RESULTS: EASIER TRANSACTIONS WITH HOUSELHOLDSMOST POPULAR EE INVESTMENTS:
RETAIL: Double glazed windows & doors, building envelopes for better isolation, solar panels for hot waterCORPORATE: Solar panels for hotels and enveloping of the business premises and roof
CHALLENGES:
Easy to “sell” to management and staff..To clients – more difficult !
FIRST MOVER DISADVANTAGE ! LOW AWARENESS - We have the job of being the first bank to increase public awareness & interest and convince that savings will pay back the EE investments
GRAY ECONOMY UNDOCUMENTED PURCHASES: Difficulties for documenting the purchases (in practice clients swap goods and services or purchase in cash without invoice avoiding taxation). Sometimes clients may prefer classical consumer loan with higher interest rate to avoid providing documentation for invoice payments.
ENERGY POLICY & LEGISLATION Still relatively low (subsidized) electricity prices.“Green Passport” not yet introduced, EU requirements not in place.
Low incentive for investment
Aleksandar MijailovicHead of SME LendingČačanska Banka
Čačanska banka a.d. Čačak
EFSE ANNUAL MEETING 2011
Energy Efficiency and Renewable Energy Lending
7 June 2011
Strategy
Enter the field of EE lending
1st Loan Agreement,
KfW, EUR 5 million
Advisor of the clients
Čačanska banka = EE/RE lending
EFSE ANNUAL MEETING 2011 – Energy Efficiency and Renewable Energy Lending – 07 June 2011
Support of EE/RE concept
KfW
Hit Energy
= EE/RE Lending
Čačanska banka a.d. Čačak
Retail segment – standardized product – 79 projectsMicro, SME, Corporate – individual approach – standard, non-standard projects
– 80 projects – EUR 4,8 million
Čačanska banka a.d. Čačak
EE Loan Poduct
Energy savings Instalment Interest
HIT ENERGY LOAN
EFSE ANNUAL MEETING 2011 – Energy Efficiency and Renewable Energy Lending – 07 June 2011
EFSE ANNUAL MEETING 2011 – Energy Efficiency and Renewable Energy Lending – 07 June 2011
Rolling out of HIT ENERGY LoanTraining of Loan OfficersDirect contact with clientsPresentation of the EE concept to the clientsParticipation on fairs and conferences
- Trainings of the Loan Officers -
- Serbian German Dialogue on Energy Efficiency -
- Loan officers on the training in Frankfurt School of Finance and Management (Frankfurt) -
Čačanska banka a.d. Čačak
EFSE ANNUAL MEETING 2011 – Energy Efficiency and Renewable Energy Lending – 07 June 2011
Supply Chain
Information
HIT ENERGY
EE Product
Distributers and manufacturers of EE equipment were a very important sales channel and became our essential partners
We implemented relevant action plans with each supplier
We organized training sessions and promotions in cooperation with partners and created a unique product package
A large number of clients did not have satisfactory financial ratios and appropriate collateral
Čačanska banka a.d. Čačak
What we have learned
THANK YOU – QUESTIONS
EFSE ANNUAL MEETING 2011 – Energy Efficiency and Renewable Energy Lending – 07 June 2011
What we have learned
THANK YOU - QUESTIONS
The campaign started at the time of the strongest strike of economic crisis
Continuous investment in resources for improving knowledge in this area is crucial
Growing potential is extremely high, a list of measures is expanding daily
The success is inevitable if the expertise of staff is used as the main resource
Loan Agreement with GGF has been signed, we continue to finance EE/RE projects, we plan to create a product with strong brand
Čačanska banka a.d. Čačak
Matthias HitzelDirector Operations, MACS
www.macsonline.dewww.macsonline.de
Challenges and Opportunities of Energy Efficiency and Renewable Energy Finance
Panel Session II
The New Opportunity:
www.macsonline.de
The Driving Force
Reducing global energy related CO2 emissions
Source: iea, 2008
www.macsonline.de
The Constraint
Energy Consumption will increase
www.macsonline.de
The Constraint
CO2 emissions as well
www.macsonline.de
The Opportunity
for clean energy technologies
Source: iea, 2010
www.macsonline.de
Situation on Credit Markets• Reflect Investment Activities
Energy Efficiency• Building code• Energy Labeling
Renewable Energy• Long Term PPA• Feed in Tarriffs
Liquidity of Financial Markets• Funding Costs for Banks
Markets: Regulation:
External Factors for most of us
The Economics
Demand side drivers
Prices:
Electricity• Generation Costs• Unbundeling/ IPP • Taxes/Subsidies
Fossil Fuel• Fuel prices• Taxes/Subsidies
www.macsonline.de
Target Groups• Retail, private households• SME, Corporate• Public Entities
RE/EE Eligibility• Level of Primary Energy Savings • CO2 Emission Reduction• others
define utility function of the credit line
Supply Side Parameter
The Scope of RE/EE Lending
Efficiency Criteria• Type of measure
0
2
4
6
8
10
12
Volu
me
Time
www.macsonline.de
Transaction Costs
The Callenges for Banks
Targeting:• Specific Measures• Client Groups
Verification/Validation:• External Energy Audits• In-house Know How
Training:• Time and Organization• Uncertain Success
Reporting:• No in-house system• Additional work load
www.macsonline.de
Targeting:• Specific Measures• Client Groups
Verification/Validation:• External Energy Audits• In-house Know How
Training:• Time and Organization• Uncertain Success
Reporting:• No in-house system• Additional work load
Portfolio review to identify existing clusters of eligiblefinancing; clear, straightforward measures
standard RE/EE measures and automatic validationeSave as plug-in solution with baseline database
Focus on Validation Tool , help desk and e-learningQuick Reference Guide , eGuide
Focus on primay energy savings and CO2emissions Merge report from eSave with core banking system
What can be done ?
The Challenges for Banks
www.macsonline.de
Market Risk and Regulation• Weak concession laws and procedure• Feed in Tariffs• lack of long term PPA• PPAs don‘t include take-or-pay clause• Lack of step-in-rights for Financiers
Challenges for RE/EE Project Finance
Risk Mitigation
Planning and Construction Risk• Concessioneer lacks expertise• Soundness of planning parameter• Construction and other permits• Quality of Tender (Equipment, Construction) • Construction Supervision
Investor Risk• Structure of Project Developer• Equity endowment• Financing Structure
www.macsonline.de
Thank you for your attention!
Arnsburger Str. 64, 60385 Frankfurt, GermanyTel +49-69-943188-0, Fax +49-69-943188-18e-mail: [email protected] Web: www.macsonline.de
Wolfgang KröpflManaging Director, enso GmbH
June 2011
ensoSOLID INVESTMENTS IN GREEN ENERGYEFSE meeting Tirana 07.06 – 08.06.2011
32
enso an Investment company : More than 100 years of experience in Hydro Power
Key Data of the Group
Austrian Family business, founded in1889 Austrian Energy Supplier since 1902
Production & Transmission Member of an Industry and consulting Group for
Engineering, Planning, up to operation of hydro power plants with excessive knowledge in Construction Manufacturing of turbines and electro-mechanics Automation and operation of Hydro Power Plants Financing & Co-operation
References of more than 70 Hydro Power Plants worldwide within the last 10 years
Dense Network especially in the Alpine region and SEE-Countries
enso investments started since 2007 www.enso.at
Dr. Gilbert Frizberg
Founder of the group Chairman of the Supervisory Board
of the biggest Austrian EnergySupplier (Verbund AG)
Board Member, Federation of Austrian Industry
1984–1991 Member of Austrian parliament; speaker of energy
Chairman of the Supervisory board of enso Hydro GmbH and investor
June 2011
33
enso - Investment
enso invests in
Hydro Electric Power Plants (Green Technology) small to medium-sized power plants, focus on 10
MW with licenses and authorizations already issued
with regional focus on South-Eastern Europe (EU resp. EU-acceding
countries) and Turkey Alpine Region Scandinavia
enso is an investment and management company that cooperates with regional partners and strives for majority participations with secured rights in participation and control by
enso for construction and operation offers assistance in construction, operation and
electricity trading
with the aim
to build up a sustainable investment portfolio until 2016 with a total investment of more than 300 Mio EURO
to generate high, stable cash-flows in a value-stable portfolio moderate investment and maintenance costs of
HEPPs no use of expensive (primary energy) resources steady sales of electricity generated
to invest in a stable environment increasing demand for electricity, independent from
economic development Green Energy forced nationally and internationally Asset Value Participation Green Technology – no emissions (CO2-free
investment)
June 2011
34
1.Attractive Potential – Market Environment
June 2011
Regional focus for hydro power plants
Annual precipitation amount Topography Europe
Hydropower =Precipitation x Slope
35
Best locations for hydro power in Europe: South of Norway and central Sweden Alpine region Southeastern European EU-acceding countries Turkey
over 2000 mm1000 – 2000 mm750 – 1000 mm500 – 750 mm250 – 500 mmunder 250 mm
Sour
ce: w
ww.m
ygeo
.info,
Wiki
media
Com
mons
June 2011
36
Market Environment
Demand/Consumption Electricity consumption
increases, even in weak economic periods
need to catch up especially in South-Eastern Europe
on average increasing electricity prices
Energy supply/Electricity production Demand for electricity exceeds
electricity production Need to use green technology
to reach the climate protection requirements
Out-dated thermal power plants
Political Trend - ecology 20:20:20 targets of the EU Ownership unbundling Promotion of green energy (direct
financial aid from EIB, EBRD and other IFIs)
Europe's (and country's) independency from imports
Industrial Structure Trend to privatisation Trend to small and
medium-sized hydro energy Regulated market Guaranteed electricity sales Guaranteed minimum feed-
in-tariffs following the Euro
Marketenviron-ment
June 2011
Comparison –increasing electricity consumption of households in SOE
Turkey 2007
Albania 2001
Turkey 2007
Washing machineDishwasher
*) Source: German Bureau of Statistics, Institute of Statistics of Albania, Turkish Statistical Institute
37
Massive need to catch up on examples „Washing machine“ and „Dishwasher“:
Electricity consumption of households in Albania is one sixth compared to households in Austria or Germany
Consumption of an average household in Turkey is about a half compared to a household in Austria or Germany
June 2011
Essential investment drivers
Key driver Hydrology Geology Location / development Grid access Planned capacity (output) / Power
Generation Storage capability Outbuilding costs Sales prices / feed-in prices Carbon credits, Green Certificates,
Grants,National and International Programmes
Financing possibilities Taxation Legal Stability
June 2011
Obstacles Local data bases (Hydrology) Legal framework Legal stability and legal certainty Governmental support Concession provisions and duration Taxation practice (e.g. VAT) Local know how Local quality perception Grid access / grid quality Feed in tariffs Financing on suitable terms Long term characteristic of investment in
Hydro Power plants to be accepted
STRICTLY CONFIDENTIAL
Disclaimer
The presentation is not intended to be a legal prospectus under the capital market law. The intended recipient (hereafter referred to as ”recipient”) of this presentation (hereafter referred to as ”presentation”) agrees and accepts herewith to handle and treat all of the contents of this brochure as strictly confidential. The presentation is being provided by enso as a framework to a limited number of qualified people who in principle have an interest in investing in enso. A recipient is not the intended recipient in all cases where this document is transferred to another party by someone other than enso. The presentation is being provided to potential institutional and experienced investors (hereafter referred to as “potential investors”) solely for the purposes to support the assessment of a potential investment in enso. Furthermore, the presentation is incomplete in as much that it contains only a brief overview relevant to the potential investment. The data contained herein is not intended to serve as investment advice. Any investment decision should solely be based upon your own complete examination taken in conjunction with a qualified potential investor. The presentation does not represent an offer or a proposal, an invitation to bid, a recommendation to purchase or sell, to subscribe or underwrite or issue any other kind of securities. Nor is it a request to contribute towards such offers or such tenders or proposals and does not provide or represent the basis of an agreement with enso. Information and/or estimation contained within the presentation is liable and subject to change without further notification. By means of the transmission of this presentation enso does not assume any obligation or liability to the recipient to provide further information or accept any liability for any omissions or any adjustments or amendments that might become evident. Potential investors should only consider the possibility of an investment once they have conducted sufficient research and/or have available satisfactory knowledge with which they can correctly consider and assess any risks associated with an investment. The provision of a letter of intent or a commitment relating to the investment does not guarantee any earnings and/or maintenance of capital. Potential investors should be aware that this investment could lead to the loss of the total amount invested. Like all investments, this investment carries considerable chances and risks. Potential investors should therefore only undertake any commitment to invest following a precise and complete assessment of the presentation itself and the market situation. With regard to the anticipated duration of the investment, investors are advised to invest only a portion of their assets. Separate assessment and appraisal of legal, tax and fiscal matters plus any other potential consequences related to the investment are the sole responsibility of the potential investors and their advisors and are seen as a precondition for a commitment and the acquisition of a shareholding (including transfer of shares and application for a participation certificate). The information contained in the presentation is compiled from, and based upon, publicly available data as well as established data from internal and other sources regarded as reliable in order to be as authoritative and dependable as is possible or deemed necessary. Additionally thereupon, it should also be noted that the presentation contains estimates and prognoses based upon commonly used economic and industry trends as well as expected developments derived and compiled respectively from them. These estimates and prognoses contain a number of subjective assessments. This presentation, other written or verbal correspondence, communication or declarations of any kind do not constitute in any way whatsoever a warranty, guarantee, commitment or other acceptance of liability, whether explicit or implied, and should not be considered to be agreed and/or assumed commitments. Neither enso or their board of directors, managers, employees or representatives assume and/or take responsibility for the completeness, accuracy and/or correctness of the information contained in the presentation (including legal and fiscal), for any omission of information, for associated estimates and for any supplementary information that are provided or made available to any interested party or their advisors. By agreeing to an investment, interested parties explicitly relinquish enso of any accountability and responsibility on the basis of such information provided herein or other failure or omission. The presentation is intended for the exclusive use and assessment of a potential transaction of the addressee only.
June 2011
40
Contact
Contact - Managementenso GmbHDi Wolfgang Kröpfl, MBAFranz-Heresch-Straße 2, 8410 WildonT: +43 (0) 3182 2216-130M: +43 (0) 664 8324460E: [email protected]
June 2011
Terry McCallionDirector, EBRD
Differing approaches to EE & RE lending
Terry McCallion 6 June 2011
Shaping and Leveraging the New Reality
The EE and RES sector
Market barriers continue to persist, including:– (Indirect) fossil fuel subsidies,
lack of carbon markets and high costs
– Lack of information/knowledge and high perceived risks by banks
– Low awareness about energy efficiency
– Highly fragmented sector with high transaction costs
– Split incentives – Lack of coherent policy
framework
On the one hand … On the other hand …
There is pressure on the region, through – Convergence and tightening EU
standards
– Governments’ urge to address climate change and improve energy security
– Increasing energy prices
– Aging infrastructure
The responsibility of IFIs
Address and fill the skills gap Reduce transaction costs Reduce perceived risks Intermediate international climate finance
flowsMeasures that address one or several of the above:
• Relationship management (IFI-local bank)
• Provision of specific technical skills (consultants and direct mgt)
• Awareness raising (banks and consumers)
• Improve credit perception
The responsibility of IFIs (continued)
Improve credit perception - targeted grants (performance based)
- policy dialogue (FITs, carbon trading, green certificates)
- good capital investment appraisal (energy audit)
- carbon cash flows
Bridge the time until the sector is fully commercia / a fully functioning carbon market is
established
EBRD Model
47
CASE STUDY: Ukreximbank
Outcome22 projects (approx. USD 60 million) are already financed; they will avoid energy use equivalent to 20 million MWh (~ 1.7mio toe or 150 MW generation capacity) and 5 million tCO2
Each million USD of energy efficiency avoids the need for the equivalent of more than 2.5 MW of electricity generation capacity.
In collaboration with EBRD - Ukreximbank pioneered the first Carbon Credit Fund deals in Ukraine, worth more than EUR 7 million. The Carbon Credits will be sold to
Policy support to the Government since mid-2007:Market and regulatory framework assessment, recommendations for FiTs Assistance to development of secondary legislation to support of renewable energy
Technical Cooperation supported the origination and assessment of 96 investment opportunities including 25 detailed energy audits. 80 projects were deemed eligible for financing.
USD 100 million loan to Ukreximbank under UKEEPCommercial lending (no grant element) typical project IRR = 25 –30% Healthy project pipeline identified.
CASE STUDY: Western Balkans Sustainable Energy Direct Financing Facility
Institutional capacity building EBRD has up to €3.5mio to address deficiencies in the regulatory frameworkDevelopment of RES support mechanisms (FITs)Preparation of primary and secondary legislationSupport to grid operators in RES integrationNational RE Action PlanInstitutional capacity building
Up to €3mio in TC fundsProject & Verification consultant provides guidance to the project sponsors and estimate and verify compliance. Develops common branding. Additional legal consultants.
€50mio financing volumePayments based on CO2 emission reductions - lays the foundations for a future CO2 market- min efficiency and min savings required.
Outcomes- 6 projects for €21.5 mio in projects are already approved- Those will save 63 MtCO2 - Support in submission of the REAP to the Energy Community Secretariat - Serbia: support to the Ministry of Energy and Mining in transposition of the EU Directive on Renewables to local Energy Law - Montenegro: Development of full set of secondary legislation to the Energy Law (ongoing)- Albania: support to the Ministry of Economy in FiT design (methodology, FiT level, affordability, caps)
Panel II:The New Opportunity: Energy Efficiency and Renewable Energy Lending
Lloyd StevensDirector
Finance in Motion
Aleksandar MijailovićČačanska Banka
Yücel InanIK Banka
Olaf ZymelkaHead of Division,
Energy SEE & TurkeyKfW
Wolfgang KröpflENSO
Terry McCallionEBRD
Matthias HitzelMACS
After Coffee Break:
Concluding and Closing PanelShaping and Leveraging the New Reality
Conference Hall Illyria
Coffee Break16:00 – 16:30
EFSE Annual Meeting 2011
