Kiev invests in energy efficiency

NEFCO NewsInformation Bulletin published by the Nordic Environment Finance Corporation, NEFCO

2 14

NOVEMBER 2014

INTERVIEW

Tougher times ahead for NDEP in Russia →18

NEWS

New Call for Proposals to pur-chase carbon credits →3

FEATURE STORY

Chernihiv in Ukraine rolls out a range of energy efficiency projects → 12

ARTICLE

Organic waste becomes fertiliser in China →21

Kiev invests in energy efficiency

Kiev has saved over one billion hryvna by reducing energy

consumption in municipally-owned buildings.

FEATURE STORY / PAgES 8-11

2 NOVEMBER 2014 nefco newsletter nefco newsletter NOVEMBER 2014 3

New LOAN. The city of Lviv in Ukraine and NEFCO have signed a loan agree-ment on financing energy efficiency investments in municipally -owned buildings. → Page 4

COLUMN. Columnist Anders Stigebrandt calls for measures to address the internal phosphorus load in the Baltic Sea. → Page 7

energy efficiency. Chernihiv is saving millions by investing in energy efficiency. → Page 12

Solid waste and methane capture. NEFCO's carbon funds address emissions in the solid waste sector in Latin America. → Page 16

Environmental advocate. "EU sanctions will hamper our operations in Russia," says Jaakko Henttonen at NDEP. → Page 18

Nordic cleantech. Organic waste becomes fertiliser in China. → Page 21

APPOINTMENTS. NEFCO’s Manage-ment Committee has two new mem-bers. → Page 23

Our role as a neutral player

The armed conflict in Ukraine has now been going on for more than half a year. Many lives have been lost and hundreds of thou-sands of people have had to flee their own homes and seek safety in other towns and cities. The conflict has also fuelled macro-eco-nomic decline and made it challenging for international financial institutions to lend capital both to the private and public sector.

We at NEFCO are affected by the conflict in Ukraine in many ways. Some of our Ukrainian customers and partners are facing increased difficulties. The weakened Ukrainian currency and damaged logistics are already impact-ing the accounts and order books of many companies negatively. Despite the

ceasefire, NEFCO has had to freeze some mu-nicipal projects because of unrest in eastern Ukraine and our local colleagues have to take into account the safety situation in their eve-ryday work.

Despite this starting point, NEFCO re-tains a strong presence in Ukraine. More than 22 per cent of our loans are currently targeted at Ukrainian projects. Our office in Kiev continues to operate as earlier and many municipal projects aimed at implementing energy efficiency measures, have become even more pivotal due to higher gas prices. Some of these projects will hopefully be up and running in the western and central parts

of the country this winter. In fact, our owners have further stressed the impor-tance of strengthening NEFCO’s commitments and pledges in Ukraine due to the ongoing crisis. This spring, NEFCO’s Board of Directors accordingly pub-lished a statement calling for continued loans for environmental projects in Ukraine and, if possible, to further broaden and expand existing activities.

To quote our Managing Director Magnus Rystedt, “We’re a small insti-tution focusing on the environment and are generally regarded as an honest broker - we don’t threaten anybody or advocate policy issues. Our role is to be a neutral player and expert organisation that helps move things beyond meetings and declarations.”

It will take considerable time, patience and money to rebuild the infra-structure destroyed during the conflict. Nordic politicians have already been involved in peace initiatives and negotiations during this summer. As a Nor-dic financial institution, we will not abandon the countries in which we have programmes or diverge from our basic mission even during ongoing crises. NEFCO’s mission in Ukraine is more important than ever.

invESTmEnT

From the Editor Contents news in brief

"It will take considerable time, patience and money to rebuild the infrastructure destroyed during the conflict."

mikael Sjövall CommunicationsManagerNEFCO

CLimATE

New Call for Proposals for NorCaP

The Norwegian Carbon Procure-ment Facility (NorCaP) has launched a second Call for Proposals to purchase carbon credits from vulnerable Clean Development Mechanism projects. This is a joint Call for the carbon funds NorCaP and NeCF, which both are ad-ministered by NEFCO.

NorCaP is expected to purchase up to 15 million certified emission reduc-tions in connection with the second call. One third of these carbon cred-its are expected to be contracted from least developed countries (LDCs). Ad-ditionally, NeCF is expected to con-tract 3 million CERs from new projects in least developed countries. Proposals for NorCaP and NeCF can be submitted until 27 November 2014.

PSI to finance four new climate projects in the ArcticThe Arctic Council Project Support Instru-ment (PSI) Committee has made its first in-vestment decisions to finance four new cli-mate projects to help reduce emissions of black carbon impacting the Arctic and North-ern Russia.

The overall investment budget for the pro-jects is EUR 4.3 million. The projects will pave the way for the cleaner combustion of diesel, the replacement of fossil fuels with renewa-ble energy, as well as for technical upgrades at diesel power plants in the Murmansk re-

gion and the Republic of Karelia. Further-more, an expression of interest to finance a project to address emissions of mercury was approved by the PSI Committee.

“The project will enable implementation of new technology as well as ensure the elec-tricity supply in these communities. Howev-er, the most important aspect is that both the environmental and health impact of black carbon will be reduced,” says Amund Be-itnes, Senior Investment Manager at NEFCO.

COvER STORY → PAgE 8

Kiev has saved one billion hryvna (UAH) by reducing heating consumption.Cover photo Patrik rastenberger

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BELARUS

Loan for brickworks in Belarus

NEFCO and the Belarusian compa-ny OJSC Keramika have signed a loan agreement to modernise the company’s energy supply system. NEFCO will provide EUR 500,000 for the project from its Cleaner Production Facility.

Located in the city of Vitebsk, 220 km to the northeast of Minsk, OJSC Keramika is one of the oldest enterpris-es in Belarus producing bricks, blocks and drainage pipes from burnt clay. The energy supply system at the facto-ry will be upgraded through the instal-lation of a new natural gas-fired cogen-eration unit (CHP) and the replacement of two obsolete hot water boilers.

"The installations will make the fac-tory self-sufficient in energy and cut annual electricity costs,” says Vitaly Ar-tyushchenko, Chief Investment Advis-er at NEFCO.

The Keramika brick production as-sociation was founded in 1980 and transformed into OJSC Keramika in 1995. Today the company has 1,110 em-ployees and an annual capacity of more than 150 million bricks.


news in briefnews in brief

ChAiRmAnShiP

NEFCO chairs NDEP

NEFCO has assumed the chairman-ship for the Northern Dimension Envi-ronmental Partnership (NDEP) from 1 July this year. NEFCO manages the ac-tivities of the Steering Group, which is responsible for coordinating environ-mental development projects in the Northern Dimension Area of North-west Russia and Northern Belarus.

NDEP has 13 active projects under implementation for improving munici-pality infrastructure. Another nine pro-jects have been completed and seven are under preparation. NEFCO has tak-en part in 12 of these projects, mainly in the water and waste management sectors.

UKRAinE

Energy efficiency investment in Kamyanets-Podilsky

The Ukrainian city of Kamyanets-Podilsky has signed a loan agreement with NEFCO to finance energy efficien-cy investments aimed at upgrading the city’s district heating system.

The energy efficiency project is managed under a Swedish funding fa-cility known as DemoUkrainaDH, which combines grant funding provid-ed by the Swedish International De-velopment Cooperation Agency (Sida) with a loan from NEFCO.

Eight projects are currently being implemented under the DemoUkrain-aDH Facility. The Eastern European En-ergy Efficiency and Environment Part-nership (E5P) has also supported the Facility by providing consultancy ser-vices for project preparation.

The project in Kamyanets-Podilsky will focus on the installation of more than 20 individual heat substations in combination with modernising inter-nal heating systems, renovating hot tap water systems and installing heat distribution pumps inside residen-tial buildings. The project also aims at rolling out an energy awareness cam-paign.

AgREEmEnT

NEFCO’s new Host Country Agreement entered into forceThe new Host Country Agreement between the Government of Finland and NEFCO has been approved by the Finnish Parliament and accepted by the President of the Republic of Finland. The agreement, signed on 15 October 2013, entered into force on 11 May 2014.

As an international organisation, NEFCO does not fall under any national legisla-tion and therefore a number of matters of both a principle and practical nature are set-tled through an agreement between the organisation and the host country. The docu-ment regulates the relations between the Government of Finland and NEFCO, and is one of NEFCO’s constituent documents. The renewed agreement replaces the agreement from 1999 and further strengthens NEFCO's status as an international organisation.

LOAn COndiTiOnS

Renewable energy projects included in the Cleaner Production FacilityNEFCO’s facility for Cleaner Production now offers financ-ing for renewable energy projects in Russia, Ukraine and Belarus. Private and public companies can apply for fund-ing from the Facility.

This will make it possible for small and medium-sized companies to apply for loans for renewable energy projects. Considerable environmental effects can be achieved by these companies, in NEFCO’s countries of operation, when sub-

stituting fossil fuels with renewable energy sources. Up to 90% of the total project costs can be financed through a Cleaner Production loan.

Until now, the Facility has mainly financed projects, in which the technology is upgraded or the production meth-ods are modernised, with the aim to conserve raw materi-als and energy, eliminating toxic raw materials and reduc-ing emissions.

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"The importance of acting now cannot be overstated: every euro spent on fossil fuels today locks in a certain amount of global warming and reduces our chances of achieving the emissions reductions needed by 2050."Un's Special Envoy for climate change, mary Robinson in the Irish Times, 20th October 2014


EnERgY EFFiEnCY

NEFCO and MTBank join forces to finance energy efficiency projects

NEFCO and Minsk Transit Bank (MTBank) have signed an agree-ment for setting up a new loan pro-gramme which will provide financing for energy efficiency projects for the bank’s current and potential custom-ers. NEFCO will provide EUR 3 million from its Investment Fund for the new facility.

The MTBank Energy Efficiency Fa-cility will provide funding to small and medium-sized businesses and pri-vate households in Belarus to enable them, among other things, to renew equipment in production facilities, to improve energy efficiency in the for-estry sector and to renovate private homes.

“We can expect at least 25% energy savings as a result of loans provided by the Facility, thanks to the introduc-tion of new and modern equipment,” says Thor Thorsteinsson, Senior Fi-nancial Manager at NEFCO.

EnERgY EFFiEnCY

Loan for energy efficiency measures in Zhytomyr

NEFCO and the city of Zhytomyr have signed a loan agreement worth EUR 3 million aimed at implementing energy efficiency measures in 19 mu-nicipally-owned buildings.

The project will will focus on the installation of individual heat substa-tions, thermal insulation of roofs and facades, as well as on replacing old windows with new, energy-efficient ones. The project is co-financed by grant funds provided by the Eastern Europe Energy Efficiency and Environ-ment Partnership (E5P) and the Swed-ish International Development Coop-eration Agency (Sida) in addition to the city’s own funds. By implementing this project, the city of Zhytomyr will reduce gas consumption by some 1.5 million cubic metres annually.

Ukraine

Boost for energy efficiency in LvivThe city of Lviv in western Ukraine and NEFCO have signed a loan agreement on financing energy efficiency investments in municipally owned buildings.

The project, which has been developed with support from the Swedish Interna-tional Development Cooperation Agen-cy, aims at upgrading four schools and two polyclinics in order to reduce energy consumption and save costs. The project measures include modernisation of heat-ing systems, replacement of windows, in-sulation of pipes, upgrading of lighting systems and installation of heat-reflect-ing screens for radiators.

The measures are expected to reduce gas consumption by over 103,000 cubic metres annually. This will generate en-vironmental benefits in terms of reduced

emissions of carbon dioxide, nitrogen ox-ides, sulphur dioxide and dust.

The project at hand, which is NEFCO's second energy savings project in Lviv, will be financed by NEFCO’s Facility for En-ergy Saving Credits, which is a loan pro-gramme that provides funds to finance energy-saving measures in municipal-ly-owned buildings such as schools, day-care centres, hospitals and sports facili-ties. The Facility currently only provides loans to Russian and Ukrainian local au-thorities and publicly owned companies.

Under the terms of the Facility, NEFCO can finance, in local currency, up to 90 per cent or EUR 400,000 of the in-vestment costs of any project being fi-nanced under the credit programme.

news in brief

EnERgY EFFiCiEnCY

Column

Baltic Sea restoration by temporarily oxygenating the deep water

The external input of phosphorus from countries around the Baltic Sea has halved since the 1980s. Despite this, the phosphorus content of the Baltic is increasing due to the large internal source of phosphorus linked to anoxic bottom areas of the sea. This internal source has been estimated to be three times greater than the external source (around 100,000 tonnes compared to around 30,000 tonnes p.a.) The phos-phorus content in the Baltic Sea is striving for equilibrium with the total input, which is thus about 130,000 tonnes p.a. If we want to seriously reduce eutrophication in the Baltic Sea, we must radically decrease its phosphorus con-tent. This in turn requires a huge reduction in the total phosphorus source. The costs of reducing the external source have ris-en since the cheapest measures have been implemented and the potential for puri-fication is declining. A reduction of more than 10,000 tonnes per year in the external phosphorus source seems almost utopian. This is why a large reduction can only be achieved by reducing the internal source.

If the internal source of phosphorus can be eliminated, which can be achieved by oxygenating the anoxic bottom areas, the phosphorus content in the Baltic sea will strive for equilibrium with the external in-put. After an estimated 10 years, the Baltic Sea should be in a condition similar to that it was in during the 1950s, when the exter-nal source was roughly the size it is now and the internal source was small. This very low concentration of phosphorus should result in a substantial reduction in the bi-ological production of organic material in the surface water and thus also the loading of the deep wa-ter with oxygen-consuming substances. The natural input of oxygen, which depends on the physical circulation, should then be able to keep the deep water of the Baltic Sea oxygen-ised. It should be noted that oxygenation only needs to take place until the concentration in the water column has fall-en to the new equilibrium.

A comprehensive study of the ecological impacts of oxygen-ation must be carried out before restoration can take place. Certain questions surrounding the effects of oxygenation can be answered by studying the conditions in basins in the Baltic Sea which vary from between being oxygenated and being an-oxic. The ecological effects can also be studied by experiments in other coastal basins. One successful smaller scale oxygena-tion experiment headed by the author of this article was con-

ducted in the Byfjord in Uddevalla, Sweden where the ecological, toxicological and bio-chemical effects of oxygenation were studied.

The BOX-WIN project, carried out with funds from the Swedish Agency for Sea and Water Management and from the BSAP Fund and NEFCO, has shown that cod reproduc-tion in the Bornholm Basin, the only place today where Baltic Sea cod reproduce, could benefit from oxygenation of this basin. Oth-er expected positive effects of oxygenating this basin are that the phosphorus discharge from deep sea bottoms could be reduced by 7,500 tonnes per year and the bottoms could be colonised.

The estimated cost of oxygenating the Bornholm Basin over a period of 10 years is around EUR 250 million. This is under dou-ble the cost of refurbishing the Swedish wastewater treatment plant SYVAB, which serves around 3% of the Swedish population. After refurbishment, it is estimated SYVAB’s phosphorus emissions would decrease by 8 tonnes annually. Further questions on the ecological effects of oxygenating the deep

water could conveniently be studied in a pilot experiment in the Bornholm Basin, where development would be mon-itored by a rigorous control programme which would ena-ble the experiment to be discontinued if unacceptable neg-ative effects are observed.

"Oxygenating the Bornholm Basin could re-duce discharges of phosphorus from deep sea bottoms by 7,500 tonnes per year."

Anders Stigebrandt Professor Emeritus

Professor Emeritus Anders Stigebrandt underlines the importance of addressing the internal phosphorus load in the Baltic Sea.

"Wind energy could supply up to 19 per cent of global electricity by 2030." Global Wind Energy Council on Twitter in October 2014

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Znamensk KievKiev

Here you can see a cooling unit that uses water as coolant, and here we have rigged up a system to measure electricity usage for different types of light. As you can see from this meter panel,

a standard bulb uses a whopping seven times more electricity than equivalent LED lights,” he says, hurrying onwards.

The municipal enterprise ME PIU in charge of Kiev’s energy efficiency measures holds over 100 meetings and tutorials per year to teach of-

ficials, policy makers, entrepreneurs and stu-dents in the noble art of saving energy. ME PIU is a communal company that is 100% owned by the city of Kiev. The city is also accounta-ble for all costs incurred by the centre’s train-ing sessions and seminars for the various tar-get groups. It is currently free to participate in one of ME PIU’s courses, which guarantees a continuous influx of inquisitive, eager-to-learn visitors from near and far.

"Tomorrow, we’ve got a visit from around 20 company representatives who want to learn some definite tips on how to reduce electricity

Energy-efficient solutions in KievDirector Anatoly Kozlenko is great at talking and gesticulating. He is in full verbal flow as he takes a walk around the Kyiv Energy Efficiency Centre in Darnitsa district on the outskirts of Kiev, all whilst showing off energy-efficient lights, different insulation materials, heat pumps and solar collectors. Photos Patrik rastenberger

● Solar collectors on the roof of Kyiv Energy Efficiency Centre in darnitsa on the outskirts of the Ukrainian capital.

"


KievKiev

usage as cost-efficiently as possible, and re-duce their company’s fixed expenses. Then we’ve got a visit by a group of mayors from several different Ukrainian towns," Ana-toly explains.

ME PIU practises what it preaches – on the roof of the centre, staff have had solar collectors installed, which over the course of our visit, have produced more energy than the centre needs. The building’s walls have been insulated to prevent heat loss and a heat pump hums away in the back-ground. Lighting is taken care of with en-ergy-saving strip lights and LED lights. The centre’s staff can check online in real time how much electricity the centre’s solar col-lectors are producing and if the technology is working as it should.

There is a significant need for ME PIU’s services in the Ukrainian capital. According to surveys conducted by the company, the city’s buildings use an average of 210-300 kilowatt hours of energy per square metre, whilst equivalent figures for Sweden are 30-60 kWh and 50-100 kWh in Germany. Over 90 per cent of the communally-owned buildings in Kiev consume so much energy that they are in the worst E and F categories, according to international classifications.

“We have implemented a comprehen-sive investment programme aimed at re-ducing heat energy consumption in over 1,500 communally-owned buildings in the education, culture and health sectors here in Kiev. The entire budget for this pro-gramme runs to a total of USD 27 million,” explains Anatoly.

He pulls out diagrams and bar graphs to illustrate the project’s concrete results so far. The investment has reduced heating consumption by close to 350,000 gigacal-ories which, in turn, has provided an eco-nomic saving of one billion hryvnia (UAH). The city of Kiev has financed 37 per cent of the costs, whilst the World Bank has fi-nanced 56 per cent and Sweden has con-tributed seven per cent of the programme’s entire costs. The money has been used for a number of purposes, including retrofits of individual heat substations with instal-lation of water heaters and automatic con-trol systems, heat metres, installation of radiator reflectors and new energy-efficient windows.

“We’ve also used infrared heat cameras to locate the biggest heat loss or leakage ar-eas in various buildings. It’s a superb way to illustrate where the constructional tech-nical challenges are and where we need to put in the insulation,” says Anatoly.

However, there is still a lot to do. The price of electricity and heating is constant-ly on the rise, which despite all economies made, has forced the city to periodically ad-just its energy budget. Last year, the city of Kiev was forced to increase its energy budg-et by UAH 100 million in order to cover the rising costs. The situation will be particu-larly worrying this winter, as the war has affected the gas supplies and Kiev’s own stock will not be sufficient to provide the entire city with heat. In September when we visited Kiev, only 20 per cent of the city’s residents had access to hot water.

We continue, and learn about one of the pilot projects that has been realised with Ki-ev’s and NEFCO’s support. At Nursery 99, they are used to strangers and foreign vis-itors. The nursery is in the same part of the city close to the energy efficiency centre, and consequently often serves as the ‘shop window’ for all sorts of visitor groups.

“We’ve insulated the roof and walls, modernised windows and doors and fitted new heating elements with thermostats and replaced the lighting with LED lights,” explains Anatoly.

We take a look at the building’s new in-dividual heating substation that is tooled up with Danfoss equipment. The shiny sil-ver pipes reflect the camera flashes. In the

nursery kitchen, the staff are cleaning up after the lunch service. A kitchen assistant is scrubbing the hobs on the new energy-efficient stove with wire wool and glanc-ing shyly at the guests wandering around. Prior to the project’s completion, the nurs-ery used around 360 kilowatt hours (kWh) of energy per square metre. Now when the investments and upgrades are done, con-sumption is only 118 kWh per square metre.

“A nursery of this size is saving around UAH 300,000 per year thanks to the focused investments in energy efficiency. The in-vestment will pay for itself in around 5 years’ time,” says Anatoly.

But what would a nursery be without children to fill it? After we have admired all the technical details and refinements, we visit the playroom to see the little ones. The children are sitting up straight, staring at us, in the middle of creating colourful but-terflies and long-haired princesses on their sheets of paper. The soft toys are carefully arranged on the pink shelves.

“Before the project, it was normal for the temperature in this room to be around 15-16 degrees Celsius in wintertime, but now we have an even, stable temperature through-out the building,” says the nursery’s Direc-tor Antonina Moshkovych.

Nursery 99 will not be the only one of its kind in Kiev. As a link in the city's future investments in energy-efficient solutions, NEFCO will also contribute their share. ME PIU has recently signed a loan agreement for EUR 5 million for a joint project that aims to implement similar investments in a long list of communally-owned build-ings. The total investment for the project is EUR 9.3 million. In addition to the sup-port from NEFCO and the city of Kiev, the project has received financial backing from USAID, Sida and the Eastern Europe Ener-gy Efficiency & Environment Partnership (E5P). The focus of the project is to install and upgrade individual heat substations, comprehensive thermal insulation and up-grade of lighting systems in the buildings that are to be renovated.

“We are happy to support the invest-ments in energy-efficiency in the Ukraini-an capital in a situation where energy con-sumption is the buzzphrase on everyone's lips; in addition to the issue becoming even more pressing due to the ongoing conflict in the east of the country. I hope that our project can serve as an example for simi-lar investments in other parts of Ukraine,” says NEFCO’s Senior Investment Manag-er Ulf Bojö.

Building colour-ful towers at nursery 99 in Kiev.

→ What's cook-ing? Energy-efficient stoves at nursery 99 in Kiev.

"A nursery of this size is saving around UAH 300,000 per year thanks to the focused invest-ments in energy efficiency. The investment will pay for itself in around 5 years’ time,” says Anatoly Kozlenko.


Chernihiv

Chernihiv saves millions by investing in energy

● Replacing draughty and ageing windows can reduce energy con-sumption by 8-15 per cent.

The 12 ancient cannons in the heart of Chernihiv face west, towards the city’s his-toric monastery. Peeking from behind the leafy trees is Ukraine’s oldest church, the Saviour Cathedral of Chernihiv, built in around 1030. According to an old legend, if a woman is in two minds about a rela-tionship and wants to ditch her persistent and unwanted suitor, she should arrange to meet the man ‘at the thirteenth cannon’. But of course, the thing is that there is no thirteenth cannon. The 12 cannons origi-nate from The Great Northern War when Karl XII’s troops were on patrol in Polta-va in 1709. It's not just the Chernihiv can-nons that are steeped in history. A third of Ukraine’s buildings from pre-Mongol times are located in Chernihiv. The city celebrated its 1,300th anniversary recently.

We are staying in the city, learning about one of of NEFCO’s latest efforts in the Ukrainian project portfolio. Local de-

cision-makers have decided to improve en-ergy consumption in the city’s education-al sector, which means a significant num-ber of investments and upgrades to Cherni-hiv's schools and nurseries, in a total of 96 different buildings.

As early as 2010, the city approved a management plan to implement the invest-ments. Now the plan is to be supplemented with a number of different measures, and the term of office for the local councillors is to be extended until 2017. The aim is to up-grade all of the 96 educational buildings. Equivalent plans have been drawn up for the city’s healthcare and cultural sectors.

"We’re saving millions by founding indi-vidual sub-heating stations, replacing bro-ken and ageing windows and investing in energy-efficient lighting," says Volodymyr Burzdov, head of the city council’s energy efficiency department.

During our September visit to Cherni-hiv, flags were at half-mast at several com-munal civil service departments. The war in eastern Ukraine is on everyone’s lips, and the subdued oppressive feeling cannot be ignored. Foreign gas supplies are un-certain, and a harsh winter is expected. The Ukrainian authorities have established directives for the country’s municipalities which will ration heating and minimise energy consumption. All avenues must be explored in order to ensure the country’s own gas stores are sufficient for the entire winter. At Chernihiv’s city hall there is an ongoing flurry of discussions about which alternative energy sources could be used.

Photos Patrik rastenberger

Chernihiv is rolling out a range of energy efficiency projects in order to cut heat consumption and save money. We met with the city's decision makers in September and visited two schools which were being refurbished.


ChernihivChernihiv

↖ School number two in Chernihiv has some 900 pupils in 34 classes.

←← Principal Lyudmyla Hatymyrska from school number nine with Depu-ty Head Myhaylo Ruban from Chernihiv's educa-tional department.

← Energetic kids seeking attention and preparing for a game of tag.

"We have discussed the possibility of in-stalling solar collectors on the roofs of some buildings, and we are also looking into us-ing geothermal energy," says Morchan Ro-man, the city’s Chief Specialist on energy management.

"When the gas runs out, we will be forced to take drastic action, as we simply cannot teach children in freezing cold build-ings. We'd then have to consider having longer winter school holidays and invest in remote learning," says Michail Ruban, Deputy Head of the education department.

At school number nine, it’s the usu-al organised chaos of children streaming through the corridors and hurrying up and down the stairs. The kids are on top form af-ter their morning’s lessons. Now it’s time for a game of tag and play follow-the-lead-er. The building houses over 380 pupils and is one of the seven buildings which, within the framework of NEFCO’s project, has un-dergone a comprehensive upgrade to save energy. The roof has been insulated, win-dows and lights have been replaced and an individual heating station has been fitted in order to save energy and release more funds into the municipal coffers.

"Replacing draughty and ageing win-dows can itself reduce energy consump-tion by 8-15 per cent. We usually use infra-red cameras to look for the areas of great-est heat loss in the buildings to be reno-vated," says Consultant Elena Kotlyarska at Fiatu, the organisation responsible for project preparation in conjunction with the city and NEFCO.

At school number two on the other side of the city, renovation work is in full swing. The school auditorium is cluttered with newly-purchased windows waiting to be installed. The school’s north wing is al-ready dealing with the finer technical sub-tleties – installing the windows and sealing the gaping holes in the building’s façade before the winter chill comes creeping in.

"We began refitting the windows in the northern section of the building first, as that area is most exposed to the winter chill and north winds," explains the school’s Principal Tamara Hosatkina.

The Principal inspires respect. As we approach the main entrance, I see two teenagers lounging about, hanging off the handrail by the door, their jaws mak-ing light work of some chewing gum. Ta-mara glanced towards them, and in a split second they had stood up and straightened up whilst we passed. School number two is of a different size, with its 900 pupils in 34 classes. The school offers in-depth studies in foreign languages, which means that a large number of the pupils speak fluent German or English.

"As you can see, we have refitted the lighting and installed heat-reflecting pan-els. We’ve used insulation materials which do not contain any fluorinated gases – this is to meet NEFCO’s strict environmental re-quirements," says Morchan Roman.

Both schools are part of a project that encompasses a total of seven differ-ent buildings in Chernihiv. The project is financed by the city and NEFCO’s Facili-ty for Energy Saving Credits which grants short-term loans for investments that im-prove energy consumption in communal-ly-owned buildings. However, NEFCO’s in-volvement in Chernihiv’s energy efficiency measures does have several ramifications. There are negotiations underway between the city of Chernihiv and NEFCO in respect of the possibility to further develop the en-ergy efficiency initiatives.

"We have recently opened discussions on a new project which would involve new in-vestments in energy efficiency to the tune of EUR 5-6 million. Chernihiv has a com-prehensive four-pipe system throughout the city which provides schools, nurseries and hospitals with heat and hot running water. There are significant cost-effective environmental and energy benefits to be gained if we can convert to a two-pipe sys-tem. I hope that we can begin the process as early as next year," says Senior Invest-ment Manager Ulf Bojö at NEFCO.

"We’re saving millions by found-ing individual sub-heating sta-tions, replacing broken and ageing windows and in-vesting in energy-efficient lighting," says Volodymyr Burdov.


Latin AmericaLatin America

managing organic wastes in BoliviaThe cities of El Alto and La Paz are locat-ed at 4,150 and 3,650 metres above sea lev-el in the Altiplano of Bolivia. The altitude and topography of the cities alone presents a challenge for urban planning and waste management. However, it is here that a Nordic Climate Facility (NCF) study con-cludes that using proven biogas technol-ogies can significantly reduce the costs of waste handling and the pollution of the urban environment, diversify the energy mix, enable technology transfer and cap-ital investment, create employment and promote sustainable waste management. It proposes a phased biogas utilisation strat-egy for organic wastes, which gradually re-duces the need for landfilling. The strategy starts with active gas extraction at the Al-pacoma or Villa Ingenio landfill, then es-tablishing a dry-digestion plant based on present, unsegregated waste collection and graduating to a source segregated anaero-bic digestion system. NCF is funded by the Nordic Development Fund (NDF) and ad-ministered by NEFCO.

Economic analysis suggests that the profitability is sensitive to the investment cost and low market prices for electricity.

The project can be made viable through en-hanced waste transportation, handling and treatment fees, and revenues from sales of organic fertiliser. The NCF work makes policy recommendations to the municipal government to overcome the identified ob-stacles.

Addressing landfill gas emissions in Brazil and ColombiaThe principal objective of NEFCO Norwe-gian Carbon Procurement Facility (NorCaP) is to prevent the reversal of emission re-duction activities by procuring credits from CDM projects whose survival depend on a

higher carbon price than achievable under current market conditions (so called “vul-nerable projects”). Through a competitive call for proposals process initiated in No-vember 2013, NEFCO has identified four waste management projects in Brazil and Colombia, which were at risk of discontin-uing their emission reduction activities. These projects, which aim to capture and destroy methane gas from landfills, have a combined contracted volume of 14 million tonnes of carbon dioxide equivalents saved.

In addition, methane is a short lived cli-mate pollutant, offering a cost effective op-portunity to slow down global warming in the short term. It can be effectively abated through separation and treatment of bi-odegradable mincipal waste and landfill gas utilisation. Mitigation of short-lived climate pollutants is a key objective of the Climate and Clean Air Coalition, of which NEFCO and Norway are both partner organ-isations.

Ash Sharma, NEFCO’s Special Adviser for Climate Change, describes recent NEFCO programmes promoting environmental improvements in the solid waste sector.

Addressing solid waste manage-ment challenges in Latin America

Overcoming barriers to investmentWork undertaken by the consultant team in Peru has found that the waste treat-ment system has relied until recently on poor public sector service provision. As the economy has expanded, environmental concerns have grown and come to the fore of public policy. Accordingly, a large invest-ment programme is being instituted to col-lect and treat more of the waste in a sus-tainable fashion, for example segregating more waste, replacing open dumps with sanitary landfills and ultimately phasing out deposition of organic waste. This will result in a growth of emission by 45% from 2010 to 2030 as more waste is collected and properly treated.

In common with the other countries in the region, the work in Peru and Bolivia proposes measures to overcome challenges to the development of the sector including:

• An adequate waste tariff system is re-quired to promote investment. In Boliv-ia, for example, the researchers found that only 17% of municipalities charge for waste disposal, and that these fees cover only 40-60% of operating costs. At levels significantly below cost recovery, service provision is funded by munici-pal budgets, which cannot finance new investment. The private sector, which is willing and able to make capital invest-ments, cannot make a profit and per-ceives the sector as risky.

• Incentives for advanced technologies are required. For example, feed-in tar-iffs for electricity generated from land-fill gas and tax or customs exemptions for equipment. In Bolivia, high subsidies to natural gas crowd out other energy options such as waste derived biofuels.

• Creation of market conditions for bi-ogas, fertilisers/compost and waste de-rived fuels.

• Facilitation of permits and authorisa-tions for solid waste infrastructure

In each case, NEFCO-supported work pro-vides targeted policy recommendations to overcome these barriers. In the case of the Peru project, the study will outline options for attracting international climate finance through the NAMA and the long term fund-ing of these investments by Nordic actors is under consideration.

A timely interventionSolid waste management has emerged as one of the most pressing environmental challenges facing cities globally. In addi-tion to climate impacts, there are signif-icant impacts on local air pollution and hence public health, and water contami-nation. The rapidly growing cities of Latin America are no exception. According to the C40 Climate Leadership Group, cities con-sume over two-thirds of the world’s ener-gy and account for more than 70 per cent of global CO2 emissions. Furthermore, with 90 per cent of the world’s urban areas sit-uated on coastlines, cities are at high risk from some of the devastating impacts of cli-mate change, such as rising sea levels and powerful coastal storms.

NEFCO has been working with solid waste management in Latin America since 2010. One of the first initiatives was in Peru where it has worked with the Ministry of Environ-ment (MINAM) and the Nordic Council of Ministers to develop a so-called Nationally Appropriate Mitigation Action (NAMA) pro-gramme in the solid waste sector. This work is particularly timely given the selection of Lima as host of the 20th Conference of the Parties in December 2014, a key milestone in the road map towards a new UN agree-ment on climate change. NEFCO will be present as the principal out-put of the work, a solid waste NAMA propos-al will be showcased at the event.

← Special Adviser Ash Sharma on a field trip in Colombia aimed at identifying waste man-agement projects in Latin America.

→ Landfill gas extraction in Bogotá, Colombia.

Photos Catalina Useche-Neal

"The NCF work makes policy recommenda-tions to the municipal government to over-come the identified obstacles."


interview

Environmental advocate in Russia Jaakko Henttonen comes across as being down to earth when we meet him in the café Viola in Kaisaniemi Botanic Garden in Helsinki, the Finnish capital. He has made a stopover in Helsinki on his way back to work after the holidays. There are two hours left before his train leaves for St Petersburg in Russia, where he has headed the work of the Northern Dimension Environmental Partnership (NDEP) since 2006.

WhAT iS ThE AddEd vALUE OF ndEP’S OPERATiOnS in RUSSiA And BELARUS WhERE YOU WORK?

“We provide grant financing for various environmental projects. Our funding constitutes vital start-up capital to enable, for exam-ple, the upgrading of wastewater treatment plants or an extension to a district heating system in small municipalities with scant re-sources. The remaining funding for various projects comes in the form of loans from international financial institutions such as NEFCO as well as from local funds from the project owners them-selves. We are needed because of the lack of this type of financing structures in Russia and Belarus.”

Contact with NEFCO will be frequent this autumn since NEFCO assumed chairmanship of NDEP’s Steering Group at the start of July this year. There is thunder in the air. Dark clouds loom on the horizon and lightning flashes to the west. We sit inside for a chat and gaze towards Eläintarhanlahti bay as the thunder rum-bles in the pouring rain.

“Needless to say, the EU sanctions against Russia will hamper our operations. Many projects will now have to be frozen since, among others, the EBRD and EIB have announced that they are unable to fund new projects in Russia. On the other hand, we will continue to work on environmental projects approved earlier. If the sanctions are long-lasting, the environmental impacts can be unpredictable,” says Henttonen.

CAn YOU givE SOmE ExAmPLES OF SUCCESS STORiES in ThE hiSTORY OF ndEP?

“Our greatest achievement has been the long-term co-operation for achieving full sewage treatment in St Petersburg so that the city now satisfies the requirements of HELCOM (The Baltic Ma-rine Environment Protection Commission). Then we have man-aged to bring about extensive co-operation between international financial institutions, NDEP contributors and national funding, which in turn has resulted in co-ordinated cash flow and loan fi-nancing of important environmental projects that would other-wise not have materialised.”

WhAT ARE YOU WORKing On AT ThE mOmEnT?

“We’re planning several investments in the waste management sector. In the Republic of Karelia and the Leningrad Region, we're trying to get a whole series of sewage treatment projects started in, among other places, Vyborg and Kingisepp, to curb discharg-es of phosphorus and nitrogen into the Gulf of Finland. A recent study from the federal authorities in Russia reveals no less than 184 wastewater treatment plants in the Leningrad Region that re-quire urgent and immediate upgrading. The situation in the waste sector is equally as gloomy, with around 400 illegal waste tips in the Leningrad Region. NDEP has earlier financed the upgrading and modernisation of wastewater treatment plants in Sosnovy Bor, Gatchina, Tikhvin and Kirovsk. These investments serve as good references and models for future projects.”

hOW dO YOU Find YOUR CUSTOmERS?

“NDEP and the international financial institutions are relative-ly well known in Russia and Belarus and are often invited to var-ious conferences and events, where we can portray our opera-tions. There are several occasions where local project owners get in touch with us to enquire about various financing possibilities before they talk to other presumptive financiers. After that, we usually contact international financial institutions to test the wa-ter and check whether there are possibilities to work together to secure the external financing of the project.”

WhAT ABOUT YOUR OPERATiOnS in BELARUS?

“We are about to roll out our first projects in Belarus and have de-veloped a functioning working relationship with the Belarusian authorities. To date, we have agreed on financing five projects in the country. The upgrading of wastewater treatment plants in Brest, Grodno and Vitebsk, in close co-operation with EBRD and NIB respectively, will have a most favourable impact on the state of the Baltic Sea since all three cities are located within the Baltic Sea’s catchment area. This autumn, we intend to explore how we can further develop our project activities in the country.”

YOU WiLL RETiRE in A YEAR. WhAT WiLL dO YOU dO ThEn?

“I’m looking forward to spending more time with the family and to taking things a bit easier in retirement. But before then, we must ensure the continuance of international environmental work in Northwest Russia and Belarus.”

Forty years of Baltic marine environment protectionHELCOM has worked since 1974 for a healthier and safer Baltic Sea.

All the nine Baltic Sea coastal countries and the EU are HELCOM members, committed to the clear targets set for saving the sea.

Photo Patrik rastenberger


Support to the internationalisation of Nordic companies

What is the main purpose of nopef’s activities?The main purpose of the fund is to support the competitiveness of Nordic small and medium-sized enterprises (SMEs) by provid-ing grants and co-financing for feasibility studies aiming at in-ternationalisation. Nopef’s project funding is particularly aimed at Nordic growth companies with proven technology and innova-tive products with a strong potential for international markets. By providing financial support in an early and often critical growth phase, we can encourage SMEs to initiate projects on new and challenging markets and help to mitigate the risks involved in foreign direct investments.

in what way has nopef developed as a financial institution since its establishment 1982?Nopef was originally established as a financial institution by the Nordic countries in order to facilitate participation in interna-tional turn-key projects and to promote Nordic export opportuni-ties on new growth markets. Nopef’s focus has since shifted to-wards the internationalisation of small and medium-sized enter-prises, a sector that today accounts for a significant share of eco-nomic growth and job creation in the Nordic countries. Follow-ing the merger with NEFCO in January 2014, Nopef continues to support and provide funding for the internationalisation of Nor-dic SMEs, but with a renewed focus on projects related to the en-vironment, climate and green growth.

how has the merger with nEFCO affected nopef?Our project activity and the demand for Nopef’s services has re-mained high, despite the recent shift in Nopef’s mandate and pro-ject focus. As part of NEFCO, Nopef’s project activity has already benefited through greater and improved access to the relevant net-works and resources both in the Nordic region and in the project countries. The merger has, of course, also given us access to NEF-CO’s environmental expertise. Nopef is mainly active in the ear-ly stages of the investment process and, in time, we will also in-creasingly be able to channel new project opportunities to NEFCO for participation in both loan and equity financing.

What are nopef’s top priorities in 2015?We will continue to be an active funding partner for Nordic SMEs and to participate in new investment and internationalisation pro-jects related to green growth. Through our new mandate, we are already seeing new project opportunities, particularly those relat-ed to the cleantech sector. As a part of NEFCO, we will also contin-ue to develop cooperation with our networks and partner organi-sations in the Nordic area, and ensure that Nopef remains a visi-ble and accessible funding opportunity for Nordic SMEs.

in which parts of the world do nordic SmEs operate?More than ever before, we are seeing the globalisation of also small and medium-sized companies as a result of slow growth and lim-ited market opportunities on the home market. Nopef operates in countries outside the EU and Efta area, and we have for some years seen a project concentration towards the largest and fastest growing emerging economies such as China, Brazil, India and Russia. However, we have also recently started to see a steady in-crease in projects targeting market opportunities in other parts of the world, such as the Middle East and Africa. Also, the North American market continues to attract Nordic SMEs, with a huge market potential for Nordic technologies and innovations in the cleantech and other sectors.

how does the future look for nordic SmEs?During the past few years, we have seen an economic slowdown in the Nordic countries and many SMEs are still feeling the ef-fects of the financial crisis and ensuing credit crunch. How- ever, international markets continue to provide ample oppor-tunities for innovative companies with global ambitions and a readiness to commit to the often long and demanding process of international expansion. Many SMEs struggle with limited resources and the lack of market information is often a key bar-rier to internationalisation. Nopef will continue to play an im-portant role in this process by providing funding and additional resources for the identification and assessment of new interna-tional business opportunities.

mikael Reims Head of the Nordic Project Fund

The Nordic Project Fund, Nopef, merged with NEFCO in January 2014. Nopef’s activities are administered by NEFCO and financed by the Nordic Council of Ministers. In this interview, Mikael Reims outlines the market potential for Nordic technologies and innovations in the cleantech sector.

interview

Nordic innovations can contribute to solving environmental problems all over the world. Based in Grimstad, southern Norway, the Norwegian company Høst ver-dien i avfall AS, has innovated a range of various processes to re-use organic waste by converting it into energy, fertiliser, soil and soil amendments. The company has developed a solution to turn dried fi-bre residues from biogas plants into min-eral-organic fertiliser. Today, Høst process-es around 100,000 tonnes of organic resi-dues.The company is also Norway’s largest

supplier of soil and, together with its part-ners, operates composting plants through-out Norway.

In 2010, Høst obtained financing from Nopef to conduct a feasibility study on the Chinese market. During the ten years since it was established, Høst had grown steadi-ly in Norway and entered into partnership with most of the large waste management companies on the market. “China was cho-sen because of a string of coincidences, but after having gained contact with the Chi-

nese market, we decided to start the estab-lishment process,” explains Høst’s manag-ing director, Torleiv Næss Ugland.

Rapid growth, industrialisation and improved living standards in China have contributed to a dramatic increase in the amount of waste produced in the country. This is why Høst thought its products would be in high demand. The huge amount of organic waste from urban areas and agri-culture causes water pollution and green-house gas emissions.

China

Organic waste becomes fertiliser in China

● machinery at the fertiliser plant in Yunnan, China.

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This is NEFCONEFCO is an international financial institution established by the five Nordic countries. NEFCO finances green growth investments and pro-jects primarily in Russia, Ukraine and Belarus as well as climate projects across the world. NEFCO's main focus is to generate positive environmental effects of interest to the Nordic region.

inFORmATiOn BULLETin 2/2014

EditorsMikael Sjövall, Editor-in-chiefHusamuddin AhmadzaiTita AnttilaAmund BeitnesUlf BojöKarl-Johan LehtinenIrina LyashenkoLia Oker-BlomThor ThorsteinssonJulia Shevchuk

ColumnistAnders Stigebrandt

LayoutLemonWorks

Translations and proof readingKäännös-Aazet Oy

Printed byOy Lönnberg Ab

PublisherNordic Environment Finance Corporation, NEFCOPostal address: P.O.Box 241, FI-00171 Helsinki, FinlandVisiting address: Fabianinkatu - Fabiansgatan 34Telephone: +358 (0)10 618 003Fax: +358 9 630 976Email: [email protected]: www.nefco.orgtwitter.com/NefcoNordic

PhotographsPatrik Rastenberger

This Information Bulletin has been published on FSC-certified paper.

nEFCO informs

STAFF

New appointments at NEFCONEFCO’s Management Committee has two new members as of 1 September 2014. Tita Anttila has been appointed as Vice President, Head of Legal and Project Ad-ministration and Helle Lindegaard will take over the position as Vice President, Head of Carbon Finance and Funds. In addition, Tita and Helle will continue their legal work as

Chief Counsel and Senior Legal Adviser re-spectively. The former Head of the CFF De-partment, Ash Sharma, will continue work-ing for NEFCO as a Special Adviser for Cli-mate Change, providing leadership on stra-tegic initiatives in the area of climate fi-nance and policy.

vidEO PROdUCTiOn

Three new videos on the Baltic Sea

NEFCO has produced and published three new videos on environmental pro-jects which benefit the ecological state of the Baltic Sea. The projects have received funding from the Baltic Sea Action Plan Fund that is administered by NEFCO. One of the video clips shows what has been done to upgrade wastewater treatment in Tallinn and Türisalu in Estonia. The oth-er two videos highlight recent invest-ments in biogas as well as environmental measures at the Port of Trelleborg in Swe-den. The videos can be watched at you-tube.com/nefcofinland.

STAFF

RetirementSenior Manager Elisabet Paulig-Tönnes will retire in Janu-ary 2015 after having worked for NEFCO for almost two decades. We met her for a chat while she was busy packing her person-al belongings at the office in Helsinki.

how would you sum up your career at nEFCO? Fifteen years ago I became a full-time employee of NEFCO, but before that I was involved in NEFCO’s loan administration as an employee of the Nordic Investment Bank. As an administra-tor, I have been able to closely follow most of NEFCO’s activities during the years. The most rewarding experiences include ad-ministering the investments in energy savings in schools and day care centres, first in Russia and more recently in Ukraine. It has been gratifying to meet local people happy with the posi-tive effects of the projects. Also contacts with local consultants have been very pleasant and I will miss the friendly relation-ships developed in both countries.

how has nEFCO changed over the years?The number of employees has almost tripled since I started, which shows how much the range of NEFCO’s activities has increased. We have also seen a change in NEFCO’s countries of operation. When our activities in the Baltic countries and Po-land came to an end, Ukraine and Belarus became new coun-tries for NEFCO’s business operations. Our focus of operations has shifted from measures to reduce harmful emissions in-to water to climate issues. This seems a logical shift in focus.

What should nEFCO focus on in the future?I think energy efficiency in the public sector will remain an important aspect for many years to come. Municipal energy efficiency projects are of great importance, since without fi-nancing support from NEFCO, they would probably be real-ised much later.

What will you do when you retire?I will devote more of my time to my grandchildren, spend more time than before at our summer house during the spring and autumn, and I have hobbies such as yoga and photography.

During the feasibility study, Høst came up against major cultural differences and widespread bureaucracy, not least be-cause the regulations are constantly changing for this type of activity in China. The joint-venture company Yunnan Sino-Norway Bio-Engineering Co. Ltd. was established in Novem-ber 2012 to assist the Chinese authorities with solving some of the major environmental challenges China faces. The compa-ny was forged through a partnership with the Norwegian com-pany Norminor AS and the state-owned Chinese company Yun-nan Circular Economy Investment Co. Ltd.

At the time, the Chinese partner had started to work on a major expansion of wastewater treatment plants and waste management facilities in Yunnan Province, which borders Vi-etnam and Myanmar and which has a population of around 46 million. The organic waste from these facilities would thus be used as raw material to manufacture mineral-organic fertilis-er at the plant.

The plant was opened at the end of October in 2013 and has an annual production capacity of up to 50,000 tonnes of ferti-liser. The company is cur-rently working on increas-ing the plant’s output. The plant was built and is op-erated by the joint-ven-ture company, which also owns the site on which the plant stands. Today, the fertiliser plant is supplied with raw material from a Chinese poultry company

which produces eggs and has 1.5 million chickens. The aim is that the plant will produce fertiliser converted from waste in the region.

“This success story would have been impossible without the establishment of Norminor AS with the Norwegian company Shincon AS, which has long experience of the Chinese market through its consultancy business, which in turn has contrib-uted to good cooperation with the Chinese,” says Næss Ugland.

Today, Høst is involved in a feasibility study, also partly fi-nanced by Nopef, in neighbouring Vietnam. Høst has learnt a lot from its work in China as a pioneer in an emerging market. In Vietnam, the idea is therefore to partly work together with the private sector, partly through exporting raw materials from Norway from the company’s new fertiliser plant in Stavanger before embarking on local production.

"Rapid growth, industrialisation and improved living standards in China have contributed to a dramatic increase in the amount of waste produced in the country."

PROJECT APPROvALS

Board meeting in Kiev

NEFCO’s Board of Directors convened in Kiev, Ukraine on 24-25 September. The Board approved three investment pro-posals and four indications of interest to be financed by the Corporation. A loan agreement with the city of Zhytomyr was signed and visits to NEFCO-financed pro-jects were also conducted in conjunction with the meeting.

miSSiOn STATEmEnT

New strategy for NEFCO

NEFCO’s Board of Directors and man-agement are currently developing a new strategy for NEFCO in order to clarify and update the Corporation’s mission state-ment. The new strategy is expected to be finalised by the end of 2014.

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The Nordic Environment Finance Corporation——[email protected]/NefcoNordic

UKRAinE

Tracing energy savingsLocal decision-makers in Cherni-hiv have decided to reduce energy con-sumption in the city’s educational sec-tor, which means a significant number of investments and upgrades to the city's schools and nurseries, in a total of 96 dif-ferent buildings. On top of this negoti-ations are underway to upgrade Cherni-hiv's district heating system.

● The Saviour Cathedral of Chernihiv built in 1030 is Ukraine's oldest church. One third of Ukraine's buildings from pre-Mongol times are located in Chernihiv.

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Documents

Kiev invests in energy efficiency