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Western Balkans Sustainable Energy Direct Western Balkans Sustainable Energy Direct Financing FacilityFinancing Facility
Taylor-made financing for small Renewable Energy Taylor-made financing for small Renewable Energy and industrial Energy Efficiency projectsand industrial Energy Efficiency projects
June 2011June 2011
ContentContent
Introduction to the WeBSEDFF
Eligibility and Operational Arrangements
CO2-based Incentive Payments
A case study/ Examples
Contact us
What is WeBSEDFF?What is WeBSEDFF?
A direct financing facility operated by the EBRD
For (small) renewable energy and (industrial) energy efficiency projects
In the Western Balkans (Albania, Bosnia and Herzegovina, Croatia, FYR Macedonia, Montenegro and Serbia, including Kosovo, under UNSCR 1244)
Endowed with up to EUR 50 million of loan funds + up to EUR 13 million in (TC) and incentive payment funds
Expected number of projects: 15-25
Financing instruments under WeBSEDFFFinancing instruments under WeBSEDFF
Senior (secured) loans and project financing arrangements
From EUR 2 million to EUR 6 million EBRD financing (for certain countries from EUR 1 million)
Average (expected) maturity of 6-8 years for energy efficiency and 10-12 years for renewable energy projects, with appropriate grace periods and flexible repayment schedules
Market based interest rates
Supported by TC funds for project identification and preparation as well as by incentive payments based on the estimated CO2 emission reductions generated by each eligible project
Structure of the Structure of the WeBSEDFFWeBSEDFF
EBRD
BorrowerVerification Consultant
Project Consultant
€ €Loan Agreement
Technical Assistance Implementation Verification
DonorFunded Contract
DonorFunded Contract
* Incentive payments will be paid upon technical completion of the investments to eligible Borrowers
Incentive Payment*
Positioning of the WeBSEDFFPositioning of the WeBSEDFF
WeBSEDFF is part of a broader Sustainable Energy Initiative of the EBRD for the Western Balkans, including also:
– The WeBSECLF – a credit line facility of up to EUR 60 million for financing industrial energy efficiency and small renewable energy projects through Participating Banks (in BiH, FYR Macedonia, Montenegro and Serbia) with individual loans between EUR 100 thousand and EUR 2 million, TC assistance and incentive payments
– An institutional capacity building component of up to EUR 2 million to address deficiencies in the regulatory framework and other obstacles to the development of the market for sustainable energy projects
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
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.
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 + up to €9mio for Incentive Payments
Payments based on CO2 emission reductions - lays the foundations for a future CO2 market - cap set at 15-20% of the loan to avoid excessive incentive payment, - min efficiency and min savings required.
€50mio + up to €9mio for Incentive Payments
Payments based on CO2 emission reductions - lays the foundations for a future CO2 market - cap set at 15-20% of the loan to avoid excessive incentive payment, - min efficiency and min savings required.
Western Balkans Sustainable Energy Direct Financing Facility – a successful EBRD Model
Results to date
- Five renwable energy projects and one energy efficiency project for €21.5 mio in projects are approved which will save 63 MtCO2
Capacity building achievements include:- 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)
Eligibility criteria (1)Eligibility criteria (1)
Eligible types of projects:*
– Renewable Energy (predominantly greenfield projects up to 10 MW) –run-of-river hydro power plants, wind farms, solar systems, biomass systems generating heat and electricity, etc.
– Industrial Energy Efficiency – on site co- or tri-generation; rehabilitation of boilers, compressed air systems and steam distribution systems; installation of chillers; installations for heat recovery from processes; various other EE improvement measures or combinations of them;
* Full list is available upon request* Full list is available upon request
Eligibility Criteria (2)Eligibility Criteria (2)
In order to qualify for financing and incentive payments under WeBSEDFF the projects should meet certain eligibility criteria: *
– Technical criteria - defined in terms of:
At least 20 percent of energy savings for industrial energy efficiency projects;
A minimum efficiency (utilization) rate for renewable energy projects;
– Financial criteria – sound financial / economic structure and sufficient equity capital contributed to the project by the Sponsor;
– Other criteria – for projects requiring concessions, licenses and permits, those should be obtained in compliance with the relevant EBRD requirements (transparent and competitive process, among others)
* Detailed information on the eligibility criteria can be provided upon request* Detailed information on the eligibility criteria can be provided upon request
Operational Arrangements (1)Operational Arrangements (1)
Project consultants will screen and evaluate potential projects. Their role is to:
– Support project sponsors to define the scope of their projects (including by performing an Energy Audit) and assist them in applying for financing
– Verify the compliance of the project with the technical and other eligibility criteria
– Estimate the potential CO2 emission reductions by each project on the basis of which the incentive payments can be calculated
– Provide guidance to the project sponsors about the best practices in the field and support them in project implementation.
Operational Arrangements (2)Operational Arrangements (2)
Approval Process and Other Features:
– A two-stage approval procedure carried out in London
– Expected duration from initial discussions to final approval: 4 – 9 months
– Legal costs: to be covered by the EBRD (subject to certain constraints)
– Interest rates: market based, depending on the type and risk profile of the project, the Sponsor and other considerations
Financing Process (1)Financing Process (1)
Preliminary Discussions
Screening Due Diligence and Structuring
Initial meetings and site visits
Discussions on mutual interest for cooperation
Entrepreneurs provide information about their company and the project
EBRD Bankers prepare a Screening Memorandum for approval by the Investment Committee
EBRD and outside consultants conduct technical, environmental, legal and financial due diligence of the company and the project
Bankers and Sponsor define and agree on the transaction structure and valuation
Final Decision of the Investment Committee
Mandate Letter Term Sheet
Pre-investment phase (from 4 to 9 months )
Financing Process (2)Financing Process (2)
Legal Agreements are drafted and executed
Subscription and disbursement take place
Company provides EBRD and the Project Consultant with regular updates on financial performance and project progress
Monitoring and RepaymentInvestment
Implementation and Monitoring
Verification of the technical completion of the project by the Verification Consultant
Provision of incentive payments (to eligible borrowers)
Post-investment phase (up to 12 years )
Company provides EBRD with regular updates on financial performance
Company repays the loan
AgendaAgenda
EBRD at a glance
Introduction to the WeBSEDFF
Eligibility and Operational Arrangements
CO2-based Incentive Payments
A case study/ Examples
Contact us
Incentive Payments: basic ideaIncentive Payments: basic idea
In order to encourage local entrepreneurs to develop Sustainable Energy projects in a less than perfect market environment, WeBSEDFF will offer incentive payments to eligible projects
The mechanism for provision of incentive payments under WeBSEDFF is based on the CO2 emissions that each project will avoid
It emulates a CDM carbon credits transaction, but without generating actual carbon credits for the project sponsor or a third party
Incentive Payments: Operational ArrangementsIncentive Payments: Operational Arrangements
The incentive payments will be paid upon technical completion of each eligible project:
– Verification Consultant will be hired using TC funds to establish the technical completion and operational viability of each project;
– The incentive payments will be paid towards a reduction of the outstanding loan principal –the entrepreneurs will not receive a lump sum, but will benefit through reduced interest and principal payments over the life of the loan;
– Incentive payment cap levels of 15-20% of the loan principal will be introduced to prevent excessive subsidies for highly efficient projects or for projects with low leverage;
Mechanism Design: formulaMechanism Design: formula
The general formula for calculation of the amount of the incentive payments for both RE and EE projects is as follows:
IP = CO2 emissions avoided per year x Price per ton of CO2 x Annuity factor
Where:
CO2 emissions avoided per year – a project specific variable
Price per ton of CO2 – a shadow price stipulated by the EBRD
Annuity factor – a variable depending on a discount rate and the number of years over which CO2 emissions reductions will be remunerated
Mechanism Design: formula (2)Mechanism Design: formula (2)
For RE projects the quantity of CO2 emissions avoided per year can be calculated as follows:
CO2 emissions avoided per year = MW of installed capacity x Hs x C
Where:
MW of installed capacity – a project specific variable
Hs – a utilization rate parameter (annual effective hours of operation per year) that will be specified according to project type;
C – a coefficient that converts MWh of electricity generated into CO2 emissions avoided (depending on the region specific electricity generation mix). Typical values can be in the range 0.5-1.1
AgendaAgenda
EBRD at a glance
Introduction to the WeBSEDFF
Eligibility and Operational Arrangements
CO2-based Incentive Payments
A case study/ Examples
Contact us
A Energy Efficiency Project in FYROMA Energy Efficiency Project in FYROM
Company active in the meat production, processing and packing sector
– Proposed measures: steam boiler upgrading, installation of return condensate pipe system, replacement of insulation panels, replacement of old compressors, implementation of energy management system, installation of frequency controllers, lighting replacement, and others
– Expected annual savings:
Electricity: 993 MWh €109,000
Heavy Fuel Oil: 212 t €189,000
– Total investment: €1.5m
A Energy Efficiency Project in CroatiaA Energy Efficiency Project in Croatia
Large Bakery with a daily production capacity of 75,000 loafs and 135,000 pieces of pastry
– Proposed measures: new boiler house for heating and new boiler house for main production facility, new compressor shockers for frozen products, new cool storage room, new backer machines
– Expected annual savings (due to increase of production capacity after measures, savings were calculated as specific savings – kWh/kg of product):
Fresh products: 38%
Long lasting products: 29%
Frozen products: 57%
– Total investment: €13.14m (including purchase of land for new site)
A Biomass Project in CroatiaA Biomass Project in Croatia
Installation of a biomass fired cogeneration power plant
– Investment: Cogeneration power plant, fuelled with forest wood chips to produce heat and power. Heat is used in pellet production facility, power is fed into the grid.
– Technical features: ORC technology, power generation: 1 MW, heat generation, 4.1 MW, design according to demand of pellet production
– Total investment: €6.6m
– Expected IRR: ~ 20% (high feed-in tariffs)
A Small Hydro Power Project in KosovoA Small Hydro Power Project in Kosovo
Rehabilitation and upgrading of small HPP near Prizren
– Proposed measures:
Rehabilitation: rehabilitation of electrical and hydro-mechanical equipment, basic repair of civil works
Upgrading: Installation of new and additional turbine generator unit, extension of power house, new penstock, new forebay, diversion channel, desander and intake
– Investment:
Rehabilitation: €360,000
Upgrading: €2.17m
– Expected IRR: ~ 13%
Benefits of energy efficiency for a Benefits of energy efficiency for a companycompany Decreased costs Increased revenues Decreased risk Improved product quality Improved company image
Increased competitiveness Improved environment Higher company value!
Energy Efficiency & Renewable Energy Energy Efficiency & Renewable Energy InvestmentsInvestments
Industrial Energy Efficiency Investments Renewable Energy Investments
On site cogeneration of heat and electricity
Rehabilitation of steam distribution systems Wind farms
Rehabilitation of boilers Installation of heat recovery from processes
Run-of-river hydro plants
Replacement of old gas boilers with condensing
boilers
Installation of absorption chillers/new
chillers
Solar water systems generating hot water for
processes and/or heating
Switch from electricity heating to fuel based
direct heating
Energy Management Systems or Building
Management Systems
Biomass systems generating heat only or
heat and electricityProcess improvements
including enhanced controls
Installation of Variable Speed Drives on selected
electric motorsGas engines using biogas
Rehabilitation of compressed air systems
Rehabilitation of power distribution systems
Diesel engines using biodiesel
Co-production of heat and electricity Co-production of heat and electricity
Many enterprises have boilers set up for producing steam / hot water. The electricity is taken from a power grid.
Replacing these boilers by high pressure boilers will make possible production of the electric power in steam turbines, while steam of low pressure at an output of the turbine can be used for technological needs.
The majority of old Soviet boilers were
designed for cheap fuel and thus they require: – Modern monitoring systems– Economizers– Better isolation – Other improvements
Changing old gas boilers for Changing old gas boilers for condensation boilerscondensation boilers
Exhaust gases of common gas boilers contain a plenty of steam which consists of hydrogen from fuel and oxygen from atmosphere
Energy of that steam can be used for needs of low-temperature consumers (central heating)
For the purposes of heating the electric power is an inefficient choice
At transition to fuel heating the economy of power resources reaches up to 75 %
And even higher percentage can be reached if renewable energy sources are used.
Upgrading the systems of steam Upgrading the systems of steam distribution and deliverydistribution and delivery
Old systems mainly have centralized steam production and long routes of transfer,
Often in that case worked-out steam and hot condensate is not used.
the Decentralized systems and steam collectors and use of a condensate can improve the situation
Improving technical process, Improving technical process, including control systems including control systems
The majority of old facilities still use manual management of valve gates, etc.
Modern IT technologies can improve management and the control considerably.
Utilizing the tech process heatUtilizing the tech process heat
Use of energy at its different levels of temperature
Use of heat for heating, drying and other aims
the Scandinavian pulp and paper industry can be an example for complex utilizing of tech process heat
Installation absorption coolers and Installation absorption coolers and modern cooling systemsmodern cooling systems
• Old systems are centralized and tend to incur large amount of energy losses
• The distributing system uses less energy and losses lesser amount of power.
Using variable speed electric enginesUsing variable speed electric engines
Work of the engine can be adjusted for corresponding load.
Economy on exceeding capacity of engines
Energy saving in buildings/facilities Energy saving in buildings/facilities
Warming of roofs, walls, floors, doors Installation of modern windows Installation of effective systems of heating Installation of effective systems of ventilation and air-
conditioning Modernization of systems of illumination
Since insulation is not a in the focus of the Facility (maximum a complementary measure, we should better leave it
Contact usContact us
Donald MishaxhiPrincipal Banker
EBRD Resident Office in AlbaniaTel: +355 4 22 32 898E-mail: [email protected]
Daniela Diedrich-Ristic
Energy Efficiency & Climate ChangeTel: +44 20 7338 7768Email: [email protected]
Nenad PavlovicProject Manager
Tel: +381 11 20 40 357 E-mail: [email protected]
Johannes HönigProject Director
Tel: +49 711 8995 377E-mail: [email protected]