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Western Balkans Sustainable Energy Direct
Financing Facility
Taylor-made financing for small Renewable Energy
and industrial Energy Efficiency projects
June 2011
Content

Introduction to the WeBSEDFF

Eligibility and Operational Arrangements

CO2-based Incentive Payments

A case study/ Examples

Contact us
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 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 WeBSEDFF
EBRD
Donor
Funded
Contract
Loan
Agreement
Project
Consultant
Technical Assistance
€
€
Borrower
Donor
Funded
Contract
Incentive
Payment*
Verification
Consultant
Implementation Verification
* Incentive payments will be paid upon technical completion of the investments to eligible
Borrowers
Positioning 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
Western Balkans Sustainable Energy Direct Financing
Facility – a successful EBRD Model
Up to €3mio in TC funds
Project & 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.
Institutional capacity building
EBRD has up to €3.5mio to
address deficiencies in the
regulatory framework
Development of RES support
mechanisms (FITs)
Preparation of primary and
secondary legislation
Support to grid operators in RES
integration
National RE Action Plan
Institutional capacity building
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)

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
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
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)

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)
Pre-investment phase (from 4 to 9 months )
Term Sheet
Mandate Letter
Preliminary
Discussions

Initial
meetings and
site visits

Discussions
on mutual
interest for
cooperation
Due Diligence
and Structuring
Screening

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
Financing Process (2)
Post-investment phase (up to 12 years )

Legal
Agreements
are drafted
and executed

Subscription
and
disbursement
take place
Monitoring and
Repayment
Implementation
and Monitoring
Investment

Company provides
EBRD and the
Project Consultant
with regular
updates on
financial
performance and
project progress

Verification of
the technical
completion of the
project by the
Verification
Consultant

Provision of
incentive
payments (to
eligible
borrowers)

Company provides
EBRD with regular
updates on
financial
performance

Company repays
the loan
Agenda

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 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 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: 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)

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
Agenda

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 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 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 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 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
company





Decreased costs
Increased revenues
Decreased risk
Improved product quality
Improved company image
 Increased competitiveness
 Improved environment
 Higher company value!
Energy Efficiency & Renewable Energy
Investments
Industrial Energy Efficiency Investments
On site cogeneration of
heat and electricity
Rehabilitation of boilers
Rehabilitation of steam
distribution systems
Installation of heat
recovery from processes
Renewable Energy
Investments
Wind farms
Run-of-river hydro
plants
Solar water systems
generating hot water for
processes and/or
heating
Biomass systems
generating heat only or
heat and electricity
Replacement of old gas
boilers with condensing
boilers
Installation of
absorption chillers/new
chillers
Switch from electricity
heating to fuel based
direct heating
Process improvements
including enhanced
controls
Rehabilitation of
compressed air systems
Energy Management
Systems or Building
Management Systems
Installation of Variable
Speed Drives on selected Gas engines using biogas
electric motors
Rehabilitation of power
Diesel engines using
distribution systems
biodiesel
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
condensation 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
distribution 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,
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 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
modern 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 engines

Work of the engine can be
adjusted for corresponding
load.

Economy on exceeding
capacity of engines
Since insulation is not a in the focus of the Facility (maximum a complementary measure,
we should better leave it
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 airconditioning
Modernization of systems of illumination
Contact us
Donald Mishaxhi
Principal Banker
EBRD Resident Office in Albania
Tel: +355 4 22 32 898
E-mail: [email protected]
Nenad Pavlovic
Project Manager
Tel: +381 11 20 40 357
E-mail: [email protected]
Daniela Diedrich-Ristic
Energy Efficiency & Climate Change
Tel: +44 20 7338 7768
Email: [email protected]
Johannes Hönig
Project Director
Tel: +49 711 8995 377
E-mail: [email protected]