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2October 14Financing Medium and Long Term Energy Security for a Low-Carbon Economy

1. Erste Group / BCR & Our Energy Infrastructure Finance Competence

2. Europes Energy Strategy

3. Romanias Renewable Energy

4. Romanias Energy Efficiency Potential

Agenda Bucharest Energy Forum

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Profile Banca Comerciala Romana

Banca Comerciala Romana (BCR) was established in 1990

Taking over the commercial banking operations of the National Bank of Romania

BCR is the most important financial group in Romania - currently manages assets ofover EUR 15bn, has over 3.2 million customers, and is the market leader with over18% market share

BCR is the most valuable financial brand in Romania, according to level of customertrust and number of clients who mainly bank with BCR.

From 2006 BCR became a member of Erste Group

Erste Group was founded 1819 as the first Austrian savings bank.

Since 1997 Erste Group has developed into one of the largest financial servicesproviders in Central and Eastern Europe

46,000 employees, 16.5 million clients, 2,900 branches in 7 countries

BCR brand

Integrationinto Erste

Group

Commitmentto Romania

Erste Group has invested so far more than EUR 7.5 bn in Romania, through BCR and

as direct investments in Romanian commercial exposureBCR has doubled the volume of its outstanding loan portfolio since 2006 and has beenthe main supporter of the Prima Casa program (60% market share for Prima Casa 4)

Financial results as of FY2013 - Erste Group posts net profit of EUR 61 million

October 14 3Financing Medium and Long Term Energy Security for a Low-Carbon Economy

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4

Group Infrastructure FinanceEnergy and Environment infrastructure targeted

October 14Financing Medium and Long Term Energy Security for a Low-Carbon Economy

Wind Parks PV plants Biomass/Biogas

Oil/Gas Generation Electricity Networks Transmission Systems

Public Systems Waste Treatment

Hydro Plants

Water TreatmentWaste Management

Energy Effici

ency

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Agenda Progress report





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Low Carbon Emissions20-20-20 targets


20% reduction in CO 2 emissions compared

to 1990 levels 20% of EUs energy consumption to come

from renewable energy sources (RES)

20% reduction of primary energy demand

by increasing energy efficiency

increase EUs energyindependence

combat climate change

strengthen EU competitiveness

The Energy Efficiency Directive (EED)

The Energy Efficiency Directive (EED 2012/27/EU) adopted on 25 October 2012 has to be transposed by allMember States (MS) by the beginning of June 2014 ;

Common framework of measures for achieving the Unions 2020 20 % headline target on energyefficiency;

Member states are on their way to accomplish the national indicative target of 9% reduction of finalenergy consumption by 2016 as it was requested under the ESD 2006/32/CE, which represents a lessambitious objective than the 20% level adopted in 2012.

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New EU Energy Security Strategy Released on 28 May 2014


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Agenda Progress report





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Energy Efficiency A Global and European Priority


Energy Efficiency is key part of EU 2020 strategy ;

The Energy Efficiency Directive (2012/27/EU) recently approved imposes energysaving obligations to Member States;

Energy efficiency obligation schemes or policy measures in all Member States

Exemplary role to be played by the public sector

The Cohesion Policy proposals for 2014 -2020 allocate a significant amount offunding to Energy Efficiency;

ELENA, The four Js (Jeremie, Jaspers, Jessica, Jasmine), EEEF (European EnergyEfficiency Fund), etc. to support investments in Energy Efficiency ; EnergyPerformance Contracting (EPC) Campaign started by DG Energy;

EBRD, EIB, IFC have all started Energy Efficiency Initiatives.

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Energy EfficiencyDecoupling economic growth from energy consumption


Annual renovation target of 3% for APC (and possibly for APL) buildings above500m (starting 01.2014) and above 250m (starting 07.2015). Cost optimal renovation can bring up to 60% energy savings. Share of public building in building stock accounts to 12%.

Renovation ofPublicBuildings

Until 31.12.2015, the newly established ANEE & ANRE will evaluate the national

potential for the application of efficient cogeneration, heating & cooling togetherwith a cost-benefit analysis, for identifying the most efficient solutions. If the analysis will prove the benefits exceed the costs, the competent authorities

will take measures to promote the development of such infrastructure.

High EfficiencyCogeneration

& EfficientHeating/Cooling

Mandatory energy audits for companies (except SMEs) with an annual energyconsumption of over 1000 toe.

Development & promotion of ESCO companies. Creation of the Energy Efficiency Investment Fund with revenues form EUA

auctions for funding Energy Efficiency projects.

AlternativePolicyMeasures

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Energy Performance Contracting (EPC)in the Public Sector


About 30%-40% of primary energy consumption comes from public and private

buildingsPublic sector advantages

- Large and homogenous asset stock (e.g. schools, hospitals, etc.)

- Significant energy saving potentials of up to 40% due to underinvestment and operationalinefficiencies

- Simple pilot projects for market development (e.g. street lightning: 1. stable demand; 2. clearbaseline; 3. high savings and short payback period; 4. clear ownership structure)

- Potentially clear procurement mechanism

ESCO market development in public sector opens up large markets andgenerates experience and trust in actors

ESCO/EnPC project development resources are not available in-house formunicipalities

If funds/grants are available: leverage by co-financing EnPC and finance in particular efficiencymeasures with long, commercially unattractive payback period

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Energy Performance Contracting (EPC)

Energy Performance Contracting (EPC)

- Procurement of works and services on basis of NPV- Contents: system analysis, (pre-)financing, design, implementation & optimised operation of

entire building, controlling

- Payments based on achieved savings

- Requirement: long, stable use of building; Ideal application: public buildings


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Advantages of EPC/ESCO approach


ESCO

Private sector expertise to design, implement EEinvestments and optimised operation

Procurement based on energy performance or NPV

Off balance sheet financing on commercial basis

Advantages of ESCO projects

Tradditional financing of EE in

public sector Lack of expertise to design, tender and implement EEinvestments and operate optimally

Procurement procedure does not relate to EE performance

Requires on balance sheet debt financing or large amountsof grants

EnergyTransformation

EnergyTransport

Energy UseEnergySource

Fuel Switching to cleaner andcheaper energysources (naturalgas, renewableenergy)

Self-generationof electricity and/orheat throughefficient boilers andgenerators

Minimization ofenergy losses(heat recovery, heatexchangers,insulation, variablespeed drives,business processoptimization,automatic controls,metering devices)

Energy efficientequipment(lighting, airconditioning,refrigeration andother domesticappliances,industrialproduction lines,etc.)

Addressing the entire efficiency value chain

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Energy Service Companies (ESCOs)

World Outlook for Energy Services Companies

- ESCO markets are a growing market worldwide

- ESCO revenues in Europe > over EUR 8bn in 2010

New EnPC markets

Legal uncertainties which are perceived as

risks

Limited contract timeframes

Limited investments => limited savings

Limited BS of ESCO companies

Limited understanding & willingness to

invest by both banks and equity providers

Mature markets

Tested legal framework

Longer tenors

Significand investments =>

unlocking the full savings potential

Well developed ESCO companies

Interest of equity and debt

providers to invest

October 14

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Energy Efficiency Projects


Financing Energy Efficiency Projects

EED preamble Member States should encourage the use of financing facilities to further the objectives ofthis Directive ;

Romanian authorities have engaged in finding solutions to develop and implement innovative and smart financingmechanisms for available funding sources (private, EU, banks), such as the development of an ESCO market anda suitable mechanism for the functioning of EE business.

Project specific risks

Lack of project standardization / Lack of track recordWhich components? Street lightning? Publicbuildings? Energy Management?KPIs?

Lack of supporting regulatory framework / clarityConcessions? Acquisition of public services?Payments to ESCO: operational expense orinvestment?

Limited public sector support due to limited additionalindebtedness potential

Lack of collateral coverage

ESCO specific risks

ESCOs assumes both performance and the underlyingcustomer credit risk if the customer goes out ofbusiness, the revenue stream from the project willdirectly impacted, putting the service provider at risk

ESCOs financing may give raise to leveraging problemsfor the service provider, as it may become too indebtedat some point

Various guarantee schemes arebeing discussed with IFIs

Projects bankability under question

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Team and Contacts

Ioana GheorghiadeBanca Comerciala Romana

Public Sector and Infrastructure Finance Executive DirectorBucharest, 15 Calea Victoriei, 3 rd District

Tel.: +40 373 516 517Mobile: +40 731 042 [email protected]

Cristina GhimbovshiBanca Comerciala Romana

Head of Infrastructure and Specialized LendingBucharest, 15 Calea Victoriei, 3 rd District


Mihai Dorin VoicanBanca Comerciala RomanaEnergy Infrastructure Specialized Finance ManagerBucharest, 15 Calea Victoriei, 3 rd District

Tel: +40 373 516 525Mobile: +40 733 040 [email protected]

Oana Roxana MogoiBanca Comerciala RomanaEnergy Infrastructure CoordinatorBucharest, 15 Calea Victoriei, 3 rd District


Sebastian Mihai StancuBanca Comerciala RomanaEnergy Infrastructure Financing ExpertBucharest, 15 Calea Victoriei, 3 rd District


Raluca Georgiana BadauBanca Comerciala RomanaEnergy Infrastructure Specialized Finance ManagerBucharest, 15 Calea Victoriei, 3 rd District

mailto:[email protected]:[email protected]:[email protected]:[email protected]

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EE/EM forMunicipalities in

CEE

ANNEX

Examples of EE technologies (1)

SectorPotentialBorrower

Energy Efficient Equipment

INDUSTRIAL Industrial companies,SMEs

Energy efficient machinery and production lines Waste heat recovery devices High efficiency electrical motors and drivers Compressed air systems Electricity peak-load control systems Efficient boilers, heaters, refrigerators Fuel switching (coal/oil natural gas) Self-generation through cogeneration or RE Complex energy optimization projects

AGRICULTURE Agribusinesses Water treatment, water pumps Efficient irrigation technologies (drip irrigation) Methane capture projects On-site generation (cogen, biomass, biogas) Reforestation, sustainable habitats, eco-farming

COMMERCIAL Commercial buildings,retail shops, officesbuildings, industrial

buildings, etc.

Efficient lighting Efficient Air-conditioning Heating and ventilation equipment Control and metering systems Electricity peak-load control systems Heat pumps, solar water heaters Sustainable construction

Compact fluorescentlamps

Solar water heaters

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EE/EM forMunicipalities in

CEE

ANNEX

Examples of EE technologies (2)

SectorPotentialBorrower

Energy Efficient Equipment

RESIDENTIAL Households and privateindividuals

Energy efficient domestic appliances Lighting, refrigeration, air-conditioning Fuel switching to natural gas for cooking Sustainable construction Green mortgages

TOURISM Hotel and othertourism business

operators

Efficient air conditioning Efficient refrigeration Efficient lighting Energy and water efficient laundry equipment Sensors and automatic controls for consumption

management Building insulation Natural gas boilers for heat productions (hot water,

kitchen, laundry); Heat recovery devices for hot water; Self-generation through cogeneration or RE

TRANSPORT Public transport

operators, taxi drivers,transport companies

Hybrid cars Electric vehicles Mass transport (e.g. Rapid bus transit)

Insulation material

Domestic appliances

27 BCR Erste

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