EBRD SUPPORT FOR GREEN ECONOMY INVESTMENTS · SMEs reached via local financial institutions...
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EBRD SUPPORT FOR GREEN ECONOMY INVESTMENTS Stefania Racolta-Cruceru Associate Director, Product and Business Development Energy Efficiency and Climate Change
Transcript of EBRD SUPPORT FOR GREEN ECONOMY INVESTMENTS · SMEs reached via local financial institutions...
EBRD SUPPORT
FOR GREEN ECONOMY INVESTMENTS
Stefania Racolta-CruceruAssociate Director, Product and Business Development
Energy Efficiency and Climate Change
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EBRD AND THE CLIMATE CHALLENGE CONTEXT
MAINSTREAMING GREEN FINANCING AT EBRD
RECENT HIGHLIGHTS IN EU MEMBER STATES
Contents
About the EBRD
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• Triple-A rated
• €30 billion capital base
• €41 billion portfolio
• €8.9 billion average annual business volume in
the past three years
• Public financing institution established in 1991 to
promote transition to market economies
• Owned by 67 countries, the EU and the EIB
• Operates in 36 countries in Central and Eastern
Europe, Central Asia and the Southern and Eastern
Mediterranean
3 key operational principles
• Sound banking
• Transition impact
• Environmental sustainability
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Other EBRD Countries of Operations
High energy intensity in the EBRD Region
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Energy intensity of economies in the EBRD region and the EU in 2013 (data from IEA)
The EBRD region has some of the most energy-intensive economies in the world (e.g. Ukraine is the 10th in
the world, Russia the 11th, Kyrgyz Rep. the 13th). 11 out of the 12 EU MS which are EBRD Countries of
Operations have intensity levels above the EU-28 average.
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Carbon intensive economies
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CO2 emission intensity of economies in the EBRD region and the EU (2013 data from IEA)
11 out of the 20 most carbon-intensive economies in the world are in the EBRD region due to
the heavy reliance on fossil fuels in their energy mix. 9 out of those 11 are net-importers of
fossil fuels. All the EU MS which are also EBRD Countries of Operations have CO2 emission
intensity levels above the EU average.
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EBRD AND THE CLIMATE CHALLENGE CONTEXT
MAINSTREAMING GREEN FINANCING AT EBRD
RECENT HIGHLIGHTS IN EU MEMBER STATES
Contents
Mainstreaming green financing:EBRD strategies
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Since 2006 the EBRD has adopted cross-sectoral strategies:
• to mainstream across the Bank’s operations, and
• to increase the share of business represented by
projects which enhance the efficient use of energy and resources (water, materials) and
contribute to the mitigation of and adaptation to climate change.
Mainstreaming green financing:EBRD business model
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• direct & indirect financing
• investment grant support
• blended concessional finance
• appraise resource
efficiency investment
plans
• enhance the green
financing capacity of
partner financial
institutions
• climate vulnerability risk
assessments
• transition gaps & market
scoping
• address sustainability &
environmental market failures
• strengthen the institutional &
regulatory context
Mainstreaming green financing: Delivery mechanisms
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Direct financing of
large borrowers (corporates, municipal)
Local Financial
Institutions
Smaller borrowers and
SMEs reached via local
financial institutions
External
technical
assistance
EBRD
Energy Efficiency
& Climate Change
team
EBRD financing
EBRD and donor-funded technical assistance and grant support
Mainstreaming green financing: Results in 2006 – H1 2016
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FINANCED
1,150projects and credit lines
>880 directly financed
projects with green
components, and >265
credit lines to locals financial
institutions for on-lending to smaller sub-projects
SIGNED
€20.3 billionof green financing
For projects with a total
value of €112 billion
In 2013-2015 green
financing represented 31%
of EBRD’s total business.
REDUCED
79 million tonnes of CO2/year
Estimated emission
reductions equivalent to
more than the annual
energy use related CO2
emissions of Romania or
twice those of Sweden
Mainstreaming green financing:EBRD’s Green Economy Transition strategy
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The latest EBRD climate financing
mainstreaming strategy, the Green Economy
Transition (GET) aims to further scale up the
Bank’s green business, and to include new
areas of activity such as enhanced
environmental protection and technology
transfer. GET aims:
• further scale-up the Bank’s operational and
policy activities to accelerate the transition of
Countries of Operations to low-carbon and
climate resilient economies
• enhance the environmental dimension of
the Bank’s investment activities
• innovative products (technical and financial)
supporting private sector climate action and
complemented by public sector channels.
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EBRD climate finance
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Share in total Bank
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Target GET financing share
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EBRD AND THE CLIMATE CHALLENGE CONTEXT
MAINSTREAMING GREEN FINANCING AT EBRD
RECENT HIGHLIGHTS IN EU MEMBER STATES
Contents
2.7
1.3
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0.7Infrastructure
Industry & agribusiness
Financial institutions
Energy
by sector (in € billion):
EBRD green financing in the New Member States
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• € 5.1 billion EBRD green
financing for projects in EU Member
States in 2006 – H1 2016
• 270 green projects and credit
lines with a total project value of
approximately €33 billion
• 16 million tonnes of CO2 of
annual emission reductions
(equivalent to half of Slovakia’s
current annual energy use-related
CO2 emissions)
• €1 billion channelled via credit
lines with 30 partner financial
institutions in the region
€ 5.1
billion
Poland
Romania
Bulgaria
Croatia
Baltic countries
Slovakia
Slovenia
Hungary
Cyprus and Greece
by country
EBRD Sustainable Energy Financing Facilities
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• Through Sustainable Energy Financing
Facilities (SEFF) the EBRD extends credit
lines to local financial institutions.
• Local financial institutions on-lend funds
to small and medium-sized businesses,
corporate and residential borrowers.
• Finance is provided for energy efficiency
and small-scale renewable energy
projects.
• SEFFs establish project implementation
teams who appraise green project
opportunities and support local financial
institutions in raising their capacity to
market, appraise and finance them.
PROGRAMME
Aims to decrease Slovakia’s energy intensity, especially after
the closure of the outdated Bohunice nuclear power plant.
SlovSEFF targets energy efficiency and renewable energy sub-
projects in the corporate and residential sectors.
FINANCING STRUCTURE
EBRD credit lines (2008-2014) € 150 million
Technical assistance and incentive grants € 30 million
(from the Bohunice International Decommissioning Support
Fund, setup after the closure of the Bohunice plant)
EBRD credit lines, extension 2015 € 40 million
Technical assistance and incentive grants € 7.7 million
(from the proceeds of a sovereign sale of carbon credits by the
Slovak Republic to Spain, a transaction facilitated by EBRD’s
carbon market development efforts).
PROJECT EXAMPLE
• An 8 stories block of 32 apartments built in 1975.
Investment amount of €120,000, benefited from a SlovSEFF
loan for 90% of the costs.
• Measures included: insulation of shield walls and basement
ceiling, stairways and entrances windows replacement,
stairway lighting regulation, solar panels.
• Energy savings of 52%, payback of 10 years.
Slovakia: residential energy efficiency
via local banks
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RESULTS TO DATE (by end of Q1 2016)
• 6 local partner banks
• €158 million of SlovSEFF funds on-lent to 700 projects, worth in
total €257 million
• 600 loans for residential projects, accounting for 60% of
SlovSEFF funds on-lent to date
• 86,000 inhabitants benefited
• Average IRR of residential projects of 9-10%
• 114,000 tonnes of CO2 annual estimated emission reductions,
582 GWh primary energy savings.
Photo credit: www.asb.sk
CLIENTHines is a private global real estate investment firm with
locations in 19 countries and US$ 85 billion of assets under
management.
HINES FUND IN POLANDEstablished in 2014 by Hines and EBRD to invest in equity
and quasi-equity of income-producing office and logistics
assets in Poland.
First-of-kind Fund with operating principles focused on
creating added value through sustainability improvements
beyond the market norms:
• Certifying 70% of acquired space under LEED/BREEAM
• Sustainability improvement targets between acquisition
and exit of assets, to be pursued via sustainability
focused and trained building management committees
• Introducing green lease clauses in lease agreements.
EBRD is the originator of the mandatory sustainability
criteria adopted by the Fund.
EQUITY PARTICIPATIONEBRD participation US$ 80 million
Total capital commitment at closing US$ 155 million
Poland: equity support for green property fund
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NEW BUSINESS MODEL
• The investment is part of an emerging EBRD line of business in
promoting sustainable energy in buildings via property funds.
• The EBRD is working on standardising this type of equity
product. The aim is to condition EBRD participation upon the
fund adopting sustainable investment and operating principles
beyond national norms.
• Initial assessment of the ranking of the Hines Fund management
principles found that it is currently a global leader.
Bulgaria: energy efficiency in glass manufacturing
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CLIENT AND PROJECT
Support for the expansion of the Bulgarian glass production
lines of Trakya Cam A.Ş., a leading glass manufacturer in
Turkey and South-eastern Europe. The aim is to diversify
production to include higher value-added products such as
coated glass, laminated and auto glass.
INVESTMENT PLAN
EBRD loan € 40 million
EIB parallel loan € 80 million
Client own funds € 50 million
GREEN INVESTMENT COMPONETS
• An advanced waste heat recovery system included in the
new production line leads to significant energy savings and
avoided emissions of approx. 20,000 tonnes of CO2 /year.
The project IRR is larger than 50%.
• An oxy-fuelling system of €12m increases the furnace
combustion efficiency by 2-3% leading to savings in natural
gas use and avoided emissions of 100,000 tonnes CO2
/year.
• Full compliance with the EU Directive on Industrial
Emissions. The production line includes an electrostatic
precipitator and a selective catalytic reactor to limit dust
and NOx emissions.
Photo credit: www.sisecamduzcam.com
Romania: supporting sustainable energy in industry,
power and the ESCOs sector via local banks
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PROGRAMME
Two EBRD Sustainable Energy Financing Facilities were active
in Romania in 2008-2015 aiming to develop the local financing
market for sustainable energy projects in the industrial and
commercial sectors.
EEFF and RoSEFF combined credit lines to local partner banks,
technical assistance for sub-project appraisal and banks’
capacity building, and partial grant incentives.
FINANCING STRUCTURE
EBRD credit lines € 130 million
Incentive payments and € 19 million
technical assistance from the EU € 7 million
RESULTS TO DATE
• 7 local participating banks
• 470 sub-projects, total investment value of €164 million
• 290,000 tonnes of CO2 estimated annual emission
reductions – comparable to 15% of the annual emissions
from the energy use of buildings in Bucharest
• 900 GWh estimated energy savings – comparable to 6% of
the hydroelectricity produced in Romania.
PROJECT EXAMPLE
• SE-GES, a Romanian ESCO, received a SEFF loan of € 1.1
million from BRD Groupe Société Générale to build a heat
and power cogeneration unit.
• The unit supplies baseload electricity and hot air to the
factory of one of Europe’s largest maize-based food
producers, Sam Mills.
• The “Build-Own-Operate-Transfer” model means the ESCO
builds the unit, gradually recovers the costs from energy
sales and eventually transfers it to the site owner.
• The investment received an EU grant of €165,000.
• Primary energy savings were of 32% and emission
reductions of 3,300 tCO2/year.
Croatia: energy and water efficiency upgrades
in municipal infrastructure
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CLIENT
Two utilities in the city of Rijeka (population 213,000) one
operating the water and wastewater network and another
the district heating and gas distribution networks.
FINANCIAL SUPPORT
EBRD water and wastewater loan € 13 million
EBRD district heating loan € 10 million
WATER AND WASTEWATER INVESTMENTS
• Support for the first phase of an investment plan of €130
million (to be supported later with EU Structural Funds).
• Targets the extension of the water supply network and
the wastewater collection system and the efficiency
improvement of the wastewater treatment plant.
• Expected reduction of water losses from 25% to 20%,
with overall estimated water savings of 720,000 m3/year.
• Enables alignment to environmental standards under the
EU Directives on Drinking Water and Wastewater
Treatment.
DISTRICT HEATING INVESTMENTS
• Rehabilitation of existing DH network over 7 km to reduce
losses from 21% to 10% leading to savings of 12,400 MWh
annually; IRR of 44%.
• Two gas-fired boilers replacing heat from light fuel oil-fired
plants, to supply the local University, a hospital and 1,000
residences.
• The fuel switch and reduction in losses will result in
emission reductions of 3,000 tCO2/year.
• Introduction of an advanced energy management system
• Longer-term plan to transform larger heat only units to
gas-fired CHP co-generation
Photo credit: www.visitrijeka.eu
Hungary: energy efficiency in public buildings
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PROGRAMME
The Municipal Energy Efficiency Financing Facility has been setup
to develop the capacity of banks in Hungary, Romania and
Slovakia to address energy efficiency opportunities in the
municipal sector.
The facility brings together dedicated credit lines, technical
assistance to supplement local capacity in running tenders, as
well as grant support for the less commercial measures often
required by these projects.
FINANCING STRUCTURE
EBRD credit lines (2009-2014) € 105 million
Technical Assistance from the EU € 5 million
Grant support for partial incentive payments € 21 million
RESULTS TO DATE (by end of 2015)
• 2 partner banks in Hungary, 1 in Romania and 2 in Slovakia
• 420 projects supported up to date with 94% of the MunSEFF
funds. 80% are energy efficiency projects in buildings, the rest
municipal infrastructure projects, mainly public lighting.
• 66 of the projects are implemented under concession or long-
term maintenance or supply contracts.
• 18,000 tonnes of CO2 estimated annual emission reductions
and 88GWh of primary energy savings.
PROJECT EXAMPLE
• Refurbishment of the heating system of a primary school in the
municipality of Szombathely (of 80,000 inhabitants)
• The executing company, entered into an 12 years energy supply
contract with the public authority, and delivered measures
leading to 30% energy savings.
• The company benefited from a MunSEFF loan of €30,000 and an
incentive payment of €4,500.
The Baltic region: supporting biomass energy
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CLIENT
An Estonian producer of wood pellets with
operations in Estonia , Latvia and Lithuania, also
specialised in forestry management and electricity
and heat generation through biomass-fuelled
combined-heat-and-power (CHP) plants.
PROJECTS
In 2011, 2013 and 2015 the EBRD supported the
financing of three pairs of new biomass CHPs in
Estonia and Latvia.
These produce both electricity to sell to the grid
and heat to support the company’s pellet business.
The project IRRs were estimated at around 20%.
INVESTMENT PLAN
2011 EBRD loan € 34 million
2013 EBRD loan € 30 million
2015 EBRD loan € 42 million
Parallel commercial banks lending €146 million
IMPACT OF PROJECTS
• New biomass-based generation capacity: 41 MW
• New biomass-based heat capacity: 109 MW
• Green electricity generation: 300 MWh/year
• Estimated emission reductions: 189,000 tonnes
of CO2/year
Photo credit: www.graanulinvest.ee
Partner with EBRD in achieving green objectives!Benefits of Cooperation
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• Experience: EBRD is a leading IFI in climate financing having provided €20.3 billion in climate financing
since 2006; access to best practice, tested solutions and instruments
• Comprehensive approach: combination of policy support, project development support and financing
instruments enables the sustainable development of resource efficiency markets
• Private sector oriented: experience in mobilising private sector participation and co-financing and
reduce the burden on state/municipal budgets to invest in sustainable projects
• Financial leverage: each €1 of donor funds used by EBRD leverages approx. €5 of private co-financing
• Effective implementation: clients outsource part of the administrative burden of managing funds,
designing and implementing effective green investment programmes. EBRD provides full and verifiable
accountability at every stage of program implementation
• Funds utilisation: given EBRD’s involvement, especially via targeted technical cooperation, mitigates the
risk of limited absorption of funds due to capacity constraints, time required to develop and deploy a
program from scratch
• Climate impact: all EBRD programmes have resulted in significant investments/energy and CO2 savings
and have often times been replenished/extended by donors
• Market sustainability: EBRD promotes market-based mechanisms and uses scarce donor resources to
help address market barriers to investments, with the commercial financing covering the profitable
investments needs; ultimately this leads to the creation of self-sustaining markets
2020 EBRD green financing objectives
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40%2020 target for the share
of GET financing in EBRD
annual new business
€4 billionTarget EBRD annual green
business volume by 2020
€18 billionTarget cumulative EBRD
green business in
2016-2020
THANK YOU
For more information:http://www.ebrd.com/climatefinance
