Dr George Chavdarov

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Market and Technology Developments in Small Scale
Heat Generation International Workshop Baku,
Azerbaijan, October 20, 2005
Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Dr George Chavdarov Bulgarian Energy Efficiency
Fund EnEffect Sofia, Bulgaria
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements

• District Heating Systems in Bulgaria
• 21 commercial DH companies are concentrated
  mainly in the district-center cities
• 20 of these companies were 100 state-owned
• The biggest company the District Heating Sofia SP
  JSCo. was 100 municipal property. Now it is 70
  municipal property and 30 state-owned

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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements

• District Heating Systems in Bulgaria
• The Strategy for Development of DH during the
  period 2000-2005 takes into consideration the
  recommendations of the World Bank to launch a
  procedure for privatization and/or transfer of
  property rights on the DH companies, for which
  budgetary support will be ceased before the year
  2004, to the local authorities

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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements

• District Heating Systems in Bulgaria
• In 2004 the District heating companies in the
  cities of Bourgas, Pleven, Veliko Tarnovo,
  Gabrovo, Lovetch, Pravetz and Rousse are offered
  for privatization
• The District heating companies in the cities of
  Vratza, Kazanlak, Lozniza, Razgrad and Yambol
  have been sold already

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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements

• District Heating Systems in Bulgaria

Example of Energy efficiency renovation of
District Heating and Heating End-Use
DH in Gabrovo Investment package Residential
buildings Investment package
Substations Investment package Distribution
network
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Instruments for financing
Practical experience
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Regular bank loans
Starting with interest rates of 16-18 Rapid
growth of number of project, when interest rate
reaches of 6-10 Current interest rate 6-8 and
less A growing number of banks offer credits for
EE projects A growing number of entities,
including power plants borrow bank credits under
market conditions
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
General municipal bonds
Municipalities of Varna, Sliven, Svishtov, Dobrich
The example of Varva ( 3 mln) - Street lighting
project - International credit rating -
Performance risk taken by the municipality -
Performance based calculations made as for
revenue bonds
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Leasing equipment (capital/financial leasing)
The example of Dobrich
About 30 schools and kindergartens
equipped Budget restrictions avoided Fixed
payments / interest rates Repayment period of 3
years Cost raised due to the risk coverage (if
buying up rejected)
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Energy Service Companies (ESCOs)
Shared savings contracts / Performance contracts
Financing of third party usually a commercial
bank Repayment depends on the project
performance The ESCO guarantees the minimal
performance ESCO pays the difference if savings
are below the estimated minimum Combination of
performance contracting with shared savings
contracting
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Energy Service Companies (ESCOs)
The examples of Rousse and Sofia
Various municipal buildings / schools Third party
financing The ESCO company takes the performance
risk The municipality pays fixed
amounts Difficulties faced in Rousse and Sofia -
financial and technical
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Energy Service Companies (ESCOs)
Heating contract / Chauffage contract
Contract for provision of heat Typically
long-term contract 20-30 years ESCO ensures
necessary maintenance and modernization of the
heating system Customers pay fixed (agreed) fee
for the heat consumed Applied for small hotels /
applicable for municipalities
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Carbon funds / Kyoto instruments
World Bank Prototype Carbon Fund
District heating modernization in Sofia and
Pernik
Joint Implementation
District Heating modernization in Rousse
(Japanese investors) Gas distribution project
for Gorna Oriahoviza, Veliko Tarnovo and
Liaskovetz (Dutch investors) Raising interest of
foreign investors
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Other financial schemes
Equity financing
Joint venture in the city of Stambolijski What
municipalities could offer to investors
Financing by utilities
Possible financing by the regional electrical
distribution companies (municipal projects under
negotiations)
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Special funds
National Environmental Fund (established under a
special low)
EE projects in municipalities EE projects in
industries
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Special funds
National Eco Trust Fund(established under a
special low)
Gazification projects in municipalities Industrial
EE projects
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Special funds
Kozloduy Fund / EBRD(established by and
agreement with the EU)
To soften the consequences of the decommissioning
of the first reactors of the Kozloduy nuclear
PS To encourage energy efficiency measures and
the use of RES Credit lines from EBRD to several
Bulgarian banks Volume 50 000 000 Period 5
7 years Technical assistance
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Special funds
Kozloduy Fund / EBRD
Market based interest rate Subsidies of - 7.5
for energy efficiency projects - 20 for RES
projects Types of credit lines - for public
(municipal) buildings - for residential buildings
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Special funds
Bulgaria Energy Efficiency Fund
(BEEF)(established by a special law)
Main sponsors GEF / World bank, Bulgarian
government / donors / public-private
partnership Independent revolving self-financing
instrument, created by the EE Act (2004) Based on
market competitive conditions Co-financing /
partnership with other financing institutions
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Special funds
Bulgaria Energy Efficiency Fund (BEEF)
Financial products - loans, - partial
guarantees, - technical assistance for project
development
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Special funds
Bulgaria Energy Efficiency Fund (BEEF)
Types of projects - industrial projects -
building projects - district heating projects -
municipal end-users projects - other end-users
projects
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Special funds
Bulgaria Energy Efficiency Fund (BEEF)
Requirements to the projects - More than ½
measurable savings - Implementation of proved
technologies - Project size 15 000 - 1 500
000 - Project owners provide over 10 own
financing - Payback period 3 - 5 years
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Special funds
Bulgaria Energy Efficiency Fund (BEEF)
Donors assembly
GEF
BEEFFund management Econoler International
(Canada) / EnEffect (BG) / Elana (BG)
WB
MEER
Privatedonors
Otherforeigndonors
TA
Loans
Guarantees
Market players FI / ESCOs / End-users
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Lessons of the implementation of various
financial instruments for energy efficiency
projects in Bulgaria
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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Local capacity building in Bulgaria

• Training of managers and specialists on
• energy auditing
• project development
• project financing

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Energy Efficiency Fund as a Means for Financing
Heating Network Improvements
Competition or Collaboration
How could BEEF survive?
Aggressive marketing policy of the BEEF Fund
Management Technical assistance for project
identification and development Best possible
credit / guarantee policy, corresponding to the
real market conditions Strategic cooperation with
other financial institutions to ensure
co-financing of projects
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Contacts
Center for Energy Efficiency www.eneffect.bg E-ma
il eneffect_at_mail.orbitel.bg Tel. [phone]
1714 or 963 0723 Fax [phone]