First part of the project the main idea is micro financing municipality for the implementation of new technologies or solutions to cut energy costs, minimum 500 k Euro up to 2 mill Euro. We are in negotiation with few investors, and we finished monitoring up of 100 municipality.

1. Financing Energy Efficiency
Projects
B.G
Initiative For Establishing The Central East European
ESCO Found

2. Session Agenda:
The finance barrier
Four financial mechanisms
Conclusions
Roles of policy makers, industry and
financial sector

3. Step 1: Planning and Organization
• task 1a: Meeting with top management
Is financing a •
•
•
task 1b: Form a Team and inform staff
task 1c: Pre -assessment to collect general information
task 1d: Select focus areas
• task 1e: Prepare assessment proposal for top management approval
barrier to
Step 2: Assessment
energy •
•
task 2a: Staff meeting and training
task 2b: Prepare focus area flow charts
•
efficiency?
task 2c: Walkthrough of focus areas
• task 2d: Quantify inputs and outputs and costs to establish a ba seline
baseline
• task 2e: Quantify losses through a material and energy balance
Step 3: Identification of Options
• task 3a: Determine causes of losses
• task 3b: Identify possible options
• task 3c: Screen options for feasibility analysis
Step 4: Feasibility Analysis of Options
• task 4a: Technical, economic and environmental evaluation of opt ions
options
• task 4b: Rank feasible options for implementation
• task 4c: Prepare implementation and monitoring proposal for top
management approval
Step 5: Implementation and Monitoring of Options
• task 5a: Implement options and monitor results
• task 5b: Evaluation meeting with top management
Step 6: Continuous Improvement
• task 6a: Prepare proposal to continue with energy efficiency for top
management approval

4. Why is financing a barrier for EE in industry
1. The Government does not give financial
1
incentives to become energy efficient
2. Management is concerned about the
2
investment costs of energy efficiency
measures
3. It is difficult to obtain financing for energy
3
efficiency projects

5. What are the (possible) causes?
Companies:
Money available but not readily
Lack of money for high cost options
Government:
Fuel subsidies
Lack of government financial incentives
Finance sector
Lack of financial mechanisms

6. Four types of financial mechanisms
Tax policy • Taxes
• Tax incentives
Subsidies • Subsidies
Lending • Bank loans
programs • Soft loans / revolving funds
• Guarantee funds
• Energy efficiency „Bank windows”
ESCOs • Guaranteed savings
• Shared savings
• Pay from savings
• Other

7. Lending programs: bank loans
Traditional loans
Barriers because banks
Lack understanding of the value of EE projects
Favor investments in expanding production
EE projects considered “high risk”
EE projects can have long payback periods
Collateral requirements
EE projects are too small
Loans for EE have higher transactions costs
Lack trust in consultant information in loan applications
Prefer to loan to applicants with established banking relationships
Businesses lack the capability to develop strong loan applications

8. Lending programs: soft loans /
revolving funds
Objective: encourage EE investments through
reduced borrowing costs
Soft loans: loan with public funds at low interest
rates
Revolving fund: repaid loans used for re-lending
to new projects
Advantages / disadvantages
+ Address many of bank loan barriers
- Does not address collateral availability;
proposal development; SME access

9. Lending programs: Guarantee funds
Objective: Encourage EE lending through subsidized
credit risk of bank
Advantages:
Alleviate barriers: collateral requirements, high risk of
new technologies, risk of long-term lending
Build bank capacity in EE loans
Work best:
Banking sector well developed and liquid
Risk of EE loans is main barrier
Sufficient demand for loan fin

10. ESCOs: what is an ESCO?
Energy Services Company (ESCO)
Private company providing EE services
Service providers (auditors / building contractors)
Suppliers (e.g. equipment)
Utilities
Energy Services Company (ESCO) Performance Contracts are innovative
financial arrangements that combine the design and implementation of
energy efficiency projects with financing and the guarantee of
performance (i.e., the customer is guaranteed that he/she will get energy
savings out of the project).

11. ESCOs: what is performance contracting
ESCO provides energy saving for a fee (link savings & payment)
EE audit
EE recommendations
Secure financing
Project implementation
Payment out of actual savings made

12. Financial mechanisms:
ESCOs: guaranteed savings
How it works:
Customer takes out “normal” loan
(will appear on balance sheet)
ESCO guarantees loan can be repaid with savings
ESCO pays difference if minimum savings not met
Main advantage: ESCO can undertake more projects

13. ESCOs: shared savings
How it works:
Customer does not take loan (will not appear on
balance sheet)
ESCO finances project: takes performance & credit
risk
Customer pays higher %
Main advantage: Independent of customer’s
borrowing capacity

14. ESCOs: pay from savings
How it works:
Subset of guaranteed savings
If savings higher: repayment faster
If savings lower: repayment slower
Main advantage: less risk for ESCO

15. ESCOs: End-use outsourcing
ESCO operates & maintains equipment or systems
Output (steam, compressed air) sold to customer
In this type of project, the ESCO assumes responsibility for the operation and
maintenance of the equipment and/or systems it installs and then sells the output
(such as steam, heating/cooling, or lighting) back to the customer at an agreed
price. Any costs for equipment upgrades or repairs are typically also the
responsibility of the ESCO, although ownership of the equipment usually remains
with the customer. This model is also sometimes referred to as chauffage or
contract energy management.

16. ESCOs: equipment supplier credit & equipment leasing
Supplier designs and implements project &
measures performance
Equipment supplier credit:
Customer owns equipment
Customer pays lump-sum or over time based on energy
savings
Equipment leasing:
Supplier owns equipment until full repayment
Customer pays lease payments

17. e. In this arrangement, an equipment supplier designs and implements the
project, and is responsible for confirming that performance and energy savings
match customer expectations. The customer pays for the equipment either on
a lump-sum basis after installation or like other performance contracting
arrangements, over time, usually from the estimated energy savings. The
customer receives ownership of the equipment immediately.
Equipment leasing is similar to supplier credit in that the supplier receives
fixed payments from the estimated energy savings to cover equipment
purchase and installation. However, the payments are made as a “lease to
own” arrangement, and the supplier retains ownership of the equipment until
all the lease payments, and any transfer payments, are completed.

18. Barriers to performance contracting
!
Lack of legal and financial infrastructure to support
performance contracts
Limited ability of local ESCOs to obtain bank financing or raise
equity capital
Lack of bank experience with EE projects and/or performance
contracts
Lack of confidence in ESCO performance estimates!

19. Conclusions
Private sector financing of EE investments can be viable and
profitable
Private sector financing insufficient to encourage EE
investments in all cases
Financial mechanisms should not be viewed in isolation from
other EE programs/policies

20. Government policy should encourage EE
Industry must have know how and systems to plan EE projects and
evaluate benefits
Financial sector must be well developed and understand profit
potential of EE in industry
•Government policy should encourage (and certainly not discourage)
efficiency improvements.
•Industry must have the technical know how and management systems
to plan energy efficiency projects and evaluate their potential business
benefits.
•The financial sector must be well developed and understand the
potential for profit in energy efficiency projects and businesses.
Achieving these conditions requires action, not just from policy makers,
but also from industry and the financial sector.