The UNDP/GEF Energy Efficiency Financing Team In · PDF fileTA Sicomed/CHP $2,000,000 BOOT -...

Capacity Building for GHG Emissions Reduction through Energy Efficiency in Romania

Mark VelodyProject ManagerTel. 40 722 280 [email protected]

UNOPS Project Office45 Washington StreetBucharest, Romaniawww.energie.undp.ro

The UNDP/GEFEnergy Efficiency Financing Team

InRomania

16th Session of the Energy Efficiency 21 Project (EE 21)Geneva, 29 June - 1 July 2005


I will present four themes today…

1. The UNDP/GEF EE Financing Project in Romania



1. The UNDP/GEF EE Financing Project in Romania1. The UNDP/GEF EE Financing Project in Romania1. The UNDP/GEF EE Financing Project in Romania

2. Results so far




2. Results so far2. Results so far2. Results so far

3. Capacity building





3. Capacity building3. Capacity building3. Capacity building

4. Lessons learned


So let’s begin!

1. The UNDP/GEF EE Financing Project in Romania


Four partners - ARCE, UNOPS, UNDP and GEF…Romanian Agency for Energy Conservation - Governmental partnerUNOPS - Executing agencyUNDP - Implementing agencyGEF - Main financier ($2 million)

… launched* the EE Financing Project in 2003…Recruited a Project Manager… – part-time at first, full-time from December… who ran a Start-up Phase – planning, hiring/equipping, holding launch event etc… and recruited a local team of six – for the core tasks of outreach, banking, finance, engineering, administration and logistics.

… so the EE Financing Team was operational by January 2004* Re-launch of an earlier initiative that had stalled in 2001 and was re-designed in 2002


Overall approach… we are a catalyst

We make small investments from the GEF grant…

… to leverage large investments energy efficiency by third parties


We offer three basic services…1. Technical Assistance (T.A.)

- Typically a Feasibility Study by specialist consultants- Private sector and public sector are eligible

2. Direct Contributions (D.C.)*- Equipment grant - maximum $50,000 or 20% of an investment- Only for public sector

3. “Deal building” - Bringing energy efficiency investors and financiers together- Advising on the range of commercial financing options that are

available in Romania.


… and we offer two basic ‘deals’

1. If… UNDP/GEF funds T.A. (usually a Feasibility Study)Then… Project Developer will carry out the EE project; and

Financier will make investment funds available;

2. If… UNDP/GEF agrees to make a small D.C. (equipment grant) *Then… Project Developer will invest in an EE project; and

Financier will make investment funds available;

* D.C. is offered to public sector investors only, and disbursed after the investor has entered into a firm financing or works contract for the main investment. The maximum DC is the lower of $50,000 or 20% of the value of the investment. This facility is now fully subscribed, but not yet fully disbursed – meaning that funds will be disbursed on municipal projects that are already under-development but have not yet financial closure.


And this simple formula works!




2. Results so far


Key financial results…We have leveraged over $23 million of definite* investment so far…

Public sector/definite $6,335,143Private sector/definite $17,537,500Total/definite $23,872,643

… expect another $7 million to result from work-in-progress…Public sector/possible $3,322,000Private sector/possible $3,650,000Total/possible 6,972,000

… and have a large and growing pipeline of potential investmentsFrom which we expect to leverage many more millions of investment dollars

* ‘Definite’ means a financing or works contract is now signed or awarded, or investment is under-way or complete.


Municipalities are investing in buildings, heating, water and lighting

Public Sector – Definite* - $6.3 MillionUNDP/GEF Town/description Investment Main source of Assistance financingDC Panaci/kindergarten $21,000 Governmental financingDC Tg Jiu/controls $132,143 Grant financingDC Radauti/meters $175,000 Bank loan (BCR)DC Cluj/controls $187,000 Supplier creditTA/DC Tarnaveni/buildings $400,000 Bank loan (BCR)TA/DC Sighisoara/schools $300,000 Municipal financingTA/DC Alba Iulia/schools $620,000 Municipal financingDC Iasi/district heating $1,300,000 'FREE‘ loan (World Bank/GEF)TA Vatra Dornei/Water $3,200,000 EIB, EU, Government.


Municipalities are investing in buildings, district heating, water and lighting

Public Sector – Possible - $3.3 MillionUNDP/GEF Town/description EstimatedAssistance InvestmentTA Rosu/water pumps $150,000TA (DC) Orastie/lighting/schools $350,000TA (DC) Victoria/building $140,000TA (DC) Tulcea/district heating $960,000TA (DC) Brad/water pumps $1,300,000TA (DC) Vaslui/Solesti water $500,000(DC) Focsani/water pumps $162,000TA (DC) Valea lui Mihai/lighting $150,000TA (DC) Salonta/lighting $250,000


Companies are lowering heat, hot water, steam and power costs, often using renewable fuels or CHP

Private Sector - Definite - $17.5 Million

UNDP/GEF Company/description Investment Main source of Assistance financing

TA Nord Simex/wood waste $600,000 Bank Financing (BRD)TA Ulerom/sunflower husks $560,000 'FREE' loan (World Bank/GEF)TA Iridex/hospital waste $1,377,500 Leasing (Piraeus)TA Sicomed/CHP $2,000,000 BOOT - RAEF/RIEEC/SE-GESTA Barlad/Rulmenti/CHP* $13,000,000 Bank Financing (BCR)

* A combined heat and power plant for a bearings manufacturer, for which we financed the Feasibility Study, representing aroundhalf of the total investment that we have leveraged so far.


Companies are lowering heat, hot water, steam and power costs, often using renewable fuels or CHP

Private Sector - Possible - $3.6 Million

UNDP/GEF Company/description InvestmentAssistance (estimate)

TA Bucharest/Isovolta/steam generation $700,000TA Victoria/Viromet/secondary steam to power $300,000TA Ploiesti/Timken/CHP $2,000,000TA Dej/Samus Mex/wood-waste $350,000TA Matex/textiles/steam/compressors/boilers $300,000





3. Capacity building


We also have a ‘Capacity Building’ roleOrganise/speak at events and training coursesPublish articles and brochuresFinance project partners’ participation at targeted eventsCreate posters with thermal images, demonstrating heat loss from buildings and proposing technical and financial solutionsSensitize banks to energy efficiency lending opportunitiesPromote non-traditional financing (ESCOs, BOOT, loans to blocks)Create employment for energy efficiency practitioners- directly, by contracting Feasibility Studies- indirectly, as the recommendations of the studies are implemented





3. Capacity building3. Capacity building3. Capacity building

4. Lessons learned


Lessons learned…Six ‘tips and tricks’ from the UNDP/GEF Team

1. How to recognise an energy efficiency idea that is likely to become an investment

2. How to build a ‘sausage machine’3. How to get the energy efficiency message across4. How to interact with multiple stakeholders5. How to get banks to make energy efficiency loans6. How to identify a suitable financier


How to recognise an energy efficiency idea that is likely to become an investment



An enthusiastic, empowered financial decision-maker!- Managing Director… with the support of the Board; or- Mayor… with the support of the local council



An enthusiastic, empowered financial decision-maker!- Managing Director… with the support of the Board; or- Mayor… with the support of the local council

This is why: of the many investment proposals that we find…- 75% are technically robust- 50% are financially viable- Only 10 - 15% involve stakeholders who are committed to invest


How to build a sausage machine


How to build a sausage machine

Why do you need a ‘sausage machine’?- Energy efficiency investment proposals are diverse.- Large numbers of very different types of proposals arrive

Five core skills are required to identify and process investment ideas- Outreach, engineering, banking, finance and admin.

So a multidisciplinary team with a mix of local knowledge is desirable- Particularly of municipal and industrial landscapes


How to build a sausage machineExample: this is how the UNDP/GEF Core Team operates

Outreach Manager – finds energy efficiency proposals/ideasEnergy Efficiency Manager – checks that the idea is technically robustHead of Banking Relations – checks that the applicant is creditworthyFinance Manager – brings in an outline financier, and builds a deal

i.e. if UNDP/GEF assists, borrower will borrow, lender will lendOffice Manager - procures consultants or equipment, using UN proceduresExternal consultants – (15 companies so far) perform Feasibility Studies

Then borrower borrows, lender lends and the investment takes place!


How to get the energy efficiency message across


How to get the energy efficiency message across

Energy efficiency is complex… so keep your message simple!

We use:If your energy efficiency investment idea is- Technically robust; and- Financially viableUNDP/GEF can help to make it happen!


How to interact with multiple stakeholders


How to interact with multiple stakeholdersLeveraging EE projects involves very large numbers of stakeholders

- We we have processed 250 investment ideas so far…- … and have to meet reporting needs of UNDP, UNOPS, GEF etc

A UNDP/GEF Team Member becomes 'contact point‘ for each proposal- Coordinating with other Team Members, updating databases- Liaising with external stakeholders

We also publish the current status of each proposal on the website- “Investment” for successes, “Study” for work-in-progress- “Fast track” or “Possible” – for proposals that look possible - “No Further Action” or “Not Eligible” – for weak proposals

Hence the entire Team speaks with one voice


How to get banks to make energy efficiency loans


How to get banks to make energy efficiency loansFinanciers feel comfortable if they understand the investment…

- So get a outline financier on board from Day 1- We insist that the investor finds a commercial financier to sign an

Agreement-in-Principle… before we invest in a study

We involve the financier of all steps towards investment- Invitation to comment on ToRs for Feasibility Studies- Invitation to help evaluate offers, copies of interim reports etc

These actions help keep the project ‘live’ in the bank’s loan pipeline


How to identify a suitable financier


How to identify a suitable financier

We provide the following advice to investors…

1. If you have a good relationship with your bank… use it!

2. We advise on financing options that are available in Romania – local banks, international banks, leasing companies, ESCOs, supplier credit

3. If the investor has no preferred financier, we introduce our ‘sister’ GEF project – the FREE


The FREE - an $8 million dedicated energy efficiency loan fund – is our ‘sister’ GEF project

Romanian Energy Efficiency Fund

(‘FREE’)

UNDP/GEF

(‘our project’)


Summary of lessons learned…If the MD or Mayor is committed to invest, everything else will fall into place. If not – walk away!You will need a strong, multidisciplinary team with good local knowledge to find and process multiple investment proposalsKeep the energy efficiency investment message simpleSpeak with one voice!Get a financier on board from Day 1In countries where there is a well developed banking market, creditworthy investors usually have a preferred bank


Questions?

For more information, please visit

www.energie.undp.ro


Mark VelodyProject ManagerTel. 40 722 280 [email protected]

UNOPS Project Office45 Washington StreetBucharest, Romaniawww.energie.undp.ro

The UNDP/GEFEnergy Efficiency Financing Team

InRomania

The UNDP/GEF Energy Efficiency Financing Team In · PDF fileTA Sicomed/CHP $2,000,000 BOOT -...

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