UTILITY INTERMEDIATED ENERGY EFFICIENCY:

ADVANTAGES AND POTENTIAL FINANCING OPTIONS

Remon Zakaria, Associate Director, Energy Efficiency and Climate Change

Aleksandar Hadzhiivanov, Associate Director, Energy Efficiency and Climate Change

Sumeet Manchanda, Principal, Energy Efficiency and Climate Change

AGENDA

INTRODUCTION TO EBRD

EEOS AND UTILITY INTERMEDIATED ENERGY EFFICIENCY

EBRD PROPOSAL

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• €30 billion capital base

• €41 billion portfolio

• €8.9 billion average annual business volume in the

past three years

• AAA rated

• The EBRD has invested approximately EUR 120

billion since 1991, in over 4,000 projects.

• Public financing institution established in 1991 to

foster transition to market economies

• Owned by 65 countries, the EU and the EIB

• Operates in 36 countries in Central and Eastern

Europe, Central Asia and the Southern and Eastern

Mediterranean region

WHAT IS THE EBRD?

MAINSTREAMING GREEN FINANCING EBRD CROSS-SECTORAL STRATEGIES

2 November, 2017 4

The EBRD has adopted cross-sectorial

strategies to mainstream green financing

across operations and increase the Bank’s

share of green finance.

MAINSTREAMING GREEN FINANCING RESULTS IN 2006 – H1 2017

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FINANCED

1,300+ projects and credit lines

1,000+ directly financed

projects with green

components, and

290 credit lines to locals

financial institutions for on-

lending to smaller projects

SIGNED

€23 billion of green financing

For projects with a total value

of €130 billion

In 2014-2016 green financing

represented 32% of EBRD’s

total business, up from only

15% in 2006.

REDUCED

85 million tonnes of CO2/year

Emission reductions equal to

twice the annual energy use-

related emissions of Sweden

+annual water savings of 190

mln m3 since 2013 equal to a

third of Londoners’ water use

EBRD’S BUSINESS MODEL

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Financing on commercial

terms

Additional tools to foster markets

and address barriers

Financing offered on market terms

• Debt

• Equity

• Guarantees

• Choices of currency

• Capital markets

Targeted technical support

• Enables transfer of skills, builds up the capacity of

clients to develop their businesses, assists in

introducing new policies or products, etc.

Policy dialogue engagement

• Helps overcome barriers hindering green

investments (e.g. by streamlining the institutional

and regulatory context)

• Address sustainability and environmental market

failures

INTRODUCTION TO EBRD

EEOS AND UTILITY INTERMEDIATED ENERGY EFFICIENCY

EBRD PROPOSAL

UTILITY INTERMEDIATED EE IS INCREASINGLY COMMON, WITH EEOS BEING A MAJOR DRIVER

• Most OECD members have some form of Utility

intermediated energy efficiency scheme.

• Principal drivers for utilities are:

• Regulatory compliance

• Market opportunities and business diversification

• The EU’s main regulatory driver is the (optional)

Energy Efficiency Obligation Scheme, part of Article

7 of the Energy Efficiency Directive.

• Other countries, especially those with EU

Association Agreements, are designing schemes:

• Montenegro, Serbia

source ENSPOL

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UTILITIES ARE DIVERSIFYING TO MEET OBLIGATIONS AND ALSO THE NEW ENERGY RETAIL CONTEXT

RWE, Enel, Engie, EDF, CEZ, EVN, E.ON – all are diversifying and are now providers of energy

services as well as energy commodities. Their initiatives include:

Residential

• Boiler exchange, repairs,

servicing, insurance

• Electric car leasing

packages

• Building’s energy

performance (e.g.

insulation, windows)

• ‘SmartHome’ package –

from simple

thermoregulator to

complete solution

• Assistance to exchange

household appliances etc.

• Installation of renewable

energy e.g. SHW, PV

• Heat pumps

Municipal

• Public lighting

• EE and RE in buildings

Commercial and

Industrial

• Boilers and CHP/CCHP

units

• Energy Management

Systems

• Building’s energy

performance (e.g.

insulation, windows, etc.)

• Industrial lighting, cooling,

heating, process steam

• EV charging packages

• Renewable energy

generation on site with on-

site operation by Utility

Own operations

• Investment in smart grids,

smart meters, networks

and renewables, own

buildings energy

performance

Mechanisms used

• On-bill financing

• Supplier partnerships

• Service providers

partnerships

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UTILITY DSM SCHEMES BENEFITS

BENEFITS

Utility Society Customer

• Business opportunities

• Brand marketing &

recognition

• Customer retention

• Corporate social

responsibility

• Regulatory compliance

• Deferred investments in

new generation capacity

• Improved quality of

service

• Energy security and

reliability

• Economic efficiency and

sustainability

• Reduction of

environmental impacts

• Market transformations

• Improved efficiency of

transmission, operation

and distribution

• Increase in the use of

indigenous resources

• Energy bill saving

• Greater control over

energy consumption

• Contribution to behavior

change

• Active market

participation

• Education and

information

• Financial payments from

market participation (DR

and micro-generation)

UTILITY EE SERVICE EXAMPLE E.ON SERVICES FOR BUSINESS

• Energy Analysis and consultancy e.g.

Connect BMS to E.ON Energy

Management Centre – E.ON then

suggests ways to optimise lighting,

heating, ventilation, air-conditioning,

chillers, process steam etc.

• On-site generation: e.g. co and tri-

generation, heat pumps, photovoltaics

• Demand response management and

“virtual power plants”

• Distributed generation services (E.ON

“Connected Services”)

• E-vehicle charging services

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UTILITY EE SERVICE EXAMPLE ENEL FOR BUSINESS

• Consultancy services: the service includes the installation of monitoring systems and consumption measurement, energy audits, feasibility studies, monitoring and planning of interventions.

• Technology supply: • Power factor banks • LED lighting and

automation • CHP/microgeneration

• Electric mobility: full-featured turnkey solutions, designed for the different needs of big customers and small businesses to access battery charging stations.

Smart Energy Solutions

EPC turnkey solutions for:

• Combined Heat and Power (CHP)

• Trigeneration

• Biomass plants

Distributed Generation

INTRODUCTION TO EBRD

EEOS AND UTILITY INTERMEDIATED ENERGY EFFICIENCY

EBRD PROPOSAL

UTILITY DSM PROGRAMME OVERALL STRUCTURE

Technical Expertise Utility company

EBRD

Client

Product structuring and

marketing support

Dedicated

loan

Fresh commercial

opportunities

Project development

and optimisation tools

Procurement,

management and

quality assurance

Technical assistance – scope of work

1. Review and identification of appropriate utility DSM options including techno-economic analysis and

business planning;

2. Support in the overall structuring of the selected utility DSM scheme including corporate governance;

3. Support in the marketing of the selected utility DSM scheme to reach its Client base and ensure successful

implementation;

4. Support in setting the necessary monitoring, reporting and verification processes for energy savings

PROPOSED FINANCING STRUCTURE

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Utility

Utility’s customers

(Industrial, commercial,

residential, municipal)

EBRD

Finance

Project development technical support

Repayments

Implementation

Repayment: on completion, or in tranches, perhaps via separate item on bill

Contractor

or internal

department

Contract/ instruction

• EBRD provides debt finance to the Utility and will assist with expertise

• The Utility markets energy services (such as building EE/ renewables, electric vehicle packages, etc.) to

customers it considers credit-worthy, then contracts and implements either itself or through its contractors

• Payments are collected through utility bills or after completion of works.

• EBRD may be able to offer technical support for project development

PROPOSED FINANCING STRUCTURE

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Repayment via utility bills

SPV EBRD

Utility

company

Finance

Project development technical support

Repayments

Implementation

Guarantee required

Utility’s customers

• EBRD provides debt finance to a special purpose vehicle (SPV) in which the Utility have equity stakes.

• Allows finance to be provided to this new entity entirely off-balance sheet to the Utility. Also suitable when

the Utility is considering entering into a JV with another industry partner.

• Depending on various end-beneficiary considerations, loan could be based on guarantee or receivables

* Collateral and Guarantees will need to be arranged by the Utility.

* EBRD may participate as a minority equity investor

Finance, design, implementation, O&M

Alternative repayment

THANK YOU Contacts:

Remon Zakaria - zakariar@ebrd.com

Svetlin Pislenski - PislensS@ebrd.com

Alexander Hadzhiivanov - hadzhiia@ebrd.com

Sumeet Manchanda – manchans@ebrd.com