Energy Efficiency and Renewable Energy Lending

EFSE ANNUAL MEETING 2011
Tirana, 6 to 8 June
Panel II
The New Opportunity: Energy Efficiency and
Renewable Energy Lending
Panel II:
The New Opportunity: Energy Efficiency
and Renewable Energy Lending
Olaf Zymelka
Lloyd Stevens
Head of Division,
Director
Energy SEE & Turkey Finance in Motion
KfW
Aleksandar Mijailovic
Čačanska Banka
Matthias Hitzel
MACS
Wolfgang Kröpfl
ENSO
Yücel Inan
IK Banka
Terry McCallion
EBRD
Yücel Inan
General Manager, IK Banka
Entering the Field of EE
Lending
Challenges & Opportunities
MACEDONIA ENERGY MARKET ASSESSMENT
 High dependancy on imports (42%)
 Most energy is used for public, business & residential buildings (42%)
 High use of electricity in heating solutions
 71% of all energy consumed by residences are for heating / cooling
 Inefficient insulation and heat distribution
 83% of residences were built before 1991
 Rising electricity cost – lifting of state subsidy
 CONCLUSION:
HUGE POTENTIAL FOR EE IMPROVEMENTS
= OPPORTUNITY FOR EE LOANS
energy consumption of the household sector to the number of electrified households
the ratio between the final energy consumption of the sector and the value added measured in constant PPP
TARGET SEGMENTS: HOUSEHOLDS + MICRO & SMALL COMPANIES
SOLUTION:
PURPOSES:
 Renewable Energy - solar panels
 Improvements in Heat Supply Systems - new boilers
 Improvements in Insulation – double glazed windows, envelopes
 Improvements in Heat Distribution - thermostatic valves & pumps
FIRST MOVER ADVANTAGE:
 Brand association: IK Banka = Green Bank, Eko Kredit = IK Banka
CAMPAIGN
INTERNAL: STAFF UNDERSTANDING IS CRUCIAL
TRAINING (TECHNICAL ASSISTANCE)
What our staff learned:
How to use the e-Save Tool & Calculation of the savings
Increased awareness for energy savings
Sales channels: direct or through sellers to individuals or companies
EXTERNAL: RAISE AWARENESS
STRATEGY:
INFORM - Multi Channel Campaign + Merchant Visits
EDUCATE - Simplify potential loan purposes through examples
RESULTS: EASIER TRANSACTIONS WITH HOUSELHOLDS
MOST POPULAR EE INVESTMENTS:
RETAIL: Double glazed windows & doors, building envelopes for better
isolation, solar panels for hot water
CORPORATE: Solar panels for hotels and enveloping of the business
premises and roof
CHALLENGES:
Easy to “sell” to management and staff..
To clients – more difficult !
FIRST MOVER DISADVANTAGE !
 LOW AWARENESS - We have the job of being the first bank to increase
public awareness & interest and convince that savings will pay back the EE
investments
GRAY ECONOMY
 UNDOCUMENTED PURCHASES: Difficulties for documenting the purchases
(in practice clients swap goods and services or purchase in cash without invoice
avoiding taxation). Sometimes clients may prefer classical consumer loan with
higher interest rate to avoid providing documentation for invoice payments.
ENERGY POLICY & LEGISLATION
 Still relatively low (subsidized) electricity prices.
“Green Passport” not yet introduced, EU requirements not in place.
Low incentive for investment
Aleksandar Mijailovic
Head of SME Lending
Čačanska Banka
EFSE ANNUAL MEETING 2011
Energy Efficiency and Renewable Energy Lending
7 June 2011
Čačanska banka a.d. Čačak
Čačanska banka a.d. Čačak
Strategy
Enter the field of EE lending
Support of EE/RE concept
KfW
1st Loan Agreement,
KfW, EUR 5 million
Advisor of the clients
Hit Energy
= EE/RE Lending
Čačanska banka = EE/RE lending
EFSE ANNUAL MEETING 2011 – Energy Efficiency and Renewable Energy Lending – 07 June 2011
Čačanska banka a.d. Čačak
EE Loan Poduct
Energy savings
HIT ENERGY LOAN
Instalment
Interest
Retail segment – standardized product – 79 projects
Micro, SME, Corporate – individual approach – standard, non-standard projects
– 80 projects – EUR 4,8 million
EFSE ANNUAL MEETING 2011 – Energy Efficiency and Renewable Energy Lending – 07 June 2011
Čačanska banka a.d. Čačak
Rolling out of HIT ENERGY Loan
Training of Loan Officers
Direct contact with clients
Presentation of the EE concept to the clients
Participation on fairs and conferences
- Serbian German Dialogue on Energy Efficiency -
- Trainings of the Loan Officers -
- Loan officers on the training in Frankfurt School of Finance and Management (Frankfurt) EFSE ANNUAL MEETING 2011 – Energy Efficiency and Renewable Energy Lending – 07 June 2011
Čačanska banka a.d. Čačak
Supply Chain
HIT ENERGY
Distributers and manufacturers of EE equipment were a very important sales
channel and became our essential partners
Information
We implemented relevant action plans with each supplier
We organized training sessions and promotions in cooperation with partners
and created a unique product package
A large number of clients did not have satisfactory financial ratios and
appropriate collateral
EE Product
EFSE ANNUAL MEETING 2011 – Energy Efficiency and Renewable Energy Lending – 07 June 2011
Čačanska banka a.d. Čačak
What we have learned
What we have learned
The campaign started at the time of the strongest strike of economic crisis
Continuous investment in resources for improving knowledge in this area is crucial
Growing potential is extremely high, a list of measures is expanding daily
The success is inevitable if the expertise of staff is used as the main resource
Loan Agreement with GGF has been signed, we continue to finance EE/RE projects, we
plan to create a product with strong brand
THANK YOU – QUESTIONS
THANK YOU - QUESTIONS
EFSE ANNUAL MEETING 2011 – Energy Efficiency and Renewable Energy Lending – 07 June 2011
Matthias Hitzel
Director Operations, MACS
Panel Session II
The New Opportunity:
Challenges and Opportunities of
Energy Efficiency and Renewable Energy Finance
www.macsonline.de
The Driving Force
Reducing global energy related CO2
emissions
Source: iea,
2008
www.macsonline.de
The Constraint
Energy Consumption will increase
www.macsonline.de
The Constraint
CO2 emissions as well
www.macsonline.de
The Opportunity
for clean energy technologies
Source: iea,
2010
www.macsonline.de
The Economics
Demand side drivers
Markets:
Regulation:
Situation on Credit Markets
• Reflect Investment Activities
Energy Efficiency
• Building code
• Energy Labeling
Electricity
• Generation Costs
• Unbundeling/ IPP
• Taxes/Subsidies
Renewable Energy
• Long Term PPA
• Feed in Tarriffs
Fossil Fuel
• Fuel prices
• Taxes/Subsidies
Liquidity of Financial Markets
• Funding Costs for Banks
External Factors for most of us
www.macsonline.de
Prices:
The Scope of RE/EE Lending
Supply Side Parameter
Efficiency Criteria
• Type of measure
12
10
8
Volume
RE/EE Eligibility
• Level of Primary Energy Savings
• CO2 Emission Reduction
• others
6
4
2
Target Groups
• Retail, private households
• SME, Corporate
• Public Entities
0
Time
define utility function of the credit line
www.macsonline.de
The Callenges for Banks
Transaction Costs
Targeting:
• Specific Measures
• Client Groups
Verification/Validation:
• External Energy Audits
• In-house Know How
Training:
• Time and Organization
• Uncertain Success
Reporting:
• No in-house system
• Additional work load
www.macsonline.de
The Challenges for Banks
What can be done ?
Targeting:
• Specific Measures
• Client Groups
Portfolio review to identify existing clusters of eligible
financing; clear, straightforward measures
Verification/Validation:
• External Energy Audits
• In-house Know How
standard RE/EE measures and automatic validation
eSave as plug-in solution with baseline database
Training:
• Time and Organization
• Uncertain Success
Focus on Validation Tool , help desk and e-learning
Quick Reference Guide , eGuide
Reporting:
• No in-house system
• Additional work load
Focus on primay energy savings and CO2
emissions
Merge report from eSave with core banking
system
www.macsonline.de
Challenges for RE/EE Project Finance
Risk Mitigation
Market Risk and Regulation
• Weak concession laws and procedure
• Feed in Tariffs
• lack of long term PPA
• PPAs don‘t include take-or-pay clause
• Lack of step-in-rights for Financiers
Planning and Construction Risk
• Concessioneer lacks expertise
• Soundness of planning parameter
• Construction and other permits
• Quality of Tender (Equipment,
Construction)
• Construction Supervision
www.macsonline.de
Investor Risk
• Structure of Project Developer
• Equity endowment
• Financing Structure
Thank you for your attention!
Arnsburger Str. 64, 60385
Frankfurt, Germany
Tel +49-69-943188-0, Fax
+49-69-943188-18
e-mail: info@macsonline.de
Web: www.macsonline.de
www.macsonline.de
Wolfgang Kröpfl
Managing Director, enso GmbH
enso
SOLID INVESTMENTS IN GREEN ENERGY
EFSE meeting Tirana 07.06 – 08.06.2011
June 2011
enso an Investment company :
More than 100 years of experience in Hydro Power
Key Data of the Group
 Austrian Family business, founded in1889
 Austrian Energy Supplier since 1902
Production & Transmission
 Member of an Industry and consulting Group for
Engineering, Planning, up to operation of hydro power
plants with excessive knowledge in
 Construction
 Manufacturing of turbines and electro-mechanics
 Automation and operation of Hydro Power Plants
 Financing & Co-operation
 References of more than 70 Hydro Power Plants
worldwide within the last 10 years
 Dense Network especially in the Alpine region and SEECountries
 enso investments started since 2007
 www.enso.at
June 2011
Dr. Gilbert Frizberg
 Founder of the group
 Chairman of the Supervisory Board
of the biggest Austrian Energy
Supplier (Verbund AG)
 Board Member, Federation of
Austrian Industry
 1984–1991 Member of Austrian
parliament; speaker of energy
 Chairman of the Supervisory board
of enso Hydro GmbH and investor
32
enso - Investment
enso invests in

Hydro Electric Power Plants (Green Technology)
 small to medium-sized power plants, focus on 10
MW
 with licenses and authorizations already issued

with regional focus on
 South-Eastern Europe (EU resp. EU-acceding
countries) and Turkey
 Alpine Region
 Scandinavia

enso is an investment and management company
 that cooperates with regional partners and
 strives for majority participations
 with secured rights in participation and control by
enso for construction and operation
 offers assistance in construction, operation and
electricity trading
June 2011
with the aim

to build up a sustainable investment portfolio until 2016
with a total investment of more than 300 Mio EURO

to generate high, stable cash-flows in a value-stable
portfolio
 moderate investment and maintenance costs of
HEPPs
 no use of expensive (primary energy) resources
 steady sales of electricity generated

to invest in a stable environment
 increasing demand for electricity, independent from
economic development
 Green Energy forced nationally and internationally
 Asset Value Participation
 Green Technology – no emissions (CO2-free
investment)
33
1.
Attractive Potential – Market Environment
June 2011
34
Regional focus for hydro power plants
Topography Europe
Source: www.mygeo.info, Wikimedia Commons
Annual precipitation amount
Hydropower =
Precipitation x Slope
over 2000 mm
1000 – 2000 mm
750 – 1000 mm
500 – 750 mm
250 – 500 mm
under 250 mm
June 2011
Best locations for hydro power in Europe:
 South of Norway and central Sweden
 Alpine region
 Southeastern European EU-acceding countries
 Turkey
35
Market Environment
Demand/Consumption
 Electricity consumption
increases, even in weak
economic periods
 need to catch up especially
in South-Eastern Europe
 on average increasing
electricity prices
Industrial Structure
 Trend to privatisation
 Trend to small and
medium-sized hydro energy
 Regulated market
 Guaranteed electricity sales
 Guaranteed minimum feedin-tariffs following the Euro
June 2011
Market
environ
-ment
Energy supply/Electricity production
 Demand for electricity exceeds
electricity production
 Need to use green technology
to reach the climate protection
requirements
 Out-dated thermal power
plants
Political Trend - ecology
 20:20:20 targets of the EU
 Ownership unbundling
 Promotion of green energy (direct
financial aid from EIB, EBRD and
other IFIs)
 Europe's (and country's)
independency from imports
36
Comparison –
increasing electricity consumption of households in SOE
Turkey 2007
Washing machine
Dishwasher
Albania 2001
Turkey 2007
Massive need to catch up on examples
„Washing machine“ and
„Dishwasher“:
 Electricity consumption of households in
Albania is one sixth compared to
households in Austria or Germany
 Consumption of an average household in
Turkey is about a half compared to a
household in Austria or Germany
*) Source: German Bureau of Statistics, Institute of Statistics of Albania, Turkish Statistical Institute
June 2011
37
Essential investment drivers
Key driver












Hydrology
Geology
Location / development
Grid access
Planned capacity (output) / Power
Generation
Storage capability
Outbuilding costs
Sales prices / feed-in prices
Carbon credits, Green Certificates,
Grants,
National and International Programmes
Financing possibilities
Taxation
Legal Stability
June 2011
Obstacles












Local data bases (Hydrology)
Legal framework
Legal stability and legal certainty
Governmental support
Concession provisions and duration
Taxation practice (e.g. VAT)
Local know how
Local quality perception
Grid access / grid quality
Feed in tariffs
Financing on suitable terms
Long term characteristic of investment in
Hydro Power plants to be accepted
Disclaimer
The presentation is not intended to be a legal prospectus under the capital market law. The intended recipient (hereafter referred to as ”recipient”) of this presentation (hereafter
referred to as ”presentation”) agrees and accepts herewith to handle and treat all of the contents of this brochure as strictly confidential. The presentation is being provided by
enso as a framework to a limited number of qualified people who in principle have an interest in investing in enso. A recipient is not the intended recipient in all cases where this
document is transferred to another party by someone other than enso. The presentation is being provided to potential institutional and experienced investors (hereafter referred to
as “potential investors”) solely for the purposes to support the assessment of a potential investment in enso. Furthermore, the presentation is incomplete in as much that it
contains only a brief overview relevant to the potential investment. The data contained herein is not intended to serve as investment advice. Any investment decision should
solely be based upon your own complete examination taken in conjunction with a qualified potential investor. The presentation does not represent an offer or a proposal, an
invitation to bid, a recommendation to purchase or sell, to subscribe or underwrite or issue any other kind of securities. Nor is it a request to contribute towards such offers or
such tenders or proposals and does not provide or represent the basis of an agreement with enso. Information and/or estimation contained within the presentation is liable and
subject to change without further notification. By means of the transmission of this presentation enso does not assume any obligation or liability to the recipient to provide further
information or accept any liability for any omissions or any adjustments or amendments that might become evident. Potential investors should only consider the possibility of an
investment once they have conducted sufficient research and/or have available satisfactory knowledge with which they can correctly consider and assess any risks associated
with an investment. The provision of a letter of intent or a commitment relating to the investment does not guarantee any earnings and/or maintenance of capital. Potential
investors should be aware that this investment could lead to the loss of the total amount invested. Like all investments, this investment carries considerable chances and risks.
Potential investors should therefore only undertake any commitment to invest following a precise and complete assessment of the presentation itself and the market situation.
With regard to the anticipated duration of the investment, investors are advised to invest only a portion of their assets. Separate assessment and appraisal of legal, tax and fiscal
matters plus any other potential consequences related to the investment are the sole responsibility of the potential investors and their advisors and are seen as a precondition for
a commitment and the acquisition of a shareholding (including transfer of shares and application for a participation certificate). The information contained in the presentation is
compiled from, and based upon, publicly available data as well as established data from internal and other sources regarded as reliable in order to be as authoritative and
dependable as is possible or deemed necessary. Additionally thereupon, it should also be noted that the presentation contains estimates and prognoses based upon commonly
used economic and industry trends as well as expected developments derived and compiled respectively from them. These estimates and prognoses contain a number of
subjective assessments. This presentation, other written or verbal correspondence, communication or declarations of any kind do not constitute in any way whatsoever a
warranty, guarantee, commitment or other acceptance of liability, whether explicit or implied, and should not be considered to be agreed and/or assumed commitments. Neither
enso or their board of directors, managers, employees or representatives assume and/or take responsibility for the completeness, accuracy and/or correctness of the information
contained in the presentation (including legal and fiscal), for any omission of information, for associated estimates and for any supplementary information that are provided or
made available to any interested party or their advisors. By agreeing to an investment, interested parties explicitly relinquish enso of any accountability and responsibility on the
basis of such information provided herein or other failure or omission. The presentation is intended for the exclusive use and assessment of a potential transaction of the
addressee only.
June 2011
STRICTLY CONFIDENTIAL
Contact
Contact - Management
enso GmbH
Di Wolfgang Kröpfl, MBA
Franz-Heresch-Straße 2, 8410 Wildon
T: +43 (0) 3182 2216-130
M: +43 (0) 664 8324460
E: wolfgang.kroepfl@enso.at
www.enso.at
June 2011
40
Terry McCallion
Director, EBRD
Shaping and Leveraging the New
Reality
Differing approaches to EE & RE lending
Terry McCallion
6 June 2011
The EE and RES sector
On the one hand …
Market barriers continue to
persist, including:
– (Indirect) fossil fuel subsidies,
lack of carbon markets and high
costs
– Lack of information/knowledge
and high perceived risks by
banks
– Low awareness about energy
efficiency
– Highly fragmented sector with
high transaction costs
– Split incentives
– Lack of coherent policy
framework
On the other hand
…
There is pressure on the
region, through
– Convergence and tightening EU
standards
– Governments’ urge to address
climate change and improve
energy security
– Increasing energy prices
– Aging infrastructure
The responsibility of IFIs

Address and fill the skills gap

Reduce transaction costs

Reduce perceived risks

Intermediate international climate finance
flows
Measures that address one or several of the above:
• Relationship management (IFI-local bank)
• Provision of specific technical skills (consultants and direct mgt)
• Awareness raising (banks and consumers)
• Improve credit perception
The responsibility of IFIs

(continued)
Improve credit perception
- targeted grants (performance based)
- policy dialogue (FITs, carbon trading, green
certificates)
- good capital investment appraisal (energy audit)
- carbon cash flows
Bridge the time until the sector is fully commercia
/ a fully functioning carbon market is
established
EBRD Model
CASE STUDY: Ukreximbank
Outcome
Policy support to the
Government since mid22 projects (approx. USD 60 million) are already
2007: financed;
Technical
they
willCooperation
avoid energy use equivalent to 20 million
(~
Market andMWh
regulatory
assessment,
supportedtoe
the origination
1.7mio
or 150 MW generation capacity) framework
and 5 million
recommendations for FiTs
and assessment of 96
tCO2
Assistance to development
investment opportunities
of secondary legislation to
including
25
detailed
Each million USD of energy efficiency avoids
theofneed
for
support
renewable
energy audits. 80
energy generation
the
equivalent of more than 2.5 MW ofUSD
electricity
100
million
loan to
projects were deemed
capacity.
Ukreximbank under UKEEP
eligible for financing.
Commercial lending (no grant
element) pioneered
typical project IRR
= 25 –
In collaboration with EBRD - Ukreximbank
the
30%
first Carbon Credit Fund deals in Ukraine,
worth more
Healthy project pipeline identified.
47
than EUR 7 million. The Carbon Credits will be sold to
CASE STUDY: Western Balkans Sustainable Energy
Direct Financing Facility
Outcomes
Up to €3mio
in TC funds
Project & Verification
Institutional capacity
- 6 provides
projectsguidance
for €21.5 mio in projects are already approved
consultant
building EBRD has up to
to the project
sponsors
and
- Those will save 63 MtCO2
€3.5mio to address
estimate and verify
deficiencies in the
compliance.
Develops
- Support
in submission of the REAP to the Energyregulatory
Community
framework
common branding.
Secretariat
Development of RES support
Additional legal consultants.
mechanisms (FITs)
- Serbia: support to the Ministry of Energy and Mining
in transposition
Preparation
of primary and
€50mio financing
volume
secondary
of the EU
Directive on Renewables to local Energy
Law legislation
Support to grid operators in
Payments based on CO2 emission reductions
- Montenegro: Development of full set of secondary
RESlegislation
integration to the
- lays the foundations for a future CO2 market
National RE Action Plan
Energy
(ongoing)
- min efficiency
and Law
min savings
required.
Institutional capacity building
- Albania: support to the Ministry of Economy in FiT design
(methodology, FiT level, affordability, caps)
Panel II:
The New Opportunity: Energy Efficiency
and Renewable Energy Lending
Olaf Zymelka
Lloyd Stevens
Head of Division,
Director
Energy SEE & Turkey Finance in Motion
KfW
Aleksandar Mijailović
Čačanska Banka
Wolfgang Kröpfl
ENSO
Terry McCallion
EBRD
Yücel Inan
IK Banka
Matthias Hitzel
MACS
After Coffee Break:
Concluding and Closing Panel
Shaping and Leveraging the New Reality
Conference Hall Illyria
EFSE Annual Meeting 2011
Coffee Break
16:00 – 16:30