Financing Medium and Long Term Energy Security
for a Low-Carbon Economy
October, 2014
Agenda
Bucharest Energy Forum
1. Erste Group / BCR & Our Energy Infrastructure Finance Competence
2. Europe’s Energy Strategy
3. Romania’s Renewable Energy
4. Romania’s Energy Efficiency Potential
Financing Medium and Long Term Energy Security for a Low-Carbon Economy
October 14
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Profile – Banca Comerciala Romana

Banca Comerciala Romana (BCR) was established in 1990

Taking over the commercial banking operations of the National Bank of Romania

BCR is the most important financial group in Romania - currently manages assets of
over EUR 15bn, has over 3.2 million customers, and is the market leader with over
18% market share

BCR is the most valuable financial brand in Romania, according to level of customer
trust and number of clients who mainly bank with BCR.

From 2006 BCR became a member of Erste Group

Erste Group was founded 1819 as the first Austrian savings bank.

Since 1997 Erste Group has developed into one of the largest financial services
providers in Central and Eastern Europe

46,000 employees, 16.5 million clients, 2,900 branches in 7 countries

Erste Group has invested so far more than EUR 7.5 bn in Romania, through BCR and
as direct investments in Romanian commercial exposure

BCR has doubled the volume of its outstanding loan portfolio since 2006 and has been
the main supporter of the Prima Casa program (60% market share for Prima Casa 4)

Financial results as of FY2013 - Erste Group posts net profit of EUR 61 million
BCR brand
Integration
into Erste
Group
Commitment
to Romania
Financing Medium and Long Term Energy Security for a Low-Carbon Economy
October 14
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Group Infrastructure Finance
Energy and Environment infrastructure targeted
Wind Parks
Hydro Plants
PV plants
Biomass/Biogas
Oil/Gas Generation
Energy Efficiency
Electricity Networks
Transmission Systems
Water Treatment
Waste Treatment
Public Systems
Waste Management
Financing Medium and Long Term Energy Security for a Low-Carbon Economy
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Agenda
Progress report
1. Erste Group / BCR & Our Energy Infrastructure Finance Competence
2. Europe’s Energy Strategy
3. Romania’s Renewable Energy
4. Romania’s Energy Efficiency Potential
Financing Medium and Long Term Energy Security for a Low-Carbon Economy
October 14
5
Low Carbon Emissions
20-20-20 targets
•
•
increase EU’s energy
independence
•
combat climate change
•
strengthen EU competitiveness
20% reduction in CO2 emissions compared
to 1990 levels
•
20% of EU’s energy consumption to come
from renewable energy sources (RES)
•
20% reduction of primary energy demand
by increasing energy efficiency
The Energy Efficiency Directive (EED)
• The Energy Efficiency Directive (EED 2012/27/EU) adopted on 25 October 2012 has to be transposed by all
Member States (MS) by the beginning of June 2014;
• Common framework of measures for achieving the Union’s 2020 20 % headline target on energy
efficiency;
• Member states are on their way to accomplish the national indicative target of 9% reduction of final
energy consumption by 2016 as it was requested under the ESD 2006/32/CE, which represents a less
ambitious objective than the 20% level adopted in 2012.
Financing Medium and Long Term Energy Security for a Low-Carbon Economy
October 14
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New EU Energy Security Strategy
Released on 28 May 2014
Financing Medium and Long Term Energy Security for a Low-Carbon Economy
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Agenda
Progress report
1. Erste Group / BCR & Our Energy Infrastructure Finance Competence
2. Europe’s Energy Strategy
3. Romania’s Renewable Energy
4. Romania’s Energy Efficiency Potential
Financing Medium and Long Term Energy Security for a Low-Carbon Economy
October 14
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Energy Efficiency
A Global and European Priority
• Energy Efficiency is key part of EU 2020 strategy;
• The Energy Efficiency Directive (2012/27/EU) recently approved imposes energy
saving obligations to Member States;
• Energy efficiency obligation schemes or policy measures in all Member States
• Exemplary role to be played by the public sector
• The Cohesion Policy proposals for 2014 -2020 allocate a significant amount of
funding to Energy Efficiency;
• ELENA, The four J’s (Jeremie, Jaspers, Jessica, Jasmine), EEEF (European Energy
Efficiency Fund), etc. to support investments in Energy Efficiency; Energy
Performance Contracting (EPC) Campaign started by DG Energy;
• EBRD, EIB, IFC have all started Energy Efficiency Initiatives.
Financing Medium and Long Term Energy Security for a Low-Carbon Economy
October 14
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Energy Efficiency
Decoupling economic growth from energy consumption
Renovation of
Public
Buildings
• Annual renovation target of 3% for APC (and possibly for APL) buildings above
500m² (starting 01.2014) and above 250m² (starting 07.2015).
• Cost optimal renovation can bring up to 60% energy savings.
• Share of public building in building stock accounts to 12%.
High Efficiency
Cogeneration
& Efficient
Heating/
Cooling
• Until 31.12.2015, the newly established ANEE & ANRE will evaluate the national
potential for the application of efficient cogeneration, heating & cooling together
with a cost-benefit analysis, for identifying the most efficient solutions.
• If the analysis will prove the benefits exceed the costs, the competent authorities
will take measures to promote the development of such infrastructure.
Alternative
Policy
Measures
• Mandatory energy audits for companies (except SMEs) with an annual energy
consumption of over 1000 toe.
• Development & promotion of ESCO companies.
• Creation of the Energy Efficiency Investment Fund with revenues form EUA
auctions for funding Energy Efficiency projects.
Financing Medium and Long Term Energy Security for a Low-Carbon Economy
October 14
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Energy Performance Contracting (EPC)
in the Public Sector
 About 30%-40% of primary energy consumption comes from public and private
buildings
 Public sector advantages
- Large and homogenous asset stock (e.g. schools, hospitals, etc.)
- Significant energy saving potentials of up to 40% due to underinvestment and operational
inefficiencies
- Simple pilot projects for market development (e.g. street lightning: 1. stable demand; 2. clear
baseline; 3. high savings and short payback period; 4. clear ownership structure)
- Potentially clear procurement mechanism
 ESCO market development in public sector opens up large markets and
generates experience and trust in actors
 ESCO/EnPC project development resources are not available in-house for
municipalities
 If funds/grants are available: leverage by co-financing EnPC and finance in particular efficiency
measures with long, commercially unattractive payback period
Financing Medium and Long Term Energy Security for a Low-Carbon Economy
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Energy Performance Contracting (EPC)
 Energy Performance Contracting (EPC)
- Procurement of works and services on basis of NPV
- Contents: system analysis, (pre-)financing, design, implementation & optimised operation of
entire building, controlling
- Payments based on achieved savings
- Requirement: long, stable use of building; Ideal application: public buildings
Financing Medium and Long Term Energy Security for a Low-Carbon Economy
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Advantages of EPC/ESCO approach
Advantages of ESCO projects
ESCO
Tradditional financing of EE in
public sector
•
Private sector expertise to design, implement EE
investments and optimised operation
•
Lack of expertise to design, tender and implement EE
investments and operate optimally
•
Procurement based on energy performance or NPV
•
Procurement procedure does not relate to EE performance
•
Off balance sheet financing on commercial basis
•
Requires on balance sheet debt financing or large amounts
of grants
Addressing the entire efficiency value chain
Energy
Source
Fuel Switching
to cleaner and
cheaper energy
sources (natural
gas, renewable
energy)
Energy
Transformation
Self-generation
of electricity and/or
heat through
efficient boilers and
generators
Energy
Transport
Minimization of
energy losses
(heat recovery, heat
exchangers,
insulation, variable
speed drives,
business process
optimization,
automatic controls,
metering devices)
Energy Use
Energy efficient
equipment
(lighting, air
conditioning,
refrigeration and
other domestic
appliances,
industrial
production lines,
etc.)
Financing Medium and Long Term Energy Security for a Low-Carbon Economy
October 14
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Energy Service Companies (ESCOs)
 World Outlook for Energy Services Companies
- ESCO markets are a growing market worldwide
- ESCO revenues in Europe > over EUR 8bn in 2010
New EnPC markets
• Legal uncertainties which are perceived as
risks
• Limited contract timeframes
• Limited investments => limited savings
Mature markets
• Tested legal framework
• Longer tenors
• Significand investments =>
unlocking the full savings potential
• Limited BS of ESCO companies
• Well developed ESCO companies
• Limited understanding & willingness to
• Interest of equity and debt
invest by both banks and equity providers
08/10/2014
providers to invest
October 14
14
Energy Efficiency Projects
Financing Energy Efficiency Projects
• EED preamble “Member States should encourage the use of financing facilities to further the objectives of
this Directive”;
• Romanian authorities have engaged in finding solutions to develop and implement innovative and smart financing
mechanisms for available funding sources (private, EU, banks), such as the development of an ESCO market and
a suitable mechanism for the functioning of EE business.
Project specific risks
ESCO specific risks

Lack of project standardization / Lack of track record
 Which components? Street lightning? Public
buildings? Energy Management?
 KPIs?

ESCOs assumes both performance and the underlying
customer credit risk – if the customer goes out of
business, the revenue stream from the project will
directly impacted, putting the service provider at risk

Lack of supporting regulatory framework / clarity
 Concessions? Acquisition of public services?
 Payments to ESCO: operational expense or
investment?

ESCOs financing may give raise to leveraging problems
for the service provider, as it may become too indebted
at some point

Limited public sector support due to limited additional
indebtedness potential

Lack of collateral coverage
Various guarantee schemes are
being discussed with IFIs
Projects bankability under question
Financing Medium and Long Term Energy Security for a Low-Carbon Economy
October 14
15
Team and Contacts
Ioana Gheorghiade
Banca Comerciala Romana
Public Sector and Infrastructure Finance Executive Director
Bucharest, 15 Calea Victoriei, 3rd District
Cristina Ghimbovshi
Banca Comerciala Romana
Head of Infrastructure and Specialized Lending
Bucharest, 15 Calea Victoriei, 3rd District
Tel.:
+40 373 516 517
Mobile: +40 731 042 090
[email protected]
Tel.:
+40 373 516 653
Mobile:
+40 785 252 993
[email protected]
Oana Roxana Mogoi
Banca Comerciala Romana
Energy Infrastructure Coordinator
Bucharest, 15 Calea Victoriei, 3rd District
Mihai Dorin Voican
Banca Comerciala Romana
Energy Infrastructure Specialized Finance Manager
Bucharest, 15 Calea Victoriei, 3rd District
Tel.:
+40 373 516 524
Mobile:
+40 726 168 576
[email protected]
Tel:
+40 373 516 525
Mobile: +40 733 040 225
[email protected]
Raluca Georgiana Badau
Banca Comerciala Romana
Energy Infrastructure Specialized Finance Manager
Bucharest, 15 Calea Victoriei, 3rd District
Sebastian Mihai Stancu
Banca Comerciala Romana
Energy Infrastructure Financing Expert
Bucharest, 15 Calea Victoriei, 3rd District
Tel:
+40 373 515 597
Mobile: +40 784 240 872
[email protected]
Tel:
+40 373 515 571
Mobile: +40 784 242 375
[email protected]
ANNEX
Examples of EE technologies (1)
Sector
INDUSTRIAL
Potential
Borrower
Industrial companies,
SMEs
AGRICULTURE
Agribusinesses
COMMERCIAL
Commercial buildings,
retail shops, offices
buildings, industrial
buildings, etc.
08/10/2014
Energy Efficient Equipment
»
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»
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Energy efficient machinery and production lines
Waste heat recovery devices
High efficiency electrical motors and drivers
Compressed air systems
Electricity peak-load control systems
Efficient boilers, heaters, refrigerators
Fuel switching (coal/oil  natural gas)
Self-generation through cogeneration or RE
Complex energy optimization projects
Compact fluorescent
lamps
Water treatment, water pumps
Efficient irrigation technologies (drip irrigation)
Methane capture projects
On-site generation (cogen, biomass, biogas)
Reforestation, sustainable habitats, eco-farming
Efficient lighting
Efficient Air-conditioning
Heating and ventilation equipment
Control and metering systems
Electricity peak-load control systems
Heat pumps, solar water heaters
Sustainable construction
Solar water heaters
EE/EM for
Municipalities in
CEE
Page 17
ANNEX
Examples of EE technologies (2)
Sector
Potential
Borrower
Energy Efficient Equipment
RESIDENTIAL
Households and private
individuals
»
»
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Energy efficient domestic appliances
Lighting, refrigeration, air-conditioning
Fuel switching to natural gas for cooking
Sustainable construction
Green mortgages
TOURISM
Hotel and other
tourism business
operators
»
»
»
»
»
Efficient air conditioning
Efficient refrigeration
Efficient lighting
Energy and water efficient laundry equipment
Sensors and automatic controls for consumption
management
Building insulation
Natural gas boilers for heat productions (hot water,
kitchen, laundry);
Heat recovery devices for hot water;
Self-generation through cogeneration or RE
»
»
TRANSPORT
08/10/2014
Public transport
operators, taxi drivers,
transport companies
»
»
» Hybrid cars
» Electric vehicles
» Mass transport (e.g. Rapid bus transit)
Domestic appliances
Insulation material
EE/EM for
Municipalities in
CEE
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