BEERECL - Energy Efficiency & Renewable Energy FW ext. 2

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Second extension of an existing framework facility under which the EBRD is considering extending credit lines to Participating Banks (PB) for on-lending to private sector companies for industrial energy efficiency and small scale renewable energy projects. Additional EBRD funds of up to € 55 million would be complemented by the Kozloduy International Decomissioning and Support Fund (KIDSF) grant funding (the Grant). There is a Grant of €35.2 million provided by the KIDSF which provides support for the initial framework and two extensions thereafter and is provided to overcome barriers faced by sub-borrowers in developing/financing and implementing such investments. The Grant will be used to provide: (i) completion fee to sub-borrowers (ii) completion fees to be paid to PBs, for participation in this Project The Grant will also provide technical assistance and is provided on the basis that individual sub-loans meet the objectives of the KIDSF. Discussions are currently taking place with potential participating banks. The Project will generate transition impact by further demonstrating the benefits of energy conservation and promoting the expansion of energy efficiency and renewable energy investments in a country with very high energy intensity. The Project aims to overcome market imperfections in the energy service market of a country with very high energy intensity (e.g. risk perceptions both at the level of sub-borrowers and banks). The Project is also expected to transfer and build expertise related to sustainable energy financing among participating banks and among companies and investors. The Project is expected to contribute to lowering the transaction costs for financing sustainable energy investments and the Facility’s success would lead to a sustainable lending for such projects in the long run. The clients will be Bulgarian PBs which will on-lend the funds to sub-borrowers planning to undertake energy efficiency investments and small scale renewable energy projects in the private sector. Senior loans of up to an aggregate of EUR 55 million to be allocated to PBs in Bulgaria. EUR 55 million from EBRD. FI screened operation. PBs will require that companies financed through this credit line comply with national requirements for environment, health and safety. This will be confirmed to the PBs by the consultant who will cover this issue as part of the preparation of each project (see Technical co-operation section below for more information). Reporting on sub-projects and annual monitoring reports will be provided by PBs. EBRD procedures for hydro sub-projects will apply under any such sub-loans under this facility. The Environmental Department will review and sign-off on all wind renewable sub-projects. Increased efficiency in heat generation, reduction of heat transmission losses and improved efficiency in the use of heat and energy will lead to a reduction of air pollutants (e.g., SO2; NOx; CO2; particulates) resulting from heat and electricity generation. This is a clear and quantifiable environmental benefit on which the PBs will provide details in an annual environmental report to the Bank. KIDSF will provide funding for technical cooperation essential for the Project. This will include the following components: 1. Rational Energy Utilisation Plan (REUP) and Marketing Consultant Potential sub-borrowers will have access to project preparation assistance which will (a) assess, present and recommend the proposed investments, (b) ensure cost effectiveness in the identification of appropriate measures and consistency with the criteria of the KIDSF Grant, (c) assist the formulation of loan applications to PBs, and (d) make recommendations to the sub-borrowers on its energy management strategy 2. Independent Energy Expert The expert will validate the successful completion of each sub-project and ensure that it was completed in line with the REUP recommendations. Kiyoshi Nishimura, Senior Banker, Financial Institutions Team EBRD, One Exchange Square, London EC2A 2JN Tel. +44 (0)20 7338 7409 Fax: +44 (0)20 7338 6119 E-mail: nishimuk@ebrd.com