4.1 - Summary of Characteristics of Financing Options for Public Sector Energy Efficiency Projects Issues to be addressed in Financing Option Conditions Pros Cons Kosovo Examples Credit barrier is too high, Easy to implement Sustainability may Who will manage Hungary 1. Budget financing with underdeveloped banking sector, be questionable, and administer the Can directly finance Lithuania capital recovery collateralization is difficult even if repayment funds? municipal entities and Armenia, Belarus is obtained through Financing should target new and central government Is there sufficient FYR Macedonia budget financing underdeveloped markets, programs agencies implementation Montenegro must be efficiently administered, initial capacity? Serbia subproject results should be intensely disseminated, need viable Availability of funding for EE projects Requires regulations for utility Streamlined repayments, Requires changes Are Kosovo Brazil 2. Utility on-bill participation lower repayment risk if in utility regulations utilities interested financing risk of utility and billing systems and willing? Strong financial position and financial India disconnection, management of utilities Creates potential Do they have Mexico Builds off of utility for monopolistic capacity and Payment discipline among public Sri Lanka relationships and behaviors billing systems for clients, adequate energy pricing and Tunisia services on-bill financing? billing practices Financing may U.S. Can be done on a compete with local What regulatory Vietnam sustainable and scalable banks, changes may be basis needed? Limited experience with heat utilities Insufficient liquidity in banking sector, Can be structured to May require new Needs a strong Bulgaria 3. Energy efficiency major aversion to risk among lenders address financing needs legislation and capable fund Romania revolving fund and evolving capacity of manager or Use of grant funds as subordinated May be difficult to Armenia all public buildings management team debt can help mobilize commercial cover (central and municipal) administrative Needs supporting ESA option can be very costs of the fund legislative TA to disseminate information on EE useful for municipalities from its revenues framework for subproject performance/financial data with poor credit and lack establishment critical to sustainability of capacity Need for professional, Fund Management Team
4.1 - Summary of Characteristics of Financing Options for Public Sector Energy Efficiency Projects Financing Option Conditions Pros Cons Issues to be addressed in Kosovo Examples 1. Budget financing with capital recovery Credit barrier is too high, underdeveloped banking sector, collateralization is difficult Financing should target new and underdeveloped markets, programs must be efficiently administered, initial subproject results should be intensely disseminated, need viable Availability of funding for EE projects Easy to implement Can directly finance municipal entities and central government agencies Sustainability may be questionable, even if repayment is obtained through budget financing Who will manage and administer the funds? Is there sufficient implementation capacity? Hungary Lithuania Armenia, Belarus FYR Macedonia Montenegro Serbia 2. Utility on-bill financing Requires regulations for utility participation Strong financial position and financial management of utilities Payment discipline among public clients, adequate energy pricing and billing practices Streamlined repayments, lower repayment risk if risk of utility disconnection, Builds off of utility relationships and services Can be done on a sustainable and scalable basis Requires changes in utility regulations and billing systems Creates potential for monopolistic behaviors Financing may compete with local banks, Limited experience with heat utilities Are Kosovo utilities interested and willing? Do they have capacity and billing systems for on-bill financing? What regulatory changes may be needed? Brazil India Mexico Sri Lanka Tunisia U.S. Vietnam 3. Energy efficiency revolving fund Insufficient liquidity in banking sector, major aversion to risk among lenders Use of grant funds as subordinated debt can help mobilize commercial TA to disseminate information on EE subproject performance/financial data critical to sustainability Need for professional, Fund Management Team Can be structured to address financing needs and evolving capacity of all public buildings (central and municipal) ESA option can be very useful for municipalities with poor credit and lack of capacity May require new legislation May be difficult to cover administrative costs of the fund from its revenues Needs a strong and capable fund manager or management team Needs supporting legislative framework for establishment Bulgaria Romania Armenia
108848-ESM-P157135-PUBLIC-EE-Options-Paper-Kosovo-ENGLISH.docx