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Tatfondbank Launches Energy Efficiency Financing

The Adonis suit company had been named one of the top suit manufacturers in Russia however the competition got tougher and Adonis began looking for ways to cut costs and improve operating efficiencies. The pressing machines used by Adonis were not optimal for pressing thinner fabric and used too much electricity.

Adonis approached Tatfondbank for financing, since the bank had recently launched a new financial product aimed at financing energy efficiency projects. The bank proposed Adonis get an energy audit of the factory’s operations. The auditors identified that Adonis could cut per unit energy costs by 43% by modernizing its lighting system and using steam energy. Tatfondbank lent Adonis approximately $58,000 and the pay back is expected to be less than 2 years.

OTP Bank Profits on Energy Efficiency Projects

OTP identified a significant business opportunity for municipal energy efficiency in Hungary. In particular, there was an untapped opportunity for energy savings in municipal buildings and since OTP was the market leader in municipal finance, this was an obvious fit. Through the centralized procurement process OTP got access to municipalities without the extra transaction cost of case-by-case procurements. The Energy Service Company (ESCO) structure was well-known to OTP therefore the bank linked up with an ESCO. However, the particularly large and long exposure to a very small ESCO required the Bank to get extra risk protection to commit to a US$ 250 million program. OTP got risk capital from IFC, who designed its structure to the specific needs of OTP Bank.

Street lighting, indoor lighting and heating renovation of municipal buildings were a few energy efficiency retrofits that enabled OTP to disburse $29 million to over 2000 municipal renovation projects. It is estimated that the OTP municipal energy efficiency loans resulted in a savings of over 2000 tons of carbon and over 9 million kWh of electricity.

Turkish Leasing Company Enters Energy Efficiency Financing

The leasing company was attracted by the opportunity to expand SMEs’ access to finance and promote energy efficiency among SMEs in Turkey. Since the leasing company has up to 33% of its portfolio eligible for EE/RE leases, energy efficiency presents potential to service the needs of existing clients while offering a new product to SMEs. EE financing is a strategic approach whereby leasing companies can take a leadership position in a new market while growing its volume and scaling up.

Leasing to SMEs is helping them gain access to critically-needed term finance for non-EE projects as well. Leasing companies have traditionally been one of the key providers of term finance for SMEs, and this initiative will help make term finance available to more SMEs by working with an SME-focused leasing company. Term finance is appropriate for small projects and EE equipment finance where a lack of collateral typically exists.

The leasing sub-projects are expected to reduce energy consumption for the relevant industries i.e. light industries (textile, printing, food), power and heat generation etc.) as well as in industrial and commercial buildings. Reduced energy consumption is an important national priority in the interest of reducing dependence on imported energy. Investments in energy efficiency offer a cost effective way to meet growing energy demand while reducing emissions.

Partnerships with equipment manufacturers, electric and heat distribution companies and (ESCOs ) Energy Service Companies present other models for leasing companies to enter the market. As the energy efficiency market grows in Turkey, other leasing companies will follow the lead and expand their offering to include energy efficiency financing to SMEs.

Axxess Capital invests in Energy Efficiency

Axxess Capital manages over EUR 220 million in private equity investments in Southern and Eastern Europe through two managed funds: The Romanian American Enterprise Fund (RAEF) and The Balkan Accession Fund (BAF). RAEF was established in 1995 by the U.S. Congress to support the development of the private sector in Romania through direct equity investments and loans and maintains a special focus on the financial services sector. BAF is a regional fund launched in 2005 to take advantage of investment opportunities offered by the EU accession of Romania and Bulgaria in 2007, but also targets selected transactions in the Western Balkans, Moldova and Ukraine.

While both funds have maintained a long-term policy for managing the environmental risks of investments, recently RAEF has seen increased potential in the developing energy efficiency and renewable energy sectors locally. In 2004, RAEF established a project company, Romanian Industrial Energy Efficiency Company (RIEEC), which develops and operates on-site co-generation power systems for industrial consumers. The cleaner power has not only demonstrated environmental benefits but has also enabled clients to reduce energy production expenses by as much as 60 percent.

The RIEEC investments have demonstrated to Axxess Capital the potential for additional growth in the area of low-carbon power generation. In fact, more than 30 percent of Romania’s electrical generating capacity is more than 25 years old and only 20 percent is less than 15 years old. The investment required to upgrade the country’s generation capacity is estimated at USD 4-5 billion over the long-term, with USD 900 million for modernization of transmission and distribution systems alone. While much of this investment is likely to be in large-scale infrastructure, RAEF is also exploring smaller projects using alternative fuel sources. In 2008, RAEF approved financing for a start-up developing wood waste as a fuel source for central heating furnaces.


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