IFI Advisory Group Environment Working Group Meeting Thursday 17 th June 2010 Massimo Cingolani

1. IFI Advisory GroupEnvironment Working Group MeetingThursday 17th June 2010Massimo Cingolani

2. GREEN FOR GROWTH FUND, SOUTHEAST EUROPEIntroduction

3. Key Features Mission Statement The mission of the Fund is to contribute, in the form of a public private partnership with a layered risk/return structure, to enhancing energy efficiency and fostering renewable energies in the Southeast Europe region including Turkey, predominantly through the provision of dedicated financing to businesses and households via partnering with financial institutions and direct financing. Initiators: European Investment Bank and KfW Entwicklungsbank, supported by the European Commission Domicile: Luxembourg SICAV-SIF First closing: December 17 2009

4. Investors and Donors Current Shareholders TA Facility Donors Initiating Shareholders

5. Objectives and Instruments Instruments • Medium to long-term senior loans • Subordinated loans • Letters of credit • Guarantees • Mezzanine debt instruments • Local debt securities • Equity • Technical Assistance support Objectives Broadening the financing base of energy efficiency and renewable energy investments in the region Increasing awareness and deepening the financial sector servicing those development needs Harmonize and coordinate donor initiatives

6. Investment Objectives • Households • Homeowner Associations • Companies, including ESCOs and RE companies • Municipal & public entities What? • Minimum 20% reduction in energy consumption • Minimum 20% reduction in CO2 emissions • Promotion of renewable energy Where? • Candidate and Potential Candidate Countries of South East Europe To Whom? • Financial Institutions • Non-Financial Institutions How? • Loans & guarantees • Mezzanine financing • Equity

7. Focus of EIB policies in water sector and environment

8. EIB Water policyDefinition of Bankability • Comply with national, regional and international policies and regulations; • Be eligible for Bank’s financing; • Be in line with loan thresholds and securitisation policy; • Provide adequate risk allocation; • Be institutionally, technically, financially, environmentally and socially sound. Projects need to:

9. Definition of Water Efficiency • Efficiency of water use by the consumer (household, industry, agriculture, and hydropower); • Efficiency in allocation across different users; • Efficiency of the utility in managing the system; • Efficiency of the systems itself.

10. EU Policy Framework Inside the EU, and candidate countries Compliance with key Directives: • Urban Wastewater Treatment Directive (91/271/EEC - UWWTD) obliges Member States to collect and treat wastewater of urban agglomerations, and gives treatment standards • Drinking Water Directive (98/83/EC – DWD) regulates drinking water quality for human consumption • Water Framework Directive (2000/60/EC - WFD) requests Member States to achieve a "good status for all water" by 2015, and enshrines the principle of integrated management of water resources on a river basin level

11. Adaptation to Climate Change EC Communications: • Green Paper on “Adaptation to Climate Change in Europe” (March 2007) Calls for demand management in the context of early action on EU level • “Addressing the challenge of water scarcity and droughts in the EU” (July 2007) States the need to move towards a water-efficient and water-saving economy; recommends water pricing as a way to promote efficient water allocation and use

12. EIB products available for financing environment in line with EU policies

13. FL & SPL Framework FL& SPL Framework Loans • without co-financing with EU Structural Funds • with co-financing with EU Structural Funds : « Structural Programme Loans » • - at national level • - at regional level • - at sector level

14. Definitions FL& SPL Framework Loan Multi-scheme operation where, due to nature of these loans, the information at the appraisal stage may not be complete, whereby decisions concerning the financing of specific sub-schemes have to be taken after Board approval on the basis of additional information Structural Programme Loan A sub-set of Framework Loans, these are multi- scheme programmes of both small and large projects included within an Operational Programme (OP) of a public sector managing authority for EU Funds

15. Dimensions FL& SPL Framework Loan • Single or multi-sector • National / Regional / Municipal / Intermediated Structural Programme Loan is a variant of the above co-financed with EU Funds • EIB often as « minority partner » in financing plan • « Heterogeneous Granularity » of operation requires differentiated treatment of « allocations » Mixed - partly EU co-financed FL

16. Ceilings/co-financing rate/implementation period FL& SPL • Ceiling on loans and maximum/minimum loan amounts • up to 50% of Project Investment Cost or • up to 100% of Eligible Investment Cost (the lower of the two) • rules on increased threshold apply (e.g. climate change, energy, R&D, TEN) • Co-financing with EU instruments and combined support • up to 70% of Project Investment Cost • Cohesion countries, IPA countries, Convergence regions in the EU - up to 100%, when exceeding 90% justification in the CA report is necessary • Project implementation period • normally 3-5 years for FL (FL procedures 3.2), longer period requires justification • SPL aligns with the NSRF, Operational Programmes’ timetable currently 2007-2015

17. Specific contractual FL/SPL clauses (under preparation for new Master Contract) FL& SPL • Menu of clauses reflecting the FL guidelines and the outcomes of the appraisal, particularly: • terminology and structure • disbursement conditions (for the first, second and subsequent, for all) • allocation and reallocation procedure (ex-post, ex-ante) • undertakings (requirements: environment, procurement, other) • information duties (monitoring – annual/at completion, allocation tables, project lists, project fiche)

18. Specific contractual FL/SPL clauses FL& SPL • Disbursements (typical conditions) • First tranche (typical 30% upfront disbursement) • Second and subsequent tranches (justification of the previous one: 80% / 50% rule) • All tranches (other general and specific conditions/undertakings)

19. Specific contractual FL/SPL clauses FL& SPL Allocation procedure • small schemes below EUR 25m: ex-post allocation/after disbursement to schemes • mid-size schemes EUR 25m-50m: ex-ante review, project fiche • large schemes above EUR 50m: ex-ante appraisal and CA report, full dossier Reallocation procedure Annexes • Allocation table (summary, detailed for roads,…) and project fiches, full dossier/EU application, NTS-EIA, Forms A and B

20. Monitoring FL& SPL • Category B (i.e. annual monitoring requiring close co-operation with Ops/Promoter and PJ sector specialists) • Annual Project Progress Report (FL level + reference to large schemes using the input from sector specialists on separate appraisals) • SPLs aligned with the reporting to the EU COM: Attendance of COM Monitoring Committees • Alignment to the Promoter´s IT systems • Record in Serapis (PPR, allocations, disbursements) • Monitoring mission (on a sample approach, ex. HU, SK) • PCR (standard template for FLs, using input from sector specialists)

21. Environment FL& SPL • The promoter’s capacity to environmentally manage the programme, EIAs, Forms A/B • Existing EIA legislation (national/regional) • The project pipeline: critical projects or types of projects triggering EIAs (Annex I and II) • Responsible authority’s way of making NTS public (rules, websites, etc.) →publication obligation inserted into Financial Contract delegation of responsibilities from the Bank to the Promoter • SEAs, if required, to be published on the Bank’s website, EIAs published for large schemes • Infringement procedures (at national/regional project level) (EIA, SEA, Nature Protection, Natura 2000 sites) • Relevant delegation principles SPL where relevant may rely on Commission opinion

22. Examples

23. Project Examples ISLAND INFRASTRUCTURE FACILITY (CROATIA) • Project cost: EUR 100m • Loan amount approved: EUR 50m • Promoter: Ministry of Sea, Transport and Infrastructure The project concerns the financing of multi-sectoral investment schemes in the context of the Islands Act and based on principles of the National Island Development Programme (NIDP); both are strategic documents for the islands’ sustainable development.The project is expected to comprise small-sized schemes in the fields of municipal infrastructure (including water, sewerage and electricity supply), social infrastructure and environmental protection, to be implemented over the period 2010-2013, and will benefit 58 local communities in 7 coastal-island counties. Environmental aspects : The promoter will be required to comply with the provisions of EU environmental legislation (namely SEA, EIA and nature conservation areas; respectively Directives 2001/42/EC, 85/337/EEC as amended, 92/43/EEC and 79/409/EEC). The transposition of EU Directive on Energy Performance of Buildings directives (2002/91/EU) will be assessed.

24. Project Examples WATER AND SANITATION REPUBLIKA SRPSKA • Project cost: EUR 80m • Loan amount approved: EUR 40m • Promoter: Ministry of Agriculture, Forestry and Water Management of Republika Srpska The project concerns the construction and rehabilitation of water supply and sanitation infrastructure in municipalities throughout the Republika Srpska of Bosnia and Herzegovina. The project purpose is the protection of public health and the environment from water pollution, while maintaining a balanced development of water supply and sanitation as well as safeguarding the financial and operational viability of the water companies. Environmental aspects : The project is strongly environmentally driven, with a strong public health impact. The investments will contribute to meeting Bosnia and Herzegovina’s needs in relation to future compliance with the EU Urban Waste Water Treatment directive and Drinking Water Directive. Several of the investments rank highly in terms of overall impact on public water supplies and bathing waters.

25. Project Examples MONTENEGRO SOLID WASTE • Project cost: EUR 54m • Loan amount signed: EUR 27m • Beneficiary: Montenegrin Municipalities or Municipality Associations Creation of national sustainable waste management system. The loan will be implemented through the Ministry of Spatial Planning and Protection of the Environment and will co-finance the first phase of the creation of a national sustainable solid waste management system in line with European Union (EU) standards and directives. The project, concerns the implementation of the first disposal cells of 5 inter-municipality sanitary landfills, transfer stations, recycling facilities and the rehabilitation of some 30 dumpsites. The investments covered by this loan will contribute to the creation of a nationwide solid wastemanagement system, thus also reducing water and soil pollution. Environmental aspects : The project is environmentally driven and intended to improve municipal solid waste disposal practices in the country by disposing of non-hazardous waste in intermunicipal, sanitary landfills.

26. THANK YOU Massimo CINGOLANI Deputy Head of Division Western Balkans Investment Framework E-mail: m.cingolani@eib.org Tel.: (+352) 4379 87226 Fax: (+352) 4379 67487 26