EBRD tackles energy efficiency of public buildings in Ukraine

By Anton Usov

The European Bank for Reconstruction and Development (EBRD) is providing a loan of up to €10 million, with an option to increase the loan to €20 million in the future, to finance energy efficiency measures in public buildings in the city of Dnipropetrovsk, one of Ukraine’s largest municipalities.

The project, which is co-financed by a €2.5 million grant from the Eastern Europe Energy Efficiency and Environmental Partnership (E5P)* – to which the EU is the largest contributor – will establish a pilot scheme of regulatory and contractual arrangements for financing energy performance contracts through private companies and banks.

It is expected that this pilot project will help replicate similar projects across Ukraine, where many other municipalities have already expressed interest in this initiative. With over 10 million buildings, the country has one of the largest housing stocks in Europe. Public buildings, including residential dwellings, which have suffered from decades of underinvestment, are a significant part of this stock. Dnipropetrovsk has over 700 public buildings and will become the first municipality in the country to test energy performance contracts. The city aims to engage private contractors to plan, finance and implement energy-saving measures, the cost of which will be covered by the energy savings achieved.

The Bank will provide funds to Dnipropetrovska Municipalna Energoservisna Kompanya (DMEK), a communal enterprise specifically established to develop and manage energy efficiency projects in the city of Dnipropetrovsk. DMEK will use the loan to finance energy efficiency measures that will be carried out by privately-owned energy service companies (ESCOs). In return for providing these investments, the city will pay DMEK the equivalent of the full energy cost savings achieved as a result of these measures.

Technical assistance for the project was provided by the government of the Czech Republic, the Swedish International Development Cooperation Agency and the EBRD Shareholder Special Fund. It will be used to prepare documentation for energy performance contracts, and tenders, as well the adjustments of newly established guidelines with the Ukrainian legislation.

The EBRD is the largest financial investor in Ukraine. As of 30 November 2013 the Bank had committed more than €8.7 billion (US$ 11.9 billion) through 318 projects in Ukraine.

* The Eastern Europe Energy Efficiency and Environment Partnership (E5P) is a €90 million multi-donor fund managed by the EBRD and designed to promote energy efficiency investments in Ukraine and other eastern European countries. The fund was established under an initiative of the Swedish government during its presidency of the European Union (EU) in 2009. E5P will complement energy efficiency loans provided by financial institutions including the European Bank for Reconstruction and Development, the European Investment Bank, the Nordic Investment Bank, the Nordic Environment Finance Corporation and the World Bank Group. Contributors to E5P are the EU and USA, as well as Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway, Poland, Sweden and Ukraine.