EBRD’s BelSEFF helps Kalinkovichi Dairy cut energy costs

By Miroslav Maly

EBRD’s BelSEFF helps Kalinkovichi Dairy cut energy costs

Belarus’s Kalinkovichi Dairy outsources energy supply and invests in reducing demand
 
One of Belarus’s largest milk processing plants will significantly reduce its energy costs and minimise losses of power supply thanks to help from the EBRD Belarus Sustainable Energy Finance Facility (BelSEFF).
 
Annual heat and electricity savings at the Kalinkovichi Dairy are expected to be worth more than US$ 2.9 million per year, enhancing its profitability and competitiveness and cutting more than 2,900 tonnes of CO2 emissions annually.
 
The plant in the town of Kalinkovichi works around the clock all year round, producing up to 460 tonnes of milk per shift and more than 60 kinds of natural dairy products for both the internal and export market.
 
And milk processing is highly energy-intensive – large amounts of heat are required for milk pasteurisation and drying – and so high energy prices always have a negative impact on dairy products’ competitiveness.
 
In the past Kalinkovichi Dairy was supplied with a 7 MW heat and steam load via a poorly insulated pipeline, 300 metres above ground, from an old gas-fired municipal heat plant (in operation since 1978). The heat plant also supplies 40 MW of heat load to neighbouring residential settlements. But the boiler efficiency is only about 70-75% and heat losses from the pipeline are estimated at around 10%.
 
Residential customers are not required to pay the full cost of heat supply and some of the burden has been transferred to the dairy. This cross-subsidy system means that Kalinkovichi Dairy pays more than the typical price in Belarus for heat.
 
Moreover, failures of external power and heat supply led to frequent production shutdowns, causing Kalinkovichi Dairy additional costs.
 
Kalinkovichi city has decided to replace the outdated gas boiler plant with new more efficient hot water boilers and to expand the heating network for households. Since the dairy was one of the two steam consumers of the heat plant, continuing the old arrangement would not be feasible.
 
Kalinkovichi Dairy considered installing of its own steam plant, but had limited financial resources to purchase such equipment and no experience of installing or operating energy generation technologies. Nevertheless, there was a solution.
 
A new private project was agreed with LLC Torsti – a private Energy Services Company (ESCO) – to implement a BOOT (Build–Own–Operate–Transfer) financing scheme for the energy supply equipment.
 
The ESCO purchased a combined heat and power unit that makes use of the waste heat produced during electricity generation and an additional pair of steam boilers. It was responsible for the specification and installation of the equipment and will operate the facility until is it transferred to the dairy after 8 years of operation.
 
A team from BelSEFF, a US$ 50 million credit line for financial institutions to help local companies select and finance energy efficiency and renewable energy investment projects with technical assistance funded by the Czech Republic, analysed the proposed technologies and carried out financial and technical due diligence, and proposed risk mitigation measures.
 
Jan Pejter, the BelSEFF engineering expert commented: “A BOOT contract is ideal from a technical and financial perspective. Because the dairy pays a fixed price per unit of energy, the ESCO needs to ensure the equipment is correctly sized and operating at maximum efficiency to keep the energy production costs down.”
 
Financing was provided to the ESCO by BelSEFF-participating bank BPS-Sberbank. Ms Ekaterina Leonovich, a financial representative of LLC Torsti said: “Businesses that need their own efficient and reliable energy supply are typically required to lock up a huge amount of capital to purchase the necessary equipment. Without specialist knowledge to optimise the energy supply to the demand profiles of the business, the financial viability of the investment can be put in jeopardy. Outsourcing energy services to a company like ours makes complete business sense for the client, as the benefits are guaranteed.”
 
“Outsourcing our energy supply to an ESCO is going to reduce our energy costs and ensure the reliability of energy supply,“ said Igor Maksiuk, the dairy’s deputy director of economics and finances. "And we did not need to purchase the equipment upfront. This has allowed us to invest in reducing energy demand."