• NMA
  • Agricultural University
  • Agricultural University
  • Veliko Tyrnovo University
  • Veliko Tyrnovo University
  • Vitosha Factory
  • Vitosha Factory
  • Summery theater
  • Summery theater
  • Summery theater
  • Montana Hospital
  • Montana Hospital
  • St. Mina Hospital
  • St. Mina Hospital
  • MU Plovdiv
  • NAM
Products

The Energy Efficiency and Renewable Sources Fund (EERSF) provides three main categories of financial products

 

Loans

Direct financing

Type

beneficiaries

Annual Fee

Maximal Tenor

Beneficiaries' minimal participation

Financing rates (BGN)

Municipalities

4% - 7%

up to 7 years

10%

30 000 – 3 000 000

Corporate clients and individuals

1) Minimal financial participation of the client in the proposed project should be at least 10%.

2) There are no additional conditions on the loan / fees (including fees for preliminary redemption after the second year of the credit*), and the monthly payment schedule is to be prepared in relation with beneficiaries' needs.
    *In case of bridge financing on EU programs, fee for preliminary redemption is not payable
 

Cessions

Type

beneficiaries

Beneficiary 

(Debtor on transfered 

receivables)

Annual Fee

 

Maximal Tenor

Beneficiaries' minimal participation

Financing rates (BGN)

Corporate clients – ESCO**

-  Municipalities

-  Hospitals

-  Universities

-  Other quasi-government organizations

    

4 - 7%

up to 7 years

10%

30 000 – 3 000 000

**ESCO - Energy Services COmpany – Company for providing of energy services.

 

Partial Credit Guarantees (PCGs)

Type of Guarantee

Annual Fee 

Maximal Tenor

Partial - 80% on a "pari passu" basis

0.5 - 2 %

up to 7 years

Partial - 50% on a first-loss basis after the bank-creditor

0.5 - 2 %

up to 7 years

Individual (per project) guarantee commitments shall not exceed BGN 800 000.

 

Portfolio Guarantees

1) ESCO portfolio guarantee - to attract more ESCO companies into this business and to make ESCOs more comfortable by guaranteeing the risk of their counterparties - the project beneficiaries.
  
2) Residential portfolio guarantee - to kick-start the market of EE investments in the residential sector, by providing market products that overcome the lack of legislation in the country.

ESCO Portfolio Guarantees


Normally ESCOs would bid for a project and then go to a bank to secure finance for it, or have a line of financing ready and fill it in with projects. The shortcoming of this approach is that typical ESCOs rely heavily on raising debt to fund their performance contracts. This requires that the cash flow of their business is very accurately timed and budgeted. Delayed payments from clients, or defaulting clients may severely disrupt the servicing of the debts of the ESCO itself. With our ESCO portfolio guarantee, we undertake some of the risk of the ESCO and guarantee that we will cover such disruptions in the flow of receivables of the ESCO.

In practice this means the following:

 -  EERSF signs a framework agreement with the ESCO to issue a portfolio guarantee for a preapproved portfolio of projects;
 - The ESCO wins a tender for an energy efficiency project;
 - EERSF approves the project and adds it to the portfolio of approved projects;
 - EERSF guarantees that it will cover up to 5% (the percentage is negotiable) of the defaults of the delayed payments of this portfolio;
 - With this guarantee, the ESCO gets better interest rates on its debt with commercial banks and has a piece of mind that there is 5% failsafe trigger that will prevent cash flow disruptions and will reduce the risk of the clients.

Statistically, the default rate of clients of ESCOs is negligible so that 5% cover of the guarantee is more than sufficient. Delays in payments are more probable and in such cases EERSF will act as a financial buffer to take the shocks.

On the other hand, such product provides an excellent leverage of EERSF's own funds. For example a BGN 500 000 guarantee will facilitate a portfolio of investments in the amount of BGN 10 million.
 

Residential Portfolio Guarantees


The guarantee works in the following way: EERSF helps the households in a building to develop a good project. Then a first class company is selected to implement the investment. The bank gives the funds to the project developer, but the repayments afterwards come from the individual households. Each household pays proportionately to their built-up area. EERSF guarantees that it will cover the first 5% of defaults within this block (or portfolio of blocks). Statistically the default rates in customers' loans are from less than 1% in some banks, to about 2.5-3%, so a guarantee of 5% will cover fully the risk of the commercial bank.

This product is being developed as a partnership with commercial banks. As mentioned before, the main reason why the EE investments in the residential sector have not materialized yet is because of the lack of adequate legislation. Moreover, in Bulgaria there is no tradition of condominiums or household associations and there is a lack of trust between the families in one building. We found a way to overcome all this by acting as a gluing component between the commercial banks and EE projects in the residential sector.