Energy Efficiency Act from 2004 Provides legal base and legal obligations for certain parties for energy efficiency improvements - Buildings with gross floor area more than 1000 m 2 are subject of mandatory energy auditing and certification - Industrial facilities with energy consumption more than 3000 MWh/y are subject of mandatory energy auditing Implements in the national legislation the European Directives 2002/91/EC for energy performance of buildings, Directive 2006/32/EC on energy end-use efficiency and energy services and others Creates legal framework for market operation of: -Certified Energy Auditing Companies -Energy Services Companies -Energy Efficiency Fund

Buildings with gross floor area more than 1000 m 2 Industrial systems with annual consumption over 3000 MWh/y Source: Energy Efficiency Agency

Establishment of EERSF EERSF is a revolving mechanism for development and financing commercially viable EE and RES projects Established in 2005 pursuant to Energy Efficiency Act from 2004 Initial capitalization – approx. BGN 22 million ($15 m) Donations from the World Bank (Global Environment Facility), Bulgarian Government, Government of Austria, Eurobank EFG, “Lukoil” AD, Brunata Bulgaria, Enemona AD and others. Main Objective: - Development of the Bulgarian energy efficiency market. New function under the Energy from Renewable Sources Act from Funding projects for production of energy from renewable sources for final energy consumption (off-grid projects)

Organizational Structure 1.Donors’ Assembly 1.Donors’ Assembly - includes all donors of the Fund. Selects Management Board members Management Board 2. Management Board - the primary governance body responsible for the overall strategic management of EERSF in compliance with its stated objectives and principles of operations Fund Manager - “EEE Consortium” 3. Fund Manager - “EEE Consortium” - responsible for the entire day-to-day operation of EERSF and for implementation of the project cycle. Its main objective is to operate the Fund as a profit-oriented business EEE Consortium consists of: Econoler International – Canada Elana Holding – Bulgaria EnEffect Center for Energy Efficiency – Bulgaria

Principles Public-private partnership Independent management Self-sustaining capacity Transparency Equal opportunities for all group of clients

Rationale behind EERSF IdeaProject Grants Technical assistance EERSF Insufficient bureaucratic Banks More expensive Institutional barriers Issues with collateral Energy Efficiency and Renewable Sources Fund EERSF Financing Cheaper High risk tolerance Smaller projects Technical assistance Fast processing Pre-financing Project PCGs Up to 80% cover High risk tolerance 0.5% to 2% per annum Technical assistance Fast processing Portfolio Guarantees Target – ESCOs Up to 5% cover on a portfolio basis Very high risk tolerance Low guarantee fees ESCOs Operational risks – real vs. “normalized” savings Financial risk – receivables of poor quality More expensive

Special product - ESCO Portfolio Guarantees Guarantees the first 5% of defaults in the portfolio of projects Application: ESCO companies to guarantee the receivables from their clients Instrument of average financial risk, which is statistically measurable Un-collateralized Small guarantee covers large number of projects (e.g. guarantee for BGN 500 thousand can cover 10 million portfolio) Portfolio Guarantee contract with the Energetics and Energy Savings Fund SPV (EESF) from April, ESCO projects under the coverage

Portfolio Guarantee ESCO Application BANKESCOCLIENT 1 EERSF ESCO service Project financing CLIENT 2 CLIENT 3 ESCO receivables EERSF guarantees the first 5% defaults Portfolio: BGN EERSF Guarantee: BGN (5% of portfolio) Maturity: 7 years BEERSF approves the project Loan repayment

Type of clients distribution as per

Credits Number of projects % projects Value of projects (BGN million) % value of projects Size of financing (BGN million) % size of financing Municipalities 6754% % % Corporate clients 4032% % 8.925% Others (hospitals, universities, etc.) 1714% % 8.122% Total: GuaranteesNumber of projects Value of projects (BGN million) Size of financing (BGN million) Total Credit Guarantees Portfolio guarantees on ESCO projects Partial credit guarantees (on credit contracts)

Preconditions for EE and Market Development Legal framework facilitating investments Market based energy prices Flexible approach to financing energy efficiency - National Supporting Schemes Higher project and client risks Customize the financial products to the client’s needs Promote the establishment of new ESCOs Set partnerships with commercial banks Provide technical assistance for project development

Thank you for your attention! Contacts: 4 “Kuzman Shapkarev” Str. Sofia 1000, Bulgaria tel: +359 (2) fax: +359 (2) Web: