1. Euroheat & Power 21 October 2005 1 Heating Sector Institutional Reform in the Former Soviet Union Baku, 21 October 2005 Challenges in Liberalisation of Large District Heating Networks Dusan Jakovljevic Euroheat & Power, Brussels

2. Euroheat & Power 21 October 2005 2 "Association of Associations" Members in 32 countries, incl. 21 national district heating & cooling (DHC) and combined heat & power (CHP) Associations: Austria, Czech Republic, Denmark, Estonia, Germany, Finland, France, Hungary, Iceland, Italy, Lithuania, Latvia, The Netherlands, Norway, Poland, Romania, Russia, Slovakia, Sweden, Switzerland and The United Kingdom. Euroheat & Power

3. 21 October 2005 3 Areas of Activity  Lobbying –Positioning in EU policies  Pooling of expertise and technical cooperation –Market analysis / statistics and certification –Assessing the societal / environmental impact –Elaborating common guidelines (quality assessment) –Common research platform  Exchange of experience and meeting platform –Forums for utilities / industries –Conferences, exhibitions

4. Euroheat & Power 21 October 2005 4  Eliminate prejudices and market the societal advantages of CHP/DHC  Create transparency and increase credibility  Raise political awareness for opportunities and problems  Link interests to political targets / measures  Create technical toolbox needed for successful policy implementation Lobbying for CHP/DHC

5. Euroheat & Power 21 October 2005 5 DHC: the link Surplus heat from industry Municipal Waste CHP Biofuels Fossil fuels Geothermal

6. Euroheat & Power 21 October 2005 6 Liberalised Market: Characteristics  decentralised ownership  a large pool of private actors competing in the market place  unbundling of production, distribution and supply  full market access  necessity to change company’s focus from production to customer Policy View

7. Euroheat & Power 21 October 2005 7 Liberalised Market: Benefits  increased investment  increased energy efficiency  becoming a market player  employment and training  customer benefits  environmental awareness

8. Euroheat & Power 21 October 2005 8 Dangers of tariff only model

9. Euroheat & Power 21 October 2005 9 Private Sector Participation in District Heating Up to 1990 in general  Western Europe: municipal and customer ownership  Eastern Europe: State ownership From 1990 in general  Significant changes  Liberalisation of Electricity and Gas markets  Direct impact on district heating

10. Euroheat & Power 21 October 2005 10 Private Sector Participation in District Heating Four alternative ownership models  Full state or municipal control  Full private control  Mixed ownership and management – PPP (PPP = Public Private Partnership)  Non profit cooperatives – customer ownership

11. Euroheat & Power 21 October 2005 11 Private Sector Participation in District Heating Public Private Partnership – different models  Operation or management contracts  Leasing  Concession  Generation-only-privatisation  Minority private equity, invited  Minority private equity, stock market (IPO)  Majority private equity  Full private ownership with municipal support

12. Euroheat & Power 21 October 2005 12 Current ownership structure

13. Euroheat & Power 21 October 2005 13 Examples of ownership in District Heating  Full public ownership Helsinki, München, Wien, Gothenburg, Budapest  Full private ownership Berlin, Hamburg, Malmö  Public Private Partnerships Tallinn, Vilnius (leasing) Paris (concession - since 1927!) Warsaw, Brno, Riga, Romania (generation only) Mannheim, Brescia (IPO) Praha, Skopje (private majority) Southampton (full private with municipal support)

14. Euroheat & Power 21 October 2005 14 Private Sector Participation in District Heating Important prerequisites for private participation  Good regulatory framework (heat tariffs, no gas subsidies)  Detailed regulation must be avoided  Market philosophy  Non political governance, commercial behaviour  Duration of contracts for PPP

15. Euroheat & Power 21 October 2005 15 Private Sector Participation in District Heating Assessing Private Participation in District Heating  Is the decision process focused on business?  Is a private actor realising environmental benefits?  Is a private actor looking to a long-term perspective?  What local focus will a private actor have?  Is a private partner financially/technically credible?  Is the national legislation appropriate for DH?

16. Euroheat & Power 21 October 2005 16 Private Sector Participation in District Heating Concluding Remarks  Many types of partnership are possible  Realise that District Heating is local business  Realise that District Heating is infrastructure  Market approach is necessary  Negotiate contracts carefully – also exit options  Private money is often needed – and welcome

17. Euroheat & Power 21 October 2005 17 www.euroheat.org