The FINANCIAL — The Eastern Europe Energy Efficiency and Environment Partnership (E5P) is ready to finance municipal projects with grants worth EUR 20 million in Georgia together with further loan financing of approximately EUR 60 million.
Public transport, waste water treatment plants, street light and energy efficient projects are an incomplete list of the products which the E5P is ready to assist the Georgian Government with, and issue funding for. Innovation, know-how and recruitment of local staff, and the creation of jobs are what the projects of E5P will bring to Georgia.
Georgia has recently joined the Eastern Europe Energy Efficiency and Environment Partnership (E5P), which is a multi-donor international fund set up to promote energy saving investments in the Eastern Partnership countries. E5P supports projects in the municipal sector by providing grant co-financing alongside loans from the participating International Financial Institutions (IFIs) such as the EBRD, EIB, CEB, NEFCO, NiB, KfW, and the World Bank. The Fund has resources of close to EUR 170 million, with EUR 20 million allocated as grant financing for Georgia. Overall, the European Union is the largest contributor to E5P with pledged funds of EUR 70 million. Contributors to the Georgian window of E5P include: the EU, Czech Republic, Denmark, Estonia, Georgia, Germany, Lithuania, Norway, Poland, Sweden and the USA.
Representatives of E5P visited Georgia and met with officials last week. At the meeting parties managed to find opportunities together to identify very good E5P products. Representatives of E5P will return to Georgia during the EBRD annual meeting in May to follow up and see what Georgia can deliver.
“Currently we have a list of potential projects that can be implemented in Georgia. They are approved by the banks and should be approved by Georgia. A fund of about EUR 20 million is available for the projects pipeline that can be implemented in Georgia. We implement projects in a speed-efficient way which is very important. The country has borders, but environmental effect has no borders. E5P will help Georgia to create a positive environmental effect. Hopefully we will approve 4-5 projects this year. Some of them can be implemented during a year, like street lighting products; other projects, like water treatment, take three or more years,” Anders Lund, E5P Manager, told The FINANCIAL.
According to Lund, there is a long queue of municipalities and a long list of good projects in Georgia, so after working together closely, the sides will soon implement them. “It is good to have this financial instrument together with EBRD and all the banks for the municipal sector. It is more appealing for the municipalities to take out a loan if there is an investment grant. That has not been the case before,” said Lund.
“This will create a lot of jobs for local companies. This is a positive job effect and also a positive macro-economic effect. Which kinds of products we will implement is based on the demand. No products will be implemented if they are not approved by Georgia. The investments in energy efficiency are quite profitable, since Georgia is using too much. This is a guarantor for not increasing the tariffs too much. So, in principal it is a financial mechanism with a positive social and macro-economic effect,” Lund said.
Q. E5P decided to expand its activities in Georgia, Moldova and Armenia in July 2014. How would you evaluate your work in the above-mentioned countries?
A. Each of the countries has different demands and needs. Moldova is very similar to Ukraine based on energy. The countries have one supplier of gas. They do not have any other energy resources in the country. They have only hydro power which covers less than two percent of consumption. Armenia has more of a blend of energy resources. They have hydro power, nuclear power and also oil and gas. Georgia is mainly relied on hydro power. So, those are the main differences between the countries. Accordingly we will see different types of products in different countries. In Ukraine the main kind of project has been district heating. It helped them to achieve the best environmental effect. Products in Georgia can be local transport, to replace old buses, as well as a water canal system, as in some municipalities there are not waste water treatment plants.
Q. What are the criteria for evaluating the effectiveness of projects in the E5P?
A. There are a couple of criteria. One is to have an environmental effect. It can be a decrease of CO2 or other greenhouse gases. The better the environmental effect, the more grants you can receive. It can also be a demonstration product with new technical equipment that is not used in the market today. Such products may be able to upgrade the municipalities. Typical projects, like the insulation of public buildings or kindergartens, schools, hospitals – which are very much needed – have a positive effect on the inhabitants in the country, as well as a positive environmental effect.
Q. The projects of E5P will enhance the economic competitiveness of Georgia, and what specific advantages will they bring to businesses?
A. When you invest, for example, in a waste water treatment plant, the bank, EBRD, together with the municipality will procure it. The best company will win and since a lot of jobs will be made locally, this will benefit the local companies. Some of the equipment will be imported and some of them can be produced here. Georgia has good producers for hydro power equipment. Typical products that Georgia is not transporting are pipes for waste water or central district heating, so these kinds of companies can benefit.
Q. Within its projects E5P brings innovation and know-how to countries. How responsive are the local municipalities to your demands?
A. Normally not. Many municipalities in different countries are not used to working with international financing organizations. So we also bring knowledge transfer and an institutional component to develop a company and a municipality. Accordingly, our services will have a long-term sustainable effect in the Georgian municipalities. We can also use investment ground for technical assistance to put in particular resources for training for the municipality in various sectors or a national scale study, which is much needed in Georgia. The EU is the main donor to the fund. So they follow this very carefully.
Q. Georgia’s contribution to the fund has been leveraged with contributions from donor governments; Ukraine has contributed EUR 10 million. What are the reasons for such diversified contribution from countries?
A. Georgia has pledged and signed EUR 1 million to the fund. From a mathematical point of view, it is a benefit for Georgia. They pay one million and receive nineteen million. Together with loans we will reach projects worth EUR 100 million in the municipal sector. There is nothing in the rules to oblige each country to contribute an exact sum. Ukraine is a big country, with over 43 million inhabitants. During the negotiations, Ukraine supported issuing EUR 10 million.
Q. What motivates each country to contribute to E5P?
A. There are different motivations. One of the motivations is that they are part of the EU and part of the EaP. The countries are strongly motivated to create a positive environmental effect and more stable micro-economic situation for all of Europe.
Q. What are the main challenges that you face in the specific countries?
A. Normally the challenges are the approval process that can be time consuming, and bureaucracy. You need to understand the local bureaucracy. In some of the countries there are changes in the government, like in Moldova, so we have been waiting for a decision since November 2014. However, it happens in all the countries. A little bit of an unpredictable political situation in some countries is also a challenge. Another issue is the quality and awareness of municipalities. They need to be prepared to assist. In this regard we can transfer the knowledge to municipalities and they can implement the projects.
Q. Currently Georgia is lacking educated people in technical fields. What is the situation in other countries?
A. The situation is common in EaP countries. Many years ago in the past you would not have education for project management, finance and economics. Today, the professions that did not exist some years ago have become popular. 10 years ago hackers wanted to develop the iPhone. Today, the best brains and most well-educated people want to solve environmental problems.
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