MECHANISMS OF ENERGY EFFICIENT PROJECTS’ FINANCIAL SUPPORT BY INTERNATIONAL FINANCIAL INSTITUTIONS IN UKRAINE

The financial support of the energy efficient projects in Ukraine due to the financial support provision by the international organizations is examined in the article. The financing system of the projects on the energy efficiency rise, funded by the international financial institutions, has been studied. The sources and methods of the energy efficient projects’ financing have been analysed. The comparative analysis has been performed to highlight the conditions of the energy efficient projects’ financing by the international financial institutions in Ukraine.


Introduction
The key condition for the successful implementation of the energy efficient projects is the sufficient funding. According to the Strategy of Ukraine for the period till 2030, it is provided to spend 1045.0 billion UAH on the energy saving. But in the previous years, the target values of funding have not been reached in Ukraine. In terms of the investment plan to spend 30 billion UAH on the energy efficient projects, only the amount of 10 billion was used, and only 5% of the above sum have come from the state budget. This situation can cause the total dependence of all sectors of our economy on energy resources. The state and local budgets of the country in the current financial situation cannot cover even 10% of the planned measures. Therefore, to implement more energy saving projects, we have to seek for help of the international financial donors that will be able to intensify the economic growth of our country.
The sources formation of the energy saving measures' funding is the basis for the successful implementation of the energy saving policy. The investment into the energy efficiency is often understood in Ukraine as the improvement of the existing system: insulation (modernization) of buildings, new equipment of boiler stations, implementation of the alternative and renewable energy sources, etc. Particular attention should be paid to the use of the energy saving technologies and techniques in the new buildings construction that will ultimately optimize or reduce the energy consumption (Information of Bevz V.V.).

Basic Material
Defining the scope and sources of funding should be based on the investment project's data, which should contain the determined structure of the project, target indices of energy efficiency, project suggestions, estimated costs and resources saving. It is advisable to determine the possibility of the co-financing attraction from multiple sources. For example, the available own budget funds can be used to finance the project development, energy audits and project management, but the borrowed funds or grants can be used for the implementation of the project.
In addition, enterprises and organizations should decide for themselves how valuable for them the "deep" projects are, involving larger investments and longer payback periods, but in future providing more significant savings. Sometimes the projects that promise a quick payback, may, at first sight, seem more attractive, but in future it may happen that they are not justifying either the related transaction costs or the time spent on them. This decision depends not only on the size of the benefits, but also on the strategic goals of the project.
The energy efficiency projects can be financed by using various mechanisms and through various sources (funds receiving entities), but all the spending units should act in the concert with each other in terms of the technology or methodology. Therefore, the important role here is played by the agreed action program, at least at the regional level, and the creation of the infrastructure elements, such as the information and advisory centres of energy saving (Information of EU-ASE: Alliance to Save Energy).
The following table provides an outline of the existing mechanisms that could be used to finance the energy efficient companies. International financial institutions (IFI) such as the World Bank (IBRD and IFC), European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ADB) also support Ukraine.
MFU supports public sector's projects with the benefits in terms of the energy efficiency, using the following tools: -debt financing (denominated in dollars or euros or, in exceptional cases, in local currency); -funds investment into the equity: share in ESCO or utility companies; -technical assistance; -partial guarantees on behalf of the state organization. At the estimation of the energy efficiency projects, the problems, not related to the energy performance, should also be examined. The most important ones are: financial performance, non-energy benefits (e.g. environmental ones), possibility of attracting funds, whether public or commercial ones. These characteristics play an important role in supporting energy efficiency programs and in providing the documentary display of all advantages.
While using the financing mechanisms of the energy efficiency projects, let's examine the algorithm of the financial mechanisms' choice to launch the energy-saving projects with the priority for the customer, the entity of the energy saving project with the minimal dependence on the borrowed funds. (Fig. 1) (Sahno, 2013).
This algorithm is a guide for the customer, the entity of an energy saving project, where it should run the gamut from the least costly financial sources in terms of the additional payments to the most onerous compound interest of banks in order to launch an energyefficient project.
The developed algorithm can become guidance or guidelines for the selection of financial mechanisms to launch the energy-saving projects with the usage priority of the first available and cheaper funding sources, and then the other alternatives. Another famous promising solution for business and industry is to create a system of energy management.

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Every company independently selects the mechanism of the energy efficiency projects financing by means of which the given transaction will be performed, but the major aspect of funding provided by the international organizations are the requirements, being put to the projects. NEFCO NEFCO includes three programs ("Energy Saving" credit program, "DemoUkraina" program, "Pure Production" credit program). The procedure of receiving funds for the energy efficient projects from NEFCO is shown in Fig.2.
To obtain a positive decision, there is a preliminary approval procedure, which should answer two basic questions: what are the environmental benefits; what are the financial benefits (the payback period should not exceed 6 years).
Only after the project application is deemed to meet all the requirements, NEFCO Kyiv sends a proposal to NEFCO in Helsinki for the preliminary approval. After that, the development of the detailed business plan starts, including the following certain stages: 1. Energy audit is a prerequisite to ensure that measures to be used are correct.
2. The developed Business-plan should demonstrate: compliance of social and environmental benefits with NEFCO requirements, ability to reimburse the loan.
3. Obtaining the municipal guarantees from the government. 4. Obtaining the information on the procedure. 5. Approval and permission of municipal guarantees. After the business plan adoption by NEFCO and approval of municipal guarantees the financing stage is starting.

E B R D / Е 5 Р F u n d
EBRD is working with the large-scale investment programs in each sector (e.g. EBRD can finance water supply, drainage and sewage utility companies not only for the procurement of pumping equipment, but it can also provide a comprehensive investment program). There is a possibility to fund the municipal solid waste (MSW) landfills if the minimum project cost is equal to 8-10 million Euros.
The critical problem for EBRD is the guarantee. Providing loans should be material, and EBRD normally requires government guarantees for the municipal loans.
The main stages of financing by EBRD are shown in Fig. 3.

Fig. 3. Financing stages of the energy saving projects with the help of EBRD (Information of EBRD in Ukraine)
For submitting proposals to the EBRD there is no special template. The following data are required: 1. Description of the project concept; 2. General financial / accounting calculations (if applicable): -Tariffs -Number of clients -The level of fee payments -Potential warranty 3. List of investment needs; 4. Pre-feasibility substantiation of the project, if it has already been performed (e.g. Local actions plan for the municipal solid waste (MSW) sphere, with the support of the project "Improving the quality of municipal services» (GIZ) and the group of Luhansk region towns and districts).
EBRD estimates the following aspects: 1. Credit reimbursement ability: -Total net revenues should exceed 8 million Euros -Debts should be equal to less than 50% of the current income (current income = total income -income from capital) 2. The level of CO2 emissions' reduction (depending on the subject matter, e.g.. at least 30% for the central heating) 3. Guarantee.

EIB/ E 5 P Fund
The Fund "Eastern Europe Energy Efficiency and Environmental Partnership" (E5P Fund) is a fund with the total amount of 90 million Euros (several donors included in a single fund), which is administered by the EBRD. It was created to promote investments into the energy efficiency in Ukraine and other Eastern European countries.
The Fund was created on the initiative of the Swedish government during the EU presidency in 2009.
The Fund complements loans for the energy efficiency projects provided by financial institutions, including EBRD, EIB, NEFCO, the Nordic Investment Bank and the World Bank Group.
Grants from the E5P fund are provided in four priority spheres: central heating, different energy efficiency projects, environmental projects in Ukraine and other Eastern European countries' projects.
In addition to promoting the principles of the energy efficiency in the projects on central heating, the Fund will also support the other investment projects aimed at achieving significant energy savings. Environmental projects in the fields of sewerage or renewable energy are also the subjects to grants financing.
Stages of EIB funding are somewhat similar to those of EBRD, but there are some differences (Fig. 4).
The peculiar feature of this international organization is the preliminary submission of a group of projects in the region.
Compliance is required with the criteria of EIB. 1. Sphere of the project: -waste; -water supply and sewerage; -central heating; -energy efficiency; -SMEs; -education. 2. Amount of the loan: -The cost of a group of projects should not exceed 50 million Euros; -The group should include 10-12 projects; -Only 50% of the total project's cost can be financed by EIB; the rest of the project should be financed from another sources (borrower, budget, grants from donors); -A short list of projects is submitted to Minregionbud.
3. Socio-economic criteria: -The project should improve the quality of life; -The project should have a positive environmental impact.

IFC/ E5P Fund
IFC is an investment bank and its principles and procedures are very similar to those of the EBRD.
IFC advises, conducts tenders and provides funding. There are legal aspects that limit the work with municipalities: -amount: the loan cannot exceed the amount of two development budgets; -currency: IFC loans in US dollars or euros, but not in the local currency; -purchase: IFC does not recognize tenders at the city level in cases when it is required by the Ukrainian legislation; IFC requires exceptional conditions for each project.
Only inter-municipal projects in the field of MSW comply with the criteria of IFC loan amount. The two main problems are to be examined: -Who will be the formal borrower? -Municipal guarantees will be required from several cities (from each city participating in the project).
The steps are similar to those of the EBRD. IFC encourages the creation of the public-private partnerships to solve the above mentioned problems.
The consideration of these international organizations in the field of the energy efficiency projects' financing permitted to evaluate the funding criteria of each organization, which is displayed in the table (Table. 2) for easier perception.

Conclusions and Suggestions
Thus, the above presented material testifies to the fact that each organization has its own priorities in the energy efficiency projects financing, each of them comprises the steps of this procedure, which have some similarities, but also differ, particularly in the amount of the provided support, payback period and the field of financing.
It should also be noted that nowadays the financing energy efficiency projects, funded by IFI, has acquired a significant importance for Ukraine. It not only promotes economic transfer to the market economy, but also stabilizes the economic progress of the country. Today there is a positive trend concerning the forecasts for IFI funding in the energy efficient projects. The performed integrated analysis demonstrates that Ukraine cooperates actively with IFI and it is this particular cooperation that will contribute to the implementation of the energy efficient projects. Raising the life quality level, positive environmental effect, warranty.
There is a possibility to combine 10-12 projects, in this case the loan amount makes from 50 million euros and more.