The Fund will invest in Southeast Europe and Turkey, namely in Albania, Bosnia-Herzegovina, Croatia, former Yugoslav Republic of Macedonia, Kosovo (under UNSCR 1244), Montenegro, Serbia and Turkey. It aims to contribute to the economic and environmental development of the region by helping public and private enterprises and households make investments in the areas of energy efficiency and renewable energy. This in turn should help Europe as a whole meet its climate goals.
Often faced with high energy intensity, obsolete equipment, poor quality building stock and low awareness of the actual energy waste and its economic and environmental implications, these countries constitute a substantial market for investment opportunities in energy efficiency (EE) and renewable energy (RE). The Fund’s initial focus is expected to be on investments in EE projects in the residential housing and small and medium-sized enterprise sectors while a pipeline of renewable energy projects, such as small-scale hydro-electric power, is built up.
Most of the Fund’s financing would be provided to businesses and households indirectly through loans to partner financial institutions. However, direct investments via specialist energy service companies (ESCOs) or EE or RE service and supply companies will also be pursued. It is expected the Fund will encourage the development in the region of ESCOs, which typically implement larger energy efficiency projects, such as for factories, hospitals, public buildings or street lighting.
As initiators and co-lead investors, EIB and KfW Entwicklungsbank are each contributing EUR 25 million to the Fund. That will be matched by the European Bank for Reconstruction and Development. The European Commission is providing EUR 20 million. The pooling of funds should contribute to a more coherent and efficient approach in the region where many bilateral, multilateral and private entities are currently working separately.The Fund has been established as a Public-Private Partnership which seeks to leverage commercial capital from private institutional investors with the help of public funding. Re-applying the structure of the successful microfinance investment fund, the European Fund for Southeast Europe (EFSE), it uses a tiered risk sharing structure to accommodate investors’ different risk-return profiles.
The Fund will be accompanied by a grant aid facility of around EUR 5 million. A first contribution towards the grant facility will be made by the Austrian Development Bank. The facility will provide well-tailored technical assistance to partner institutions setting up energy efficiency and renewable energy lending operations as well as support to companies in the form of project preparation and energy audits or EE and RE project implementation.
The Fund is registered under Luxembourg law as a Variable Capital Investment Company (SICAV). The Fund will be privately managed. The fund management consortium is composed of Oppenheim Asset Management Services S.à r.l. (Luxembourg) and Finance in Motion GmbH (Frankfurt/Main, Germany), an alternative asset management firm dedicated exclusively to development finance, as Investment Advisor.