IFC’s Experiences and Programs on Financing Energy

Efficiency in the Building Sector

October 4, 2012
Berlin, Germany
2
 Agenda

1 IFC Risk-Sharing Facility

2 IFC Russia Residential Energy Efficiency Finance Program

3
 About International Finance Corporation (IFC)

A member of the World Bank Group

Promotes sustainable private sector development
Three main lines of business:
Investment Services
Advisory Services
Asset Management Company

4
IFC Investment and Advisory Services – Unlocking Opportunities
for Energy Efficiency Finance

HOAs &
Credit Lines Cooperatives
Risk Sharing
Blended Products Housing
Management
IFC Commercial Banks Companies
Loans

Advisory Services ESCOs

Contractors
Advisory Services

5
1 IFC Risk-Sharing Facility

6
When entering a new market of EE financing of multi-family
buildings, banks may need risk-sharing mechanisms to mitigate
various risks.

Market for Financing of EE in Multi-family Buildings

Untested market demand

Untested borrower loan repayment capacity
Lack of borrower collateral

Market risk
Credit risk

7
 Risk-Sharing Facility – Basic Elements

IFC guarantees a portion of a bank’s portfolio of assets

On balance sheet – no sale or transfer of assets

Structured on a portfolio basis not on a loan-by-loan basis

Bank and IFC agree on selection criteria

Bank and IFC agree on servicing procedures for performing, delinquent and
defaulted assets

8
 Risk-Sharing Facility – Overview

Reference Portfolio

IFC Risk
Individual loans
Sharing
Agreement
Individual loans
IFC Bank
Individual loans

9
 Risk-Sharing Facility – Potential Structure

Assets Potential Losses

Portfolio of loans
on bank’s Bank IFC Senior Risk
balance sheet

First Loss
(provided by Bank)

IFC takes direct credit exposure to loan portfolio with credit origination and decision-
making delegated to the Bank

Once the first Loss is exhausted, IFC will share the credit risk pari passu with Bank
covering all principal losses

10
 Risk-Sharing Facility – Benefits to a Bank

Increase capacity to originate new assets

Reduce credit risk on the reference portfolio

Improve risk management and operational efficiency

Obtain a regulatory capital savings on the reference portfolio (subject to

banking regulator approval)

11
Risk-Sharing Facility Example – Block House Energy Efficiency
Program with Raiffeisen Bank Hungary (2003-2008)

IFC Risk-sharing facility provided a 50% guarantee on Raiffeisen’s block

house portfolio for energy efficiency improvements.

Мore than 650 projects worth about US$200 million were financed by
Raiffeisen Bank covering more than 45,000 apartments in over 2,200 multi-
family buildings across Hungary.

12
2 IFC Russia Residential Energy Efficiency Finance Program

13
There is a market failure in Russia with respect to bank financing
of energy efficiency modernization of multi-family buildings.

Majority of population in Russia lives in multi-family buildings (MFBs)

Buildings are old and highly energy inefficient

Residential sector is among the largest energy end-users and MFBs have
a 50% energy savings potential (on average)

Homeowners in MFBs have no access to bank financing for energy

efficiency modernization of their buildings

14
Banks remain cautious about financing EE modernization in multi-
family buildings due to perceived and existing barriers.

Market New and untested market (market demand, profitability)

Multi-family buildings (MFBs) are owned jointly and

Legal & proportionally by individual homeowners:
Regulatory
Who is the borrower?
Environment
How will loans be repaid?

Credit MFBs can not be mortgaged: what can serve as a

collateral for a loan?

15
To enable bank lending for EE modernization of multi-family
buildings, IFC applies an innovative approach to address market
barriers.

Awareness

Bank Capacity
Building

Policy Work

16
Thank you!

17
Disclaimer

This presentation was prepared by the International Finance Corporation (“IFC”) exclusively for the benefit and internal
use of the recipient in order to present in general terms IFC’s structured finance products. This presentation is
incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by IFC. The
presentation is proprietary to IFC and may not be disclosed to any third party or used for any other purpose without the
prior written consent of the IFC .

In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and
completeness of all information available from public sources or which was provided to us by or on behalf of the
Company or which was otherwise reviewed by us.

18