THE UN/ECE promotes energy efficiency investments
in the Russian Federation
21 January 1997
Russian experts estimate that up to 40% of their current national energy use is wasted.
To fight against this waste, important new legislation has been passed in the
Russian Federation to enhance energy efficiency. New policy measures and the financing
methods they have created are described for investors by the United Nations Economic
Commission for Europe (UN/ECE) Energy Efficiency Project which publishes a new guideline
that, together with the UN/ECE Manual on Business Planning, will provide assistance in
preparing loan projects in the Russian Federation.
These Guidelines from the Energy Efficiency 2000 Project of the UN/ECE will provide
foreign investors important new information on recently developed financing mechanisms,
investment guarantees, Council of Ministers' Decisions, laws and regulations governing energy
efficiency investments in the Russian Federation. The Guide for Investors in Energy Efficiency
Projects in the Russian Federation was prepared by an international Steering Committee of
governments, commercial companies and banks under the chairmanship of Vice Minister
Vitaly Bushuev, Ministry of Fuel and Energy of the Russian Federation. The Guideline should
reduce costs for investors by providing information needed for the due diligence of investment
projects together with two worked examples of how new financing mechanisms would be
applied in the Russian market.
The Guideline describes laws and regulations governing investments before explaining new
financial mechanisms developed with Russian commercial banks and international financial
institutions to use long-term credit lines for energy efficiency investments in the
Russian Federation. The financial mechanisms were prepared by an Experts Group under the
Chairmanship of Mr. Niels de Terra, Hagler Baily Consulting Limited, with contributions from
international and Russian experts from the Russian Federal government, local and regional
authorities and the Russian Energy Efficiency Demonstration Zones Association (RUSDEM).
Commercial companies providing expertise included Gasprom, Gaz de France, Honeywell
Incorporated, Enron Gas Services Corporation, and Landis & Gyr (Europe) Corp. Participants
from the financial sector involved experts from Mosbusinessbank, Menatep Bank, Stroyinvest
Bank, Rosprom, Creditprom Bank, KPMG Peat Marwick and the European Bank for
Reconstruction and Development (EBRD). The EBRD provided material contained in Chapter 4
of the Guidelines on the requirements of financial institutions for preparing and submitting
proposals for energy efficiency project financing. The Experts Group was supported by
contributions from the governments of the United States and Norway.
The Guide represents an important element of cooperation between the United States and
the Russian Federation in the framework of the Commission on Energy, Environment and Outer
Space under the Co-Chairmanship of Prime Minister Victor Chernomyrdin and Vice President
Al Gore implemented with support of the United States Department of Energy (USDOE) and
United States Agency for International Development (USAID). The Norwegian Ministry of
Industry and Energy hosted the Experts Group and provided expertise from the Institute for
Energy Technology in Oslo, Norway.
By the end of 1996, two World Bank loan projects for energy efficiency investments were
approved and signed by Russian authorities to provide an important source of long-term capital
for investments in this sector. The Russian Energy Efficiency Project (GASI) provides
US$ 120 million for ten cities, six of which are energy efficiency demonstration zones of the
UN/ECE Energy Efficiency 2000 Project. The loan is implemented through the Russian Energy
Saving Fund (RESF) of the Ministry of Fuel and Energy in Moscow. The loan project is designed
to increase energy efficiency in Russia, enhance the safety of the gas distribution system and
support policy reforms.
The second loan is the Enterprise Housing Divestiture Project (EHDP) designed to improve
the energy efficiency in housing and municipal buildings for US$ 300 million in six cities, one
of which is an energy efficiency demonstration zone. The project is to be implemented by the
Foundation for Enterprise Restructuring of the Ministry of Economy.
During the first half of 1997, the UN/ECE Energy Efficiency 2000 Project will be holding
training courses on financial engineering with support of the Norwegian Ministry of Energy and
Industry with trainers drawn from the Norwegian Energy Efficiency Group (NEEG), the Project
Implementation Units (PIU) of the two World Bank loans and the Regional Adviser on Energy
of UN/ECE. The courses are scheduled to begin in February 1997 in St.Petersburg composed
of teams from six to eight energy efficiency demonstration zones to develop business plans for
investment projects using the Guide to Investors and the UN/ECE "Manual on Business Planning:
How to Construct a Business Plan for Energy Efficiency Projects" (ENERGY/WP.4/R.2). As a
result, World Bank Project Implementation Units will have the opportunity to guide energy
efficiency demonstration zones management teams in the preparation of their business plans
so that successful plans could be considered for financing from the World Bank loan projects.