REQUEST FOR CEO APPROVAL
PROJECT TYPE: Medium-sized Project
TYPE OF TRUST FUND:GEF Trust Fund
PART I: PROJECT INFORMATION
Project Title: ESCO Moldova - Transforming the market for Urban Energy Efficiency in Moldova by introducing Energy
Service Companies (ESCOs)
Country(ies):
Moldova
GEF Project ID:1
5157
GEF Agency(ies):
UNDP
GEF Agency Project ID:
5135
Other Executing Partner(s):
Ministry of Environment (MoE)
Submission Date:
18 July 2014
Ministry of Economy (MoE)
Resubmission Date:
Energy Efficiency Fund (EEF)
City of Chisinau
GEF Focal Area (s):
Name of Parent Program (if
applicable):
 For SFM/REDD+
 For SGP
 For PPP
Climate Change
N/A
Project Duration(Months)
Project Agency Fee ($):
48
123,500
A. FOCAL AREA STRATEGY FRAMEWORK2
Focal Area
Objectives
(select)
CCM2
Promote market
transformation
for energy
efficiency in
industry and
building sector
Expected FA Outcomes
Outcome: Sustainable
financing and delivery
mechanisms established and
operational
Expected FA Outputs
2.2 : Investment mobilized
Trust
Fund
GEF TF
Grant
Amount
($)
1,300,000
Co-financing
($)
7,615,000
2.3: Energy savings achieved
GEF TF
(select)
(select)
(select)
(select)
(select)
(select)(select)
(select)(select)
(select)(select)
(select)(select)
(select)(select)
Total project costs
1,300,000
7,615,000
B. PROJECT FRAMEWORK
Project Objective: The project objective is to create a functioning, sustainable and effective ESCO market in Moldova,
scaling up mitigation efforts in the municipal building sector of Chisinau and Moldova in line with the Green Urban
Development Plan leading to at least 68,000 tonnes of direct CO2 emission reductions from EPC projects supported by the
project and 240,000 tonnes of indirect CO2 emission reductions during the period of project influence.
Trust
Grant
Confirmed
Grant
Fund
Amount
CoProject Component
Expected Outcomes
Expected Outputs
Type
($)
financing
($)
COMPONENT 1 TA
1.1 Green Urban
1.1 Resource
GEF TF
51,500
1,310,000
Green Urban
Development Plan
Mobilization Plan for
Development Plan for
adopted by City of
the Sustainable Energy
Chisinau
Chisinau and
Action Plan (SEAP)
additional emission
1
Project ID number will be assigned by GEFSEC.
Refer to the Focal Area Results Framework and LDCF/SCCF Framework when completing Table A.
2
GEF5 CEO Endorsement ESCO Moldova Project
1
reduction projects are
financed and
implemented in
Chisinau as a result
of the Green Urban
Development Plan
1.2 Green Urban
Procurement Guide
is being utilized by
City of Chisinau
COMPONENT 2:
Creation and
Operation of ESCOs
TA
2.1 ESCOs are
sucessfully investing
in energy savings
green urban
development
projects in the
building sector using
Energy Performance
Contracting modality
(EPC)
GEF5 CEO Endorsement ESCO Moldova Project
for Chisinau is
prepared, developing
the platform for
cooperation between
the various Moldovan
cities signed up for the
EU Covenant of
Mayors
1.2 Targets for
emission reduction
projects are defined
and prioritized by the
City of Chisinau
1.3 Urban
Development Plan for
the City of Chisinau is
updated and becomes
the Green Urban
Development Plan
1.4 Green Procurement
Guide for the City of
Chisinau is developed
and adopted.
2.1 Trainings delivered
to ESCOs, Chisinau
energy managers, and
financial institutions
towards the EPC
modality
2.2 At least 5 ESCOs
are in operation using
EPC modality.
2.3 Standing working
arrangements between
the Energy Efficiency
Agency (EEA),
Chisinau and PMU
towards project
objectives related to EE
savings in the building
sector finalised.
2.4. Pre-investment
activities (audits,
feasibility studies and
business plans) are
carried out for at least
20 energy saving
projects in Chisinau,
selected in partnership
with the selected ESCO
and the City of
Chisinau
2.5 ESCOs in Moldova
succesfully sign at least
20 energy savings
contracts using EPC
modality during the
lifetime of the project
2.6 At least 20 energy
savings projects using
ESCO modality are
implemented during
lifetime of the project
GEF TF
150,700
5,135,000
2
COMPONENT 3:
ESCO Market
Operation including
support for financial
mechanism
development
Inv
and
TA
COMPONENT 4:
ESCO Market
Operation Replication and
Dissemination
TA
3.1 ESCO Market is
operating in Moldova
and the Financial
Mechanism (Loan
Guarantee Fund) is
working and
available to ESCOs
3.1 Agreement of Loan
Guarantee Fund
regulations and
operations
3.2 Financial Institution
Partnership Agreement
between UNDP and the
Financial Institution
3.3 Financial
Partnership and
working Agreement
with the EEF
3.4 Model EPC
3.5 LGF Management
and Accountability
Arrangements
3.6 LGF Operations,
Monitoring and
Reporting
3.7 Exit Strategy and
New Regulation
Framework
GEF TF
4.1 ESCO(s) are
designing, financing
and successfully
implementing energy
efficiency projects
using EPC modality
in at least one (1)
other city in Moldova
outside of
Chisinau
4.1 Training
Workshops
conducted in other
towns and cities in
Moldova
4.2 Joint Ventures or
Partnership
Agreements to
implement ESCO
activities in at least
two (2) other
towns/cities
in Moldova
4.3 Lessons Learned
Study and 10 Case
Studies prepared
4.4 End of Project
Workshop to
disseminate Lessons
Learned and Project
Results.
4.5 One other city/town
in Moldova has
developed a Green
Urban Development
Plan
GEF TF
1,010,000
900,000
INV
(select)
(select)
(select)
(select)
(select)
(select)
(select)
(select)
Subtotal
Project management Cost (PMC)3
Total project costs
59,550
TA
(select)
66,250
10,000
1,228,000
72,000
1,300,000
7,465,000
150,000
7,615,000
C. SOURCES OF CONFIRMED CO-FINANCING FOR THE PROJECT BY SOURCE AND BY NAME ($)
3
PMC should be charged proportionately to focal areas based on focal area project grant amount in Table D below.
GEF5 CEO Endorsement ESCO Moldova Project
3
Please include letters confirming co-financing for the project with this form
National Government
National Government
Local Government
Energy-Efficiency Fund
Ministry of Environment
City of Chisinau
Type of Cofinancing
Cash
In-kind
Cash
Others
UNDP Moldova
Cash
Sources of Co-financing
Name of Co-financier (source)
(select)
Total Co-financing
Co-financing
Amount ($)
1,000,000
40,000
6,425,000
150,000
(select)
7,615,000
TRUST FUND RESOURCES REQUESTED BY AGENCY, FOCAL AREA AND COUNTRY1
GEF Agency
Type of
Trust Fund
(select)
(select)
(select)
(select)
(select)
(select)
(select)
(select)
(select)
(select)
(select)
(select)
(select)
(select)
(select)
(select)
(select)
(select)
(select)
(select)
Total Grant Resources
Focal Area
Country Name/
Global
Grant
Amount (a)
(in $)
Agency Fee
(b)2
Total
c=a+b
(select)
(select)
(select)
(select)
(select)
(select)
(select)
(select)
(select)
(select)
0
0
0
0
0
0
0
0
0
0
0
0
0
1
In case of a single focal area, single country, single GEF Agency project, and single trust fund project, no need to provide information for this
table. PMC amount from Table B should be included proportionately to the focal area amount in this table.
2Indicate fees related to this project.
D. CONSULTANTS WORKING FOR TECHNICAL ASSISTANCE COMPONENTS:
Component
International Consultants
National/Local Consultants
Grant Amount($)
124,150
149,800
Co-financing ($)
203,000
Project Total ($)
124,150
352,800
E. DOES THE PROJECT INCLUDE A “NON-GRANT” INSTRUMENT?No
(If non-grant instruments are used, provide in Annex D an indicative calendar of expected reflows to your Agency and to the
GEF/LDCF/SCCF/NPIF Trust Fund).
PART II: PROJECT JUSTIFICATION
A. DESCRIBE ANY CHANGES IN ALIGNMENT WITH THE PROJECT DESIGN OF THE ORIGINAL
PIF4
To efficiently achieve the Project, the PIF encompassed 4 Components:
-
Component 1: Green Urban Development Plan for Chisinau.
Component 2: Creation and Operation of ESCO Moldova as a PPP through an investment of $900,000
transferred to Chisinau.
Component 3: ESCO Market Operation incl. support for financial mechanism development.
Component 4: ESCO Market Operation - Replication and Dissemination
For questions A.1 – A.7 in Part II, if there are no changes since PIF and if not specifically requested in the review sheet at PIF stage, then no
need to respond, please enter “NA” after the respective question.
4
GEF5 CEO Endorsement ESCO Moldova Project
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In the GEF Request for CEO endorsement, Component 2 is renamed Creation and Operation of ESCOs as in the
revised project design we are now aiming to support a broader ESCO market development approach as opposed to
support for a single company ; a public private partnership (PPP).
Evolution of the Concept and Changes in Project Design
1. The project design submitted to the GEF is in line with the PIF approved by the GEF in 2013. Although the
objectives and outcomes are the same, the implementation of the proposed project approach differs in regard to
the greenhouse gas emissions reduction priority sectors and the way to develop and implement the ESCO business
model. In particular, the project now supports a broader ESCO market development approach as opposed to the
creation of a single PPP company as originally proposed. The ESCO Moldova project now aims to act as a
catalyst to the development of the ESCO market. Instead of supporting a public-private partnership (PPP),
component 2 and 3 of the project will now focus on the roll-out of a partnership-oriented loan guarantee fund to
support the energy performance contracting (EPC) modality and to overcome the barrier faced by the energy
service providers (ESPs) in regard to EE projects financing. In addition, the project will now focus on the
residential sector only. The rationale behind these adjustments is as follows:
- The 2013 ESCO Moldova PIF defined two priority sectors to reduce the GHG emissions in Moldova: (i) the
building sector and (ii) the industrial sector. The residential multi-storey and public buildings sector remains
the key priority but the industrial sector has been dropped. Although the PIF identified the industrial sector as a
priority sector, the project design team does not recommend an involvement in this sector. The residential sector
is the greatest energy consumer (40% of the total final consumption), followed by industry (21%). The economic
and structural reforms (1990 to 2010) in the country resulted in substantial reductions of industrial production,
which in turn resulted in reduced energy consumption. Even if the energy efficiency of the industrial sector is
low, the specific energy consumption in processes is high and the energy losses are substantial, energy efficiency
is still not a matter of great concern in industry where energy is often treated as a fixed cost. For instance, in
2007 the energy intensity of industrial production was 0.118 t.c.e./thousand MDL, a number almost half that of
2001. In addition, most of the time, EE investments in the industrial sector are more capital-intensive and risky
in terms of energy savings than in the building sector. Taking into consideration these facts and the very limited
capacity to mobilize financing through ESCOs, the project design team recommends focusing on the building
sector only, with project strategy and activities having been modified accordingly.
- The second major adjustment to the project concept outlined in the PIF is related to the set-up of a PPP (publicprivate partnership) to advance the ESCO business model in the municipal sector through the creation of single
company. Based on many meetings with key EE players in the private sector, financial institutions and the
Chisinau municipal authority, the project design team decided to drop the idea to create a PPP because only the
GEF was potentially willing to invest real money in the PPP. The City of Chisinau indicated that they were not
in a financial position to invest the required $1.5 million dollars in the PPP as outlined in the PIF, no commercial
banks or financial institutions were willing to finance or invest in the PPP, and all private energy services
providers met in Moldova affirmed that the PPP concept was not interesting for them taking into consideration
a questionable track record of the public sector as a cost-effective investor, company shareholder and business
partner. Energy Service Providers (ESPs) are defined as companies which provide services in the energy sector
which includes energy savings technologies and consulting services for a few but they do not provide a financing
solution. Among the 10 Energy Service Providers met during the project development phase, none of them
expressed an interest to embark as a partner on a PPP but all supported the idea of having a loan guarantee fund
to make it easier for them to finance energy savings project. In such a situation, based on the recommendation
of key players in the private sector and following a broad consultative process with the municipal and
government agencies, the project design team adjusted the concept and gave the highest priority to ESCO market
development through the existing private ESPs already established in the Moldovan market. The municipality
of Chisinau confirmed its agreement to improve energy efficiency in residential and public buildings by
investing the money saved from energy savings in EE projects initiated and financed by the private sector
(ESCOs). Rather than investing $900 000 in the PPP as mentioned in the PIF, the UNDP/GEF project will
support the set-up of a financial mechanism to advance energy efficiency project implementation in accordance
with the ESCO business model and the energy performance contract modality. In essence, the revised approach
aims to convert existing energy service providers into ESCOs.
- Following the ESCO market development objective, rather than investing in the PPP, the recommendation of
the project team is to establish up a partnership-oriented Loan Guarantee Fund (LGF) managed by an
GEF5 CEO Endorsement ESCO Moldova Project
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independent financial institution acting as risk-sharing partner. The funds which were to have been earmarked
for the PPP in the PIF will now instead be earmarked for the loan guarantee mechanism to be set up by a FI.
The recommended approach has the double advantage of giving access to project financing to energy service
providers as well as permitting a degree of leverage on the initial deposit (UNDP’s trust bank account) to be
negotiated at the stage of the partnership agreement with the selected FI. Additionally, the design of the loan
guarantee fund through a partnership agreement should secure the sustainability of the GEF investment even
after the end of the project, as the loan guarantee fund can continue to operate after the lifetime of the project.
2. Project outputs are similar in terms of the number of EE projects to be carried out as in the PIF with an
estimate of 20 energy savings projects using an ESCO business model. However, the GHG emissions reduction
estimates have been reduced from the PIF as more detailed calculations have revealed that early estimates were
too optimistic. The PIF estimated a cumulative direct impact of 221 ktons CO2 over a 20 year lifetime. The
revised estimate for 20 projects is now 68 ktons cumulative GHG reductions. The difference comes from the
investment constraint through the Energy Performance Contract modality. Under the EPC modality only EE
projects having short payback periods (PBP) of less than four years can be financed on nascent ESCO markets,
mainly because of high interest rates, risk management issues and EPC incremental costs related to M&V as well
as the fact that the project is no longer intending to focus on industrial energy-efficiency projects.. Such a
limitation primarily comes from the lending institutions who will not be willing to lend to projects with payback
periods of longer than 4 years. The appropriate target should be a PBP shorter than 4 years. The commercial banks
currently provide loans to their best quality clients at an interest rate of 12%. Such a situation is not favorable to
loans longer than 4 years. That constraint has not been taken into consideration at the stage of the PIF preparation.
The abatement cost is now estimated to $21 per ton rather than $8 as estimated in the PIF. By taking into
consideration the post-project direct impacts (20 additional projects supported by the LGF after the current project
timeframe), the total GHG emissions reduction will be 101,6 ktons and, as a result, the related abatement cost will
be nearly 13$ per ton avoided.
A.1 National strategies and plans or reports and assessments under relevant conventions, if applicable, i.e.
NAPAS, NAPs, NBSAPs, national communications, TNAs, NCSAs, NIPs, PRSPs, NPFE, Biennial
Update Reports, etc
3. N/A. The consistency of this project with the 2nd National Communications to the UNFCCC and with the
commitment of the City of Chisinau under the EU Covenant of Mayors is explained in the PIF.
A.2 GEF focal area and/or fund(s) strategies, eligibility criteria and priorities
4. N/A
A.3 The GEF Agency’s comparative advantage
5. The project objective fully complies with the comparative advantages matrix approved by the GEF
Council, in which UNDP is assigned a leading role for technical assistance and capacity building on climate
change as is explained further in the PIF.. the project is fully aligned with UNDP-GEF’s signature program
on low emission climate resilient urban and transport infrastructure.
6. The UNDP Country Office in Moldova currently manages a portfolio of over $25 million USD of projects
(current annual delivery $7.5 million USD). Dedicated resources include a full time Assistant Resident
Representative on Energy and Environment strategically guiding project implementation, monitoring and
evaluation as well as an experienced full time Environment and Energy Associate who oversees project
implementation on a daily basis supported by a UNDP Moldova Finance and the Operations unit with 12 staff
members. In addition, UNDP Moldova is supported by the UNDP Bratislava Regional Service Centre which
is responsible for supporting over 30 climate change, renewable energy and energy-efficiency projects in the
region. UNDP has significant experience in working in other countries with projects which aim to use the
ESCO mechanism to promote additional investment in energy saving projects.
A.4 The baseline project and the problem that it seeks to address
7. In the baseline project, it is highly unlikely that energy service providers able to convert themselves into
ESCOs which would lead to significant additional investments in energy-efficiency from using an EPC business
GEF5 CEO Endorsement ESCO Moldova Project
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model. The existence of legal/regulatory, institutional, financing, and awareness barriers in Moldova in the
residential sector means that the EPC business model is unlikely to take off in the buildings sector in Moldova.
Energy Efficiency Law 142 which came into force in Moldova in 2011 defines both ESCOs and EPC but does
not on its own create the framework conditions which would enable the creation of ESCOs. There are no sub laws
or regulations which would specifically encourage the creation of ESCOs.
The buildings sector in Moldova consists predominantly of commercial, government, institutional
(kindergartens and schools) and residential (high-rise, multi-level and single unit) buildings. In 2011, the
estimated electricity use in the buildings sector amounted to about 1,547 GWh in the whole country. In the
Chisinau area the electricity consumption was estimated at 460 GWh for the same year. The same year the total
consumption for the heating load was 1,77 mil. Gcal or 2,06 TWh5 for the whole country and 1,41 mil. Gcal or
1,64 TWh for Chisinau area. In 2011 the total energy consumption of the building sector (electricity and heating
load) was equivalent to 3,6 TWh for the whole of Moldova and 2,13 TWh for the Chisinau area.
8.
9. The present growth in annual electricity consumption in buildings is expected to continue to significantly
contribute to GHG emissions (about 1 176 ktons in 2011) growth if nothing is done to improve energy efficiency.
The growth in energy consumption is brought about by an increase in new building constructions (about 1,4% in
2011), inefficient energy utilization and a continuously increasing stock of electrical appliances in new and
existing buildings. The total energy resource consumption by Moldovans and commercial sector (including
buildings) was 865 ktoe or 10 TWh in 2011 broken down between the energy consumed by the population (82%
or 8,23 TWh in 2011) and the energy consumed in commercial, office and institutional sectors (18% or 1,83 TWh
in 2011).
10. The CO2 emissions from the building sector (mainly from electricity use and heating) in 2011 in Moldova
were about 1,176 ktons. Considering that the growth in electricity and gas consumption in buildings is higher than
in other sectors, and the fact that the potential for improvements are substantial in this sector 6, there are strong
reasons to address the situation comprehensively through a UNDP project that will facilitate the installation of a
widespread application of EE technologies and practices in this sector.
11. The estimation of heat consumption was done based on the following assumptions:
1. In urban areas all inhabited areas of residential buildings are heated.
2. In rural areas only 50% of the inhabited areas of residential buildings are heated.
3. For the data presented in the Energy Balance in 2011 the following assumptions were made:
- only 10% of the natural gas consumption was used for heating;
- real consumption of wood log was increased 4 times compared to the official data presented by
National Bureau of Statistics (NBS);
- coal consumption for heating was calculated according to the NBS presented data for 2011.
12. In 2011, according to studies carried out in similar situations (weather and climate), an EE public building in
Moldova should have an average energy consumption for heating of 80-100 kWh/M2/yr. In the multi-level residential
sector the per unit index should be 60-75 kWh/M2/yr. Based on recent energy audit reports in Moldova the energy
consumption for heating can easily be improved: the current energy index for typical multi-level residential buildings
is 110-140 kWh/M2/yr (46% potential savings) and 140-180 kWh/M2/yr (44% potential savings) in office/institutional
buildings. About 90% (or 72 million M2) of the residential and institutional building stock needs a major retrofit with
the aim of implementing basic EE measures:
-
Wall insulation with mineral wool or EPS (thickness 100 mm), saving potential 50%;
Windows replacement, saving potential 14%
Implementation of individual heating substation for buildings connected to DHS, savings potential 10%
Implementation of new internal heating systems (two pipes, thermostats etc.), savings potential 15%.
13. Most of these multi-level buildings are in Chisinau area. Based on statistics the residential building stock in
Moldova and in Chisinau area is expected to increase respectively by 0,6 % and 2.5% a year during the upcoming 20
5
National Bureau of Statistics of Moldova, Energy Balance 2011. The NBS reported figure for the total energy consumption for heating load in the country (in
the residential, commercial and public buildings sectors) takes into consideration only the amount of energy delivered to the mentioned sectors’ buildings by
district heating companies. However, it must be taken into consideration that a big amount of energy resources for heating load is consumed in individual HOB
or homemade stoves, which is not registered in the statistics as a separate figure.
6
There is no reliable and comprehensive data on building average age.
GEF5 CEO Endorsement ESCO Moldova Project
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years. Although the current project deals with existing buildings (residential and institutional-public), EE
improvements and best practices in energy management should be replicated in most of the retrofitted and new
buildings.
14. This project aims to promote green urban development, as the potential for emission savings is largest in
the housing and public building sectors that are concentrated in urban centers. In Moldova, there is no city that
can currently be described as a “green city”. Urban development is primarily driven by economic considerations
and ‘greening’ considerations are yet to be taken appropriately into consideration, although the City of Chisinau
has recently signed up for the EU Covenant of Mayors. Most Moldovan cities are increasingly in decay and
have outmoded urban infrastructure, deteriorated communal housing, poor planning, and a lack of municipal
budget to meet the needs of growing urban populations. All these problems are present in the city of Chisinau.
Specifically, ensuring maintenance and communal services for multifamily housing remains a key priority for
all cities. The ESCO business model presents a sustainable solution for reducing greenhouse gas emissions
while at the same time reducing urban decay and promoting green development.
15. The key barriers that the project intends to address and remove are presented in the table below:
Table A4-1 Key Barriers
Barriers
Legal &
Regulatory
Barriers
Institutional
Barriers
Financial
Barriers
Barrier Explained
Means of Overcoming Barrier
There are legal and regulatory barriers to
implementing energy-efficiency measures: there are no
specific incentives; tariff regime does not
encourage less use; current urban planning does not
integrate EE goals. The new EE law will need additional
by-laws and regulations to be fully and effectively
implemented, in particular with regards to ESCOs.
The City of Chisinau has no clear institutional
division of responsibilities for green urban planning.
The new State Energy Efficiency Authority has no
particular focus on urban level measures.
The project will address these barriers as part of
the green urban development plan for Chisinau
focusing on municipal level incentives given that
national level work related to green tariffs,
energy-efficiency building standards and fuel
emission standards are already ongoing.
There is a lack of funds available for the green urban
development projects and EE projects that the City would
like to carry out, as local banks are reluctant to lend for EE
measures. The financial institutions have no specific focus
on ESCOs and are unfamiliar with the EPC
concept/modality.
Private Sector Private sector companies with a business model-based
Investment
around investing in energy efficiency are not yet
Barriers
established in current environment and there is no previous
experience with this model in Moldova.
Awareness & There is a lack of information available and/or
Knowledge
awareness concerning green cities and green urban
Barriers
development issues.
GEF5 CEO Endorsement ESCO Moldova Project
The project will work with the City of
Chisinau to develop a Green Urban
Development Plan (GUDP) where institutional
structures and roles will be better defined and a
Green Procurement Guide will be prepared and
widely distributed.
The project aims to overcome financial barriers by
converting existing energy service providers into
ESCOs. ESCOs will aim to work successfully
with the Energy-Efficiency Fund (EEF) on a
number of pilot/demo projects (20). The EEF is
committed to providing grants in accordance with
its new regulation. In addition, a resource
mobilization plan will be developed as a
component of the GUDP for the City of Chisinau.
Most importantly, the Project will set up the
appropriate financial mechanism with the aim of
providing private ESCOs with a loan guarantee
for financing the EE projects in the multi-storey
and public building sectors.
The project will aim at creating and
‘’operationalizing’’ at least 5 successful private
ESCOs to support the City of Chisinau with
investments in energy-efficiency and energy
performance contracting (EPC). The project
design team met with 10 Energy Service Providers
interested to embark on the ESCO business model.
Seminars and workshops will be held throughout
the project to increase awareness on green urban
development issues and improve knowledge on
the options available to develop green cities with
a particular focus on the ESCO business model
and replicating the green urban development plan
from Chisinau to at least one other town/city in
Moldova.
8
16. The concept of an ESCO (‘Energy Service Company’) is well-known in Western Europe and in the United
States and has been proven in many cases to work as an effective tool to reduce energy consumption and promote
energy-efficiency. It is an especially effective modality in the building sector, where many business opportunities
exist. The central idea of this project is therefore to introduce the ESCO concept in Moldova by creating an
effective market in Chisinau and lay the basis for a national up-take in all major urban centers in Moldova. Rather
than creating new ESCO(s) directly, the project aims to support the establishment of a loan guarantee mechanism
that will enable existing energy service providers (ESPs) in Moldova to finance energy savings projects using
energy performance contracting (EPC) modality and thereby convert themselves into ESCOs. The project design
team promotes using the acronym ESCO rather than ESP because the ESCO concept implies EE project cofinancing as well as an energy performance contract modality. In Moldova, as well as elsewhere, ESPs are
engineering or consulting firms providing equipment and technical service and then receivingthe full payment at
the EE project commissioning. In other words, the ESCO takes a double risk (financial and technical) while ESP
limits its risk to technical issues but not to financial issues. In the municipal sector, where the borrowing capacity
is restricted by regulations, the ESCO involvement allows to transfer the investment cost to the annual budget of
operations. By doing so, the municipal decision-makers can use the investment budget line for larger projects than
simply improving the insulation in roofs and walls. Most importantly, however, such a business model provides
a guarantee of performance all over the project payback period and this guarantee should leverage additional
investments. For the reasons listed ESCO involvement in the municipal sector as opposed to the traditional energy
service provider approach is strongly justified.
Business As Usual Scenario
17. Moldova is not starting from scratch in developing an energy-efficiency project financing instrument. The EU
Delegation in Moldova has been supporting the Government of Moldova to reform the energy sector and the
Energy Efficiency Fund (www.fee.md), established in June 2012. A total of €42.4 million has been allocated
during the period 2011-2014 for the energy sector and to facilitate technical improvements related to the operation
of the EEF. More than half of this direct budget aims to support EE investments through the Energy Efficiency
Fund. The EBRD has made energy efficiency a top priority in Moldova through the Moldovan Sustainable Energy
Financing Facility (MOSEFF) which was established in 2009 (www.moseff.org). Other donors are also providing
financial support through credit lines for EE investments in Moldova. However, in the business as usual scenario,
available financing facilities would be unsuitable to ESCOs as commercial banks, who are managing the
MOSEFF, ask for significant guarantees as collateral, hardly convenient to Energy Service Providers due to their
lack of assets. As a result, the ESCO business model will never take off in the absence of the proposed financial
mechanism (LGF) because energy service providers will not be able to easily finance energy savings projects and
will be restricted to implementing projects where the client pays for the investment cost (equipment and services)
at the project commissioning. The municipal sector already uses the investment facilities made available by a few
international financing institutions (e.g. EBRD) for infrastructure projects and public building major retrofitting
projects, including EE components. These projects are capital-intensive and fit in with the objective and interest
of international financing institutions while small EE projects are not attractive because of the high transaction
costs related to energy audits, project assessment, analysis, and follow-up. For the time being, ESPs core business
is related to EE components of big projects financed by the international institutions for which they got the full
payment at the commissioning. In the absence of the proposed financial mechanism, ESPs will go on with their
current core business and use their working capital to support short term investment (wedge funding over a few
months), not on a long-term time horizon as exists with EPC modality.
18. Under the business as usual scenario, the City of Chisinau will be required to finance upfront the energy
efficiency investments because the capacity of the City to borrow is quite limited and the city budget is not
adequate for the scale of investments that are require. Such a situation where the City cannot easily finance energy
savings projects and has very limited capital of its own can last for decades and as a result, there are no substantive
activities or investments in EE projects.
19. In addition it is not easy for the City of Chisinau to get co-financing from the EEF because by regulation,
the EEF is not allowed to provide project financing if the project beneficiary is not in a position to invest
upfront at least 20% of the whole investment cost. Unfortunately, in many cases the City of Chisinau is not able
to provide the 20% co-financing that is required. At the end of 2013 the design team noted that the EEF had not
signed a single co-financing agreement with the municipality of Chisinau, despite being in operation for over 18
months. Within the UNDP project framework the borrower is the private sector (ESCO) which agreesin
principle to invest 20% of the EE project costs at the start of the project through the EPC modality. The total
investment cost includes detailed EE project design, equipment supply, installation and supervision, monitoring
GEF5 CEO Endorsement ESCO Moldova Project
9
and verification (M&V), training, profit and financing cost. The ESP will finance costs related to M&V (1%),
Energy end-users training cost (lump sum), and profit (15%). This constitutes approximately 20% of the
investment cost before the financing cost.
The EEF indicated its willingness (letter of Commitment) to co-finance investment in EE projects up to 1 million
dollars. Therefore, using a loan guarantee fund is likely to be the key to unlocking the ability of the City of
Chisinau to work with energy service providers (now ESCOs) and the EEF in order to finance energy savings
projects.
A.5 Incremental /Additional cost reasoning:
20. As further elaborated in Section 1 (Situation Analysis) of the project document, the government of Moldova
has already undertaken several regulatory measures to advance the EE improvements in the building sector. This
includes EE Law 142, secondary regulations in regards to Energy Performance Contracts, ESCO regulation and
the framework for implementing the reliable Monitoring and Verification systems. EE Law 142 is the linchpin of
the legal framework, dealing with 24 conditions to promote ESCO involvement.
21. Key points are summarized as follows:
(1) Energy service companies can provide energy services and energy performance contracts if the contract
stipulates:
a) Primary energy consumption before the energy performance contract is signed;
b) The energy savings guaranteed and procedures for achieving them;
c) Arrangements for financing the EE project;
d) The recovery of investments made by the ESCO or, where appropriate, by third parties.
(2) Energy distributors, distribution systems operators and energy suppliers will not undertake any activity that
would hinder the development of the energy services market and make other energy efficiency improvement
measures.
(3) Energy distributors, distribution systems operators, and energy suppliers are obliged by law to provide,
directly and / or indirectly through other providers of energy services upon request, energy services to final
consumers at competitive prices, to perform competitively and independently priced energy audits and / or
measures to improve energy efficiency and promote these audits and measures.
22. In regard to ESCOs development, the Government Decision intends to promote awareness activities and
provide information about the establishment of the appropriate legal and institutional framework through activities
such as publishing articles and brochures on energy services, organizing training for energy managers in the
industrial sector, the introduction and explanation of the management system – ISO 50001, organizing courses on
the optimization of steam systems, energy auditors, inspectors energy, energy savings evaluators, etc.
23. In other words, the table is set for further development towards EE investments. However, the private sector,
namely the Energy Service Providers and Equipment Suppliers, do not yet implement EE projects by using the
energy performance contract (EPC) modality because they cannot support EE investment with their own working
capital. In addition, because of the demanding conditions in regard to collateral, EE project financing is not
available in practice to the private sector. The Incremental and Cost reasoning makes the proposed project very
attractive. In fact, the government has already invested effort, time and money to set up the required framework.
As a rule the development of the basic legal/regulatory framework has a significant incremental cost that the
proposed project does not need to assume because the work is already done.
24. The proposed project is designed to keep the technical assistance incremental cost relatively low. The
technical assistance budget provision (national and international) represents 27% of the total GEF funding. The
remaining GEF 73% of funding ($900,000), is granted for establishing a sustainable financial mechanism in the
form of a loan guarantee fund. In order to make up for the GEF budget dedicated to TA, the UNDP CO has
managed to agree an additional in-cash contribution of $125,000 from the City of Chisinau to cover the cost of
40 energy audits7 at the very earliest stage of the project implementation. From these 40 energy audits, it is
estimated that at least 20 energy savings projects will get implemented using the ESCO business model by the
ESPs that the project has helped convert into ESCOs. This is a significant support to the project implementation
as energy audit reports are a basic requirement to proceed with the selection of the most attractive EE projects. It
is imporant to mention that the primary co-financers are the City of Chisinau($6.425 million) and the EEF ($1
million). The private sector will provide co-fiancing of approximatively 20% of the investment before dept7
At this stage the project design team cannot rule on the final number of EA because it depends of the size of the facility. An average cost of
3,000$ per audit is a realistic estimate for 40 EA.
GEF5 CEO Endorsement ESCO Moldova Project
10
financing cost. Consequently, the commercial bank providing a loan (80%) to ESCO is not a co-financer since
the bank will be reimbursed by the ESCO. Similarly, the ESCO will be repaid by the municipality in accordance
with the EPC modality within the co-financing commitment ($6.425 million).
25. The Loan Guarantee Fund (LGF) will continue to be operated by the financial institution as a mechanism to
enable EPC projects after the current project timeframe.
26. The Energy-Efficiency Fund has indicated that at least $1 million of co-financing will be made available. The
City of Chisinau is committed to investing $6.425 million8 from the operating budget spread out over a period of
approximately 5 to 10 years, depending of the EE projects PBP. As a result, the in-cash co-financing ratio is nearly
6:1 on the GEF funding.
Component-based Incremental Cost Reasoning
Component 1 Outcome: Green Urban Development Plan (GUDP) Adopted by City of Chisinau
27. The proposed project invests $51,500 in technical assistance for developing the Green Urban Development
Plan.
28. Component 1 focuses on developing the green urban development plan for Chisinau buildings on the existing
Urban Development Plan (UDP) in order to add a “green focus” and to place special emphasis on energy efficiency
investments in the building sector. Component 1 is important as it will help define: i) the specific areas in which
the municipal ESCO will invest; ii) a strategy to finance the necessary investments to achieve the emissions
reduction targets established by the City; iii) the development of a ‘Green Procurement Guide,’ whose adoption
will ensure that all public tenders meet minimum standards of environmental integrity which includes promoting
and encouraging investments in energy-efficiency, and iv) to provide guidelines to other major municipality to
implement the same green strategy towards their urban development objectives. The Green Procurement Guide
will be prepared with the aim to be readily transferred to other towns and cities of Moldova.
29. Tracking the cost-effectiveness of green measures is not standard practice because the impact is spread out
over the very long run. The GUDP will deliver significant health, economic and environmental benefits without
compromising affordability which is a challenge which this project aims to meet. In accordance with the project
objective, the incremental cost reasoning must focus on investment vs. energy and money savings from the Green
Urban Plan implementation through energy-efficiency measures in the building sector. It is expected that the
GUDP will result, at the least, in a tangible investment of $1 million by the City of Chisinau over the upcoming
4 years9. If the EE projects cost breakdown structure is similar to EE projects implemented through the LGF, the
project design team estimates that at least 5 EE projects will be carried out as a result of the GUDP. The success
of the GUDP needs to be measured to the extent that it leads to real and tangible investments as committed.
Component 2 Outcome: ESCO Business Model in Moldova is operational
30. The project will invest $150,700 in TA for training and creating the enabling environment to ESCO
development. Component 2 is the core TA component of the proposed project. Component 2 aims at strengthening
the capacity of Energy Service Providers in order to get involved as ESCOs, and creating EE project opportunities.
As a result of Component 2 a series of 20 EE projects will be implemented in the Chisinau area through the EPC
modality. Component 2 is the most costly component in term of technical assistance. As a result, the project will
help at least 5 existing Energy Services Providers to shift their business concern towards the ESCO business
model and implement 20 EE projects, including training of ESP staff members (20), bank credit officers (3 to 5
financial institutions), and building managers (at least 20). The budget provision allocated to that component will
have a major impact on the whole project objective.
Component 3 Outcome: Financial Mechanism and Financial Support available to ESCOs
31. Although the budget provision for Component 3 is seemingly large with $959,550 allocated, the TA
component account for only $59,550. The majority of the funding under this component ($900,000) is allocated
to the loan guarantee mechanism which will be provided to a selected financial institution in accordance with
UNDP rules and procedures. Under the Component 3, the project will provide the needed international TA to set
up the required long-term partnership agreement with the selected FI. The success of the partnership agreement
will be measured by the negotiation of the multiplier factor on the GEF/UNDP trust bank account ($900,000).
8
Letter of commitment: EPC repayment: $5 million; Energy Audit $125,000; Various EE project in the building sector ($1 million)in line
with the Green Urban development Plan.
9
Letter of Commitment Prodoc, Appendix 8
GEF5 CEO Endorsement ESCO Moldova Project
11
The expected EEF’s co-financing is $1 million as project-based subsidies for supporting the implementation of
20 EE projects in order to shorten the payback period under 4 years.
Component 4 Outcome: EPC Projects Replicated in Other Municipalities and Information Disseminated
32. The budget provision for Component 4 is estimated to be $66,250. Cost of MTR and Final evaluation
are included in the budget. In practice, the budget provision for drafting 10 Case Studies, holding
information dissemination workshops (2), drafting a final project report, and the small-scale replication in
another city is estimated at $10,000. The Project Manager will intensively lead and carry out those
activities.
A.7 Risks, including climate change, potential social and environmental risks that might prevent the
project objectives from being achieved, and measures that address these risks:
33. To be successful, the project requires continuing commitment and full engagement of the municipal
(Chisinau), private (ESCOs) and financial institutions (Commercial Banks and the EEF) to work collaboratively
to implement the Green Urban Development Plan in the building sector. During the project design stage, UNDP
met with high level decision makers in the most important financial institutions in Moldova including the EBRD,
with many Energy Service Providers (private), and the City of Chisinau. Because of the benefits of the financial
mechanism (LGF), which will enable them to disburse loans more easily and with lower risks, and the quality of
the project beneficiary (Chisinau), most banks established in Moldova confirmed their interest to embark on the
project and provide the needed project financing to ESCOs but expressed some concerns whether under normal
conditions energy service providers will be able to provide the necessary guarantees in order to secure the
financing required. Banks will make their decision based on the detailed design of the financial mechanism and
the related regulation and on an evaluation of project risk. The Project will give the highest priority to jointly draft
the LGF regulation10 in coordination with the selected partners, i.e. financial institution(s) and the Energy
Efficiency Fund11. The failure of obtaining the support of financial institutions is consequently considered as the
main project risk. However, due to the fact that discussions have already been held with these financial institutions
who indicated their interest in loan guarantee mechanism, this risk is expected to be moderate. Other project risks
are presented in the table below:
Table A7-1 Project Risks
#
Description
Type
1.
2.
Impact &
Probability
(NOTE)
Lack of interPolitical &
Targets
institutional
Organizational requiring
ownership and
institutional coco-operation in
operational and
implementing the
cross-sectoral
project activities.
ownership not
met.
P=2
I=4
Lack of interest Strategic
Low level of EE
of the managers
compliance and
of the
quality
construction
implementation
companies and
P=3
building
I=3
professionals to
attend and apply
Countermeasures / Mgt response
Owner
Fostering the co-operation by early engagement of the Project
key stakeholders and using the Project Board Board
(Steering Committee) as a complementary platform
for raising issues requiring institutional co-operation.
Furthermore, the institutional ownership and cooperation is further fostered by project’s training and
awareness raising activities.
The roll-out of the ESCO business model is the key PMU
mitigation tool for: 1) involving practitioners at the and
stage of the tailed training program included into the EEA.
project Component; 2) having a constant quality
control by ESCOs and a double check by the PMU
and EEA.
The project training component starts with the
training needs assessment to identify the main drivers
10
Prodoc-Appendix 6 set out the preliminary draft regulation.
It is important to mention that by regulation the EEF is not allowed to provide a grant and a loan or a guarantee to the same EE project.
Such a regulation rules out the EEF as LGF manager because its involvement as co-financer (grant scheme) is crucial to the ESCO Moldova
project. On the other hand, the project design team still recommends transferring the LGF ownership to the EEF at the end of the project
timeframe because ownership and LGF management are different. The selected partner financial institution will continue to make the
decisions and provide the guarantee regardless of who is the owner of the Trust Account (LGF), i.e. UNDP up to the end of the project and the
EEF (on behalf of Government of Moldova) once the project is finished.
11
GEF5 CEO Endorsement ESCO Moldova Project
12
in practice the
training provided
by the project.
.
3.
Low Awareness
and
understanding of
the Green Urban
Development
Plan, amongst
decision makers
and relevant
stakeholders
4.
Inadequate
Operational
and/or noncapacitated
human resources
and/or lack of
financial
resources to
successfully
implement the
project and
support the
mainstreaming of
its results.
5.
The projected
co-financing
does not
materialize
6.
Lack of adequate
and reliable
market data to
facilitate the
monitoring of
project impact
and planning of
further policy
measures.
7.
Inadequate local
availability of
certified, costeffective
construction
materials and EE
GEF5 CEO Endorsement ESCO Moldova Project
The risk is
related to the
Green
Development
Plan. If the
municipality
does not go
further in term
of GUDP
approval and
implementation,
EE project
initiatives could
be slowed
down.
P=1
I =5
Project not
meeting the
stated targets.
P=3
I =5
guiding the work of practitioners, to test the different
training approaches and to demonstrate the common
and sustainable benefits of the training sessions,
thereby gradually raising the interest among the
broader group and developing the training up to the
point. To this end, the training of trainers approach is
promoted.
By drafting the Green Urban Development Plan and City of
the Green Procurement Plan, the project supports the Chisinau
municipality of Chisinau to enforce key regulations
and investments to advance EE measure
implementations in the building sector owned and
operated by the municipality. Such an approach and a
few Case Studies drafted should raise the interest of
the private sector as well as other major municipalities
in Moldova
Open tendering and thorough screening of the
candidates (Project Manager, Project Administrative
Assistant, International and National Experts, and
ESCOs) applying for an assignment of a contract will
mitigate that risk.
Identification and securing of additional funds to
support project activities.
UNDP procurement procedures applied in a
pragmatic and efficient way (within the allowed
limits) to meet the project support requirements in a
timely fashion and to ensure the highest professional
level of the support provided.
Adequate training of the key project staff and their
exposure to international experiences and lessons
learnt.
Project not
In addition to co-financing letters which have been
meeting the
obtained,
re-confirming
the
co-financing
stated targets.
commitments in-prior starting the project
P=2
implementation. Finding other municipalties in
I =5
Moldova to co-finance the project.
Inadequate
Close cooperation with the EEA, local construction
information for companies, producers and sellers of different
monitoring
construction materials and equipment, industry
project impact associations and Government entities collecting
and for planning related statistical information.
new policy
The implementation of a tight Monitoring and
measures
Verification (M&V) protocol is a key tool to get
P=4
reliable data and proceed with the constant follow-up
I=3
of the EE projects performance. The M&V is a
mandatory requirement under the EPC modality.
The PMU and EEA will cross-check the reliability of
the data by comparing the results from different
sources and approaches (e.g. top-down / bottom-up).
Lower
As a result of the ongoing efforts of the government
compliance and to improve energy efficiency of buildings in a few
therefore lower facilities in Chisinau area, a relatively good selection
impact on
of energy efficient building materials and equipment
energy savings (such as EE windows, boilers, etc..,) are already
P=2
available in the market. According to the feedback
UNDP
UNDP
ESCOs
PMU
and EEA
ESCOs
and
PMU
13
equipment to
meet the revised
energy efficiency
targets.
I=4
from the local stakeholder consultations, the lack of
availability of national certified construction
materials is not going to present a major bottleneck to
improving the energy efficiency of buildings.
As with the previous risk, however, the situation will
be monitored and further studied during the project
implementation, including random tests of some
construction materials used in order to verify their
compliance with the stated performance.
8
Lack of financing
The project
The project made a strategic decision by strongly
for technical
does not meet
involving Energy Service Providers, candidate
assistance
targets in term ESCOs, which are knowledgeable and technically
of outputs
skilled to deal with EE measures implementation. It is
P=2
important to mention that the EE projects
I=4
implementation relies on ESP-ESCOs, not on the
PMU. However, Outcome 1 related to the Green
Urban Development Plan Development (GUDP)
needs additional TA to be implemented. The
municipality of Chisinau agreed (letter of
commitment) to invest 1.3 million dollars in the
GUDP implementation (2014-2018), but the lack of
capacity available at the municipality level could
jeopardized the effective development of activities
that will be recommended in the GUDP. In order to
mitigate that risk, the project includes Activity 1.2.4
related to fund-raising and resource mobilization
through the donor community with the aim of
provisioning the needed TA for implementing the
GUDP.
9
EnergyThe energy
The energy supply cost is out of the control of energy
efficiency
supply
end-users. EE measures in the building sector will
sensitivity to
(electricity and mainly deal with the heating load (air and water), and
variation in
gas) cost
heating demand is rather price-inelastic. The
energy price
negative impact inelasticity comes from characteristics of energy as a
on EE
necessity in a cold country. The risk of a negative
investment and impact on EE investments is rated LOW because the
costenergy supply cost is currently quite low in Moldova.
effectiveness.
EE projects carried out in accordance with the EPC
modality are not sensitive to variation in energy price
P=1
because the per unit money saving (resulting of per
I =1
unit energy saving) is agreed by contract (EPC) and
remains unchanged until the end of the PBP.
NOTE: Probability on a scale from 1 (low) to 5 (high) / Impact on a scale from 1 (low) to 5 (high)
PMU
and
UNDP
CO
ESCO
A.8 Coordination with other relevant GEF financed initiatives
34. The project will co-ordinate with other GEF projects in Moldova and in particular the ongoing UNIDO GEF
Energy-Efficiency for the Industrial Sector in Moldova project through sharing of information and organization
of joint events. In this regard, at the regional level the project will share information with at least two GEF
projects, namely “LGGE Improving Energy Efficiency in Low-Income Households and Regions of Romania’’;
and Improving Energy Efficiency in Residential Buildings in Belarus”, currently implemented, and “Belarus
Green Cities: Supporting Green Urban Development in Small and Medium Sized Cities in Belarus”. In Ukraine,
the Project should share useful information with the new UNDP GEF project namely “Removing Barriers to
Increase Investment in Energy-Efficiency in Public Buildings (UNDP).” The basic document for learning from
other projects is by sharing the annual progress reports and case studies and in particular sharing experiences in
relation to the operation and success of the loan guarantee fund
B. ADDITIONAL INFORMATION NOT ADDRESSED AT PIF STAGE:
B.1 Describe how the stakeholders will be engaged in project implementation.
GEF5 CEO Endorsement ESCO Moldova Project
14
35. The roles and responsibilities of central and local public authorities and other players in the field of energy
efficiency are summarized in the Table below:
Table B1-1
EE institutional framework at the national and local level
Public authorities
1
Ministry of Environment
2
Ministry of Economy
3
Energy Efficiency Agency
4
Energy Efficiency Fund (NOTE 1)
5
Ministry of Regional Development and
Constructions
6.
Local Public Authorities, i.e. District
Councils, two Municipal Councils
(Chisinau12 and Balti) and other local
councils
including
from
the
Administrative-Territorial
Unit
Gagauzia
Responsibilities – Roles and Purpose
The Ministry of Environment (MoENV) is a key stakeholder since the
MoENV is responsible for the climate change policy and programs, national
compliance with the UNFCCC and Kyoto Protocol commitments and for
reaching the GHG emissions reduction targets. MoENV is also the GEF
and UNFCCC national focal point steering the process of national
adaptation and mitigation and has therefore been chosen by the Government
of Moldova as the primary Implementing Partner for the project.
Ministry of Economy is the central pubic authority empowered to set the
state policy priorities in the area of energy efficiency and the main activity
directions in the field of energy efficiency for public authorities. The MoE
drafted the new regulation related to ESCO development and Energy
Performance Contract and in the framework of the present project will
further contribute to development of the relevant by-laws and regulations
with regards to ESCO operation.
The EEA, as an implementation agency, has the responsibility to promote
the ESCO mechanism in Moldova. The EEA has been identified as the key
technical partner to advance the ESCO Moldova project. The EEA will
intensively support the UNDP project in terms of training deliveries,
feasibility studies and case studies.
The main Government body involved in EE investment established by
Government Decision No. 401 of 12 June 2012.
Independent government body established with the aim of attracting and
managing financial resources to finance and implement energy efficiency
and renewable energy projects, in accordance with strategies and programs
developed by the Government. The EEF is a key partner and co-financer
within the ESCO Moldova project through the provision of grants to ESCOs
with the aim of shortening the pay-back period of energy efficiency
investments.
MRDC’s mission is to develop, promote and implement state policy on
regional development, land use planning, architecture, design and
construction. The Ministry has the function to develop the legal and
regulatory framework necessary to achieve the objectives in the fields of
activity bringing it closer to the European standards, especially standards
related to EPBD. The Ministry coordinates the implementation of
sustainable development principles in urban planning design.
Local Public Authorities responsible for the promotion and implementation
of state policy in the field of energy efficiency at local level. These LPAs
shall appoint an energy manager, aiming at monitoring the implementation
of Local Energy Efficiency Programs (LEEPs – three-year programming
document) and Local Energy Efficiency Action Plans (annual EE planning
document).
The Chisinau Municipality, the main project beneficiary and client, is
responsible for promotion and implementation of energy efficiency policy
and climate change mitigation efforts at the local level leading to reduction
of GHG emissions.
B.2 Describe the socioeconomic benefits to be delivered by the Project at the national and local levels,
including consideration of gender dimensions, and how these will support the achievement of global
environment benefits (GEF Trust Fund/NPIF) or adaptation benefits (LDCF/SCCF):
36.
12Chisinău
The project will aim to achieve the following socio-economic benefits:
includes 35 localities: 1 municipality (with 5 sectors), 6 towns (which include 2 villages), 12 communes (including 14 villages).
GEF5 CEO Endorsement ESCO Moldova Project
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(1) Creating new “green” jobs: The project will promote wide development of the EE technologies and best
practices in energy management, leading to the creation of new jobs for designing and monitoring EE projects
implemented in accordance with the EPC modality. At least two staff members per ESCO must be hired to carry
out the M&V and financial analysis, creating 10 new jobs, in addition to other technology-oriented job
developments difficult to estimate at this stage. Additionally, the project will strengthen or develop a new field
of expertise in project financing and M&V of EE impacts in the building sector.
(2) Improving country’s energy security: With respect to energy used by the country, Moldova currently is heavily
dependent on fossil fuels and natural gas exported from Russia. Increased utilization of passive and active EE
measures and technologies will help to alleviate this dependence on natural gas from Russia.
(3) Economic impacts- Lowering household energy bill and increasing comfort: Energy efficiency is the easiest,
most affordable and most cost effective way for families to use energy more wisely and save money on household
expenses. Power bills can make up a significant percentage of household expenditure and energy poverty is a
significant issue in countries like Moldova. As a result, some households have difficulty paying to heat their
homes to a comfortable level. Inadequately heated homes can make occupants more susceptible to a range of
health problems. At the end of the payback period the money savings are transferred to the building (or apartment)
owner. If all identified EE measures are implemented the potential energy savings are estimated as being 46%. In
the public buildings the energy savings estimated at 44% will be transferred to the public authority at the end of
the payback period and could be used for implementing additional EE measures or/and improving the upkeep of
the building and equipment.
(4) The project will illustrate that Moldova can develop and implement its own approach for a better green
development in line with EU guidelines and requirements. Local developers, engineers, and consultants can
profitably participate in this endeavor.
(5) It should be noted that existing level of communities’ involvement in decision-making with regard to EE is
still relatively low in Moldova. The GEF Project will facilitate the diaologue between specialists, decision-makers
and enenrgy end-users through educational material (Case Studies) and information dissemination workshops.
The affected communities in the residential sector will be involved in a decision-making process regarding
demonstration projects. They will also be involved in providing input to the secondary legislation and technical
standards, the EE energy strategy for a broad and efficient replication of 20 demonrtrations projects in other major
cities in Moldova. At the stage of EE projects screening, the PMU and the city of Chisinau will organize and hold
round-tables where local communities will be also invited in discussions on new energy performance contracting
modality in term of role and responsibility of EE project beneficiaries.
B.3 Explain how cost-effectiveness is reflected in the project design:
37. The project aims to leverage the GEF funding ($1.3M) to $7.6 million dollars, a ratio of 6:1. This result can
be achieved because 73% of the GEF funding is investment in the Loan Guarantee Fund (UNDP’s Trust account:
$900,000). The ESCO investment would generate an internal rate of return of 14% and an average return on
investments up to 34%, both indicators proving that this can be an attractive business in Moldova assuming
commercial bank interests rates of around 12%. An alternative way (Alternate 1) should be to provide Chisinau
with a grant funding scheme corresponding to the same amount for implementing EE projects in the building
sector. In such a situation the ESCOs business model cannot take off because of the lack of debt or equity financing
capacity and as a result, the whole project will not make sense although the ESPs will make good and non-risky
business (BAU) by recovering its investment at the project commissioning. Importantly, the municipal cofinancing commitment ($6.425 million) can come to reality only through the EPC modality because the cofinancing (from the operating budget line allocated to energy supply) is spread on the full PBP to reimburse the
EE investment. In other words, without the financial mechanism, the leverage effect on the GEF funding will be
about 1.5:1 as a result of the EEF co-financing (up to 50% of the investment cost). There is another alternate way
(Alternate 2) to proceed: the GEF grant funding (if any) can be linked to major retrofitting projects initiative in
public buildings through the Moldovan Sustainable Energy Financing Facility (MOSEFF) set up by the EBRD.
Because of the approval delay for making the financial arrangement and negotiating the loan with the MOSEFF
and a commercial bank, the municipality will not be in a position to launch such an EE investment program before
3 years and maybe longer, that is to say nearly out of the current project time horizon. As per alternate 2, the EPC
modality cannot be applied because the structure of the project financing (the borrower is the municipality). On
GEF5 CEO Endorsement ESCO Moldova Project
16
the other hand, although the ESCO business model does not work, Alternate 2 should have an interesting leverage
effect of 5:1on the GEF funding13.
38. At this stage of the project design and accordingly with agreement with the municipality, the final selection
of EE projects (sites and buildings) will be based on the result of the energy audits reports. Through its cofinancing, the municipality agreed to carry out 40 energy audits in target buildings, both residential multi-storey
and public. The main criteria for selecting EE projects are: i) the payback period based on the ratio savings on
cost (as short as possible); ii) the investment cost; and iii) the easiness and reliability of EE measures impact.
39. The UNDP project intends to implement 15 EE projects in the residential sector and 5 projects in public
buildings using the ESCO modality. Such a strategy is based on criteria mentioned above; residential sector focus
is due to a less intensive -average investment cost than in public buildings. The breakdown between residential
and public buildings (currently proposed as 15 residential EE projects and 5 public sector EE projects) will need
to be revisited at the start of the project and thefinal decision will need to be based on Energy Efficiency Agency
reports concerning the most attractive EE investment opportunities.
40. Based on available data and a survey of some typical buildings, details related to EE projects are provided
in tables below. The EE measures considered at this stage are the following:
-
Roof insulation (EPS 100 mm)
Windows replacement
Walls insulation (EPS 100 mm)
Implementation of efficient heating substation (public buildings)
41. The list of EE measures to be implemented is not only related to projects related to the insulation of walls and
roofs. The target remains to reduce the energy consumption per sqm from 110-140 kWh/M2/yr to 60-75 kWh/M2/yr
in multi-level residential buildings and from 140-180 kWh/M2/yr to 80-100 kWh/M2/yr in public buildings. Those
targets are in accordance with the building energy index for similar buildings in similar climate conditions. GHG
emission reduction was estimated accordingly.
42. It is important to recall that the final decision about the selection of projects, technologies and EE measures
will be made when the energy audit reports will be submitted at the early stage of the project implementation. The
municipality of Chisinau has agreed to pay an amount of $125,000 to carry out 40 energy audits from which it is
expected that 20 investment projects will be selected. In accordance with the methodology, the municipality will
make the final selection of 20 buildings (sites) by taking into consideration (among others) the payback period,
the energy savings and greenhouse gas emission reductions. Some EE measures are more cost-effective than
others and the municipality jointly with the PMU and ESCOs, will make the selection in a way that best suits to
EPC modality.
13
A major retrofitting project requires an investment of about $5 million.
GEF5 CEO Endorsement ESCO Moldova Project
17
Table B3-2 Typical multi-story building built in the 60s : 15 similar (bigger or smaller) EE projects should be implemented
Unit
Average
Area
Total
Average
Annual estimated
PBP
GHG
EE measure
impl.
sq.m or
cost
energy
ES
Euro
Costs
unit
Saving
with VAT
ratio
kWh
EUR
years tons CO2/
year
Roof insolation (EPS
100 mm)
Window replacements
Wall insolation (EPS
100 mm)
Implementation of
individual heating
substation
Total
MDL
/
sq.m
MDL
/
sq.m
MDL
/
sq.m
MDL
/ unit
500
372
10 000
4%
8 652
415
25,31
1,83
1 725
281
27 000
14%
30 282
1 452
18,86
6,39
580
1 239
41 000
50%
108 149
5 185
7,83
22,82
146 200
1
8 000
10%
14 708
705
11,71
3,10
161 791
7 757
20
34,14
86 000
Table B3-3 Typical public building built in the 80s: 5 similar (smaller or bigger) projects should be implemented
EE measure
Unit
Average
Area
Total
Average
Annual
PBP
impl.Cost
sq.m
cost
ES ratio
estimated ES
Euro
with VAT
or unit
kWh
EUR
years
Roof insolation (EPS
100 mm)
Window replacements
Wall insolation (EPS
100 mm)
Implementation of
heating substation
MD
L/
sq.
m
MD
L/
sq.
m
MD
L/
sq.
m
MD
L/
unit
TOTAL
GHG
tons
CO2/
year
5
00
1 789
51 000
11%
73 560
3 527
14,33
15,52
1 725
589
57 000
16%
106 996
5 130
11,19
22,58
5
80
2 633
86 000
36%
240 741
11 543
7,47
50,80
338 000
1
19 000
______
8%
33 704
______
1 616
______
11,82
_____
7,11
________
455 001
21 816
9,7
96,01
213 000
A. Direct Emission Reductions
43. By developing the Chisinau Green Urban Development Plan and implementing EE projects in accordance
with a new modality, namely the “Energy Performance Contract,” the project will have a significant impact on
the GHG emissions reduction. As part of this, the ESCO Moldova project will implement 20 EE projects in the
building sector over 4 years.
44. As a result of these activities during the project implementation period of 4 years, direct cumulative
greenhouse gas emission reductions totalling 68 ktons of CO2 equivalent will be achieved over the lifetime of the
investments of 20 years using the revised GEF methodology for calculating GHG benefits from energy-efficiency
projects. In the non-GEF case, the related energy needs would be satisfied by the DHS currently providing thermal
energy with a conversion factor of 0.211kton/MWh, based on the predominance of gas fired generation for heating
power supply.
The estimate is calculated based on the following formula and assumptions:
The estimate is calculated based on the following formula and assumptions:
GEF5 CEO Endorsement ESCO Moldova Project
18
CO2direct = E * L * C; where
• C – CO2 emission factor (DHS), i.e. 0.211tCO2-eq/MWh for DHS systems
• L – average useful lifetime of investments, i.e. 20 years; and
• E – annual thermal energy supply reduction: 14.6 GWh (or 292 000 MWh on 20 years)
CO2direct = 14 600 MWh* 20*0.211tCO2-eq/MWh = 68 KtCO2-eq
This leads to cumulative emissions reduction of 68 KtCO2-eq.
B. Direct Post-project Emissions Reduction
45. The project activities include providing assistance to the City of Chisinau in various aspects of EE building
projects through the implementation of EE measures. Such assistance could be on the conduct of feasibility
analyses and replication of building retrofitting design. Based on the Chisinau energy savings target of 20%
energy savings in the building sector, it is estimated that a number of additional EE retrofit projects will be
carried out by ESCOs provided that the payback periods are 3-4 years or less. These full-sized EPC projects
carried out over a period of 6 years after the ESCO MOLDOVA PROJECT completion will be impacted by the
GEF/UNDP activity. Such projects would potentially account for at least the same savings per EPC project than
the EPC demo projects implemented during the project timeframe. This translates to an annual (average) energy
savings of about 14.6 GWh during the period 2025-2038:
• C – CO2 emission factor, i.e. 0.211tCO2-eq/MWh for DHS
• L – time base considered: 2025-2038: 13 years;
• E – annual thermal energy supply reduction: 14.6 GWh (or 190 000 MWh on 13 years).
CO2post-direct = 14,600 MWh* 13*0.211tCO2-eq/MWh = 40 KtCO2-eq
This leads to cumulative emissions reduction of 40 KtCO2-eq.
C. Indirect Emission Reductions (bottom-up)
46. The ESCO MOLDOVA PROJECT helps create the enabling environment and launches a financial support
mechanism that will facilitate the widespread application of energy efficiency technologies, techniques and best
practices in the building sector of Moldova. The primary targets of the project are the municipal institutional and
residential buildings. The capacity development activities and the implementation of the ESCO business model
are expected to influence the relevant stakeholder entities in the promotion, support, design and installation,
financing, operation and maintenance of EE building (retrofits) projects.
47. The project will also involve interventions that will bring about the necessary institutional, regulatory and
financial policies and mechanisms that would enhance the promotion of the applicable and feasible building
energy management systems, including energy efficient building services systems, and encourage the target
groups in taking on such technologies, techniques and best practices.
48. The transformation of an additional 20% (Chisinau Municipal target: 70 000 M2 a year)) of municipal public
buildings from relatively high overall average BEI of 160 kWh/m2/yr to a benchmark BEI level (target) of 90
kWh/m2/yr (a number influenced and induced by the enabling environment established and ESCO business model
developed under the ESCO MOLDOVA PROJECT) is expected to bring additional savings in public/office
buildings to be EE efficient at a pace of 1% of the municipal building (institutional/office) stock per year from
2018 to 2038. As a result, additional cumulative energy savings should be 1.1 TWh14 and cumulative CO2
emissions avoidance of about 621 ktons (2018-2038) through EE retrofitting of 20% municipal institutional
buildings in Chisinau area.
49. The same calculation related to multi-level residential buildings owned and operated by Chisinau (1.1 million
M2) which should target a BEI of 67.5 kWh/m2/yr (rather than 125 kWh/M2/yr) will result in cumulative (20182038) energy savings of 0.133 TWh and cumulative CO2 emissions avoidance of about 73 ktons (2018-2038) in
accordance with the approved retrofitting target of 20% of multi-level residential buildings owned and operated
by Chisinau over the next 20 years.
50. Most of the indirect CO2 reduction can be attributed to the interventions that will carried out during the ESCO
Moldova project implementation period because of the enforcement of the GUDP, the establishment and
14
TWh: TeraWh or 1,000 GWh or 1,000,000 MWh
GEF5 CEO Endorsement ESCO Moldova Project
19
enforcement of EE building policies and financing mechanisms, market enhancement, and the successful
demonstration programs.
51. Assuming a project influence period of 20 years (2018-2038) and based on a “Bottom-up” approach, the
indirect CO2 emissions reductions amount to approximately700 ktons. Using a “Top-down” approach, the
potential CO2 emissions reductions during the period of project influence (2018-2038) should be adjusted to the
appropriate GEF Causality Factor (CF). In this case, the CF used was 0.4, resulting in 240 Ktons rather than 700
ktons.
C. DESCRIBE THE BUDGETED M&E PLAN:
The project will be monitored through the following M&E activities. The M&E budget is provided in the table
C1-1 below.
Project start:
52. A Project Inception Workshop will be held within the first 2 months of project start with those with assigned
roles in the project organization structure, UNDP country office and where appropriate/feasible regional technical
policy and program advisors as well as other stakeholders. The Inception Workshop is crucial to building
ownership for the project results and to plan the first year annual work plan.
53. The Inception Workshop should address a number of key issues including:
a) Assist all partners to fully understand and take ownership of the project. Detail the roles, support services and
complementary responsibilities of UNDP CO and RCU staff vis-a-vis the project team. Discuss the roles,
functions, and responsibilities within the project's decision-making structures, including reporting and
communication lines, and conflict resolution mechanisms. The Terms of Reference for project staff will be
discussed again, if needs be.
b) Based on the project results framework and the relevant GEF Tracking Tool if appropriate, the UNDP will
finalize the first annual work plan. Review and agree on the indicators, targets and their means of verification,
and recheck assumptions and risks.
c) Provide a detailed overview of reporting, monitoring and evaluation (M&E) requirements. The Monitoring
and Evaluation work plan and budget should be agreed and scheduled.
d) Plan and schedule Project Board meetings. Roles and responsibilities of all project organization structures
should be clarified and meetings planned. The first Steering Committee meeting should be held within the first 6
months following the inception workshop.
54. An Inception Workshop report is a key reference document and must be prepared and shared with participants
to formalize various agreements and plans decided during the meeting.
Quarterly

Progress made shall be monitored in the UNDP Enhanced Results Based Management Platform.
Based on the initial risk analysis submitted, the risk log shall be regularly updated in ATLAS. Risks become
critical when the impact and probability are high. Note that for UNDP GEF projects, all financial risks associated
with financial instruments such as the Loan Guarantee Fund (Trust Account) is automatically classified as critical
on the basis of its innovative nature (high impact and uncertainty due to no previous experience justifies
classification as critical).

Based on the information recorded in Atlas, a Project Progress Reports (PPR) can be generated in the
Executive Snapshot.

Other ATLAS logs can be used to monitor issues, lessons learned etc. The use of these functions is a key
indicator in the UNDP Executive Balanced Scorecard.

Annually
55. Annual Project Review/Project Implementation Reports (APR/PIR): This key report is prepared to monitor
progress made since project start and in particular for the previous reporting period (30 June to 1 July). The
APR/PIR combines both UNDP and GEF reporting requirements.



Progress made toward project objective and project outcomes – each with indicators, baseline data and endof-project targets (cumulative)
Project outputs delivered per project outcome (annual).
Lesson learned/good practice.
GEF5 CEO Endorsement ESCO Moldova Project
20




AWP and other expenditure reports
Risk and adaptive management
ATLAS QPR
Portfolio level indicators (i.e. GEF focal area tracking tools) are used by most focal areas on an
annual basis as well.
Periodic Monitoring through site visits
56. UNDP CO and the UNDP Bratislava Regional Centre will conduct visits to project sites based on the agreed
schedule in the project's Inception Report/Annual Work Plan to assess first hand project progress. Other members
of the Steering Committee may also join these visits. A Field Visit Report/BTOR will be prepared by the CO and
UNDP RCU and will be circulated no more than one month after the visit to the project team and the Project
Board members.
Mid-term of project cycle
57. The project will undergo an independent Mid-Term Review at the mid-point of project implementation after
the project has been under implementation for two full years. The Mid-Term Review will determine progress
being made toward the achievement of outcomes and will identifycorrective measures to undertake adaptive
management to improve the ability of the project to meet its objectives, as required. The mid-term review will
focus on the effectiveness, efficiency and timeliness of project implementation; will highlight issues requiring
decisions and actions; and will present initial lessons learned about project design, implementation and
management. Findings of this review will be incorporated as recommendations for enhanced implementation
during the final half of the project’s term. The organization, terms of reference and timing of the mid-term
evaluation will be decided after consultation between the parties to the project document. The Terms of Reference
for this Mid-term evaluation will be prepared by the UNDP CO based on guidance from the Regional Coordinating
Unit and UNDP-GEF. The management response and the evaluation will be uploaded to UNDP corporate systems.
The relevant GEF Focal Area Tracking Tools will also be completed during the mid-term evaluation cycle.
End of Project
58. An independent Final Evaluation will take place three months prior to the final Steering Committee meeting
and will be undertaken in accordance with UNDP and GEF guidance. The final evaluation will focus on the
delivery of the project’s results as initially planned (and as corrected after the mid-term evaluation, if any such
correction took place). The final evaluation will look at impact and sustainability of results, including the
contribution to capacity development and the achievement of global environmental benefits/goals. The Terms of
Reference for this evaluation will be prepared by the UNDP CO based on guidance from the Regional
Coordinating Unit and UNDP-GEF.
59. The Terminal Evaluation should also provide recommendations for follow-up activities and requires a
management response which should be uploaded to PIMS and to the UNDP Evaluation Office Evaluation
Resource Center (ERC). The relevant GEF Focal Area Tracking Tools will also be completed during the final
evaluation.
60. During the last three months, the project team will prepare the Project Terminal Report. This comprehensive
report will summarize the results achieved (objectives, outcomes, outputs), lessons learned, problems met and
areas where results may not have been achieved. It will also lay out recommendations for any further steps that
may need to be taken to ensure sustainability and replicability of the project’s results.
Learning and knowledge sharing
61. Results from the project will be disseminated within and beyond the project intervention zone through existing
information sharing networks and forums.
62. The project will identify and participate, as relevant and appropriate, in scientific, policy-based and/or any
other networks, which may be of benefit to project implementation though lessons learned. The project will
identify, analyze, and share lessons learned that might be beneficial in the design and implementation of similar
projects in the future. Finally, there will be a two-way flow of information between this project and other projects
of a similar focus.
Table C1-1 M&E workplan and budget
Type of M&E
Responsible Parties
activity
GEF5 CEO Endorsement ESCO Moldova Project
Budget US$
Time frame
21
Excluding project team
staff time
$1,000
Inception Workshop
and Report


Project Manager
UNDP CO, UNDP/GEF
Measurement of
Means of Verification
of project results

To be finalized in
Inception Phase and
Workshop



UNDP/GEF RTA/Project Manager
will oversee the hiring of specific
studies and institutions, and delegate
responsibilities to relevant team
members
Monitoring and Reporting consultant
Oversight by Project Manager
Project team
To be determined as part
of the Annual Work
Plan's preparation
Annually prior to
ARR/PIR and to the
definition of annual
work plans





Project manager and team
UNDP CO
UNDP RTA
UNDP EEG
Project manager and team
None
Annually
None
Mid-term Evaluation




$ 20,400
Final Evaluation




Project Terminal
Report








Project manager and team
UNDP CO
UNDP RCU
External Consultants (i.e. evaluation
team)
Project manager and team,
UNDP CO
UNDP RCU
External Consultants (i.e. evaluation
team)
Project manager and team
UNDP CO
local consultant
UNDP CO
Independent financial auditors
UNDP CO
UNDP RCU (as appropriate)
Government representatives
To be determined by
Project team and
UNDP CO
At the mid-point of
project
implementation.
Measurement of
Means of Verification
for Project Progress on
output and
implementation
ARR/PIR
Periodic status/
progress reports
Audit
Visits to field sites
TOTAL indicative COST
Excluding project team staff time and UNDP staff and travel
expenses, if needs be.
Within first two
months of project start
up
Start, mid and end of
project (during
evaluation cycle) and
annually when
required.
$ 22,000
At least three months
before the end of
project implementation
0
At least three months
before the end of the
project
$2,000 Annually
$8,000
none
Included into the
regional office fee.
US$ 51,400
PART III: APPROVAL/ENDORSEMENT BY GEF OPERATIONAL FOCAL POINT(S) AND GEF
AGENCY(IES)
GEF5 CEO Endorsement ESCO Moldova Project
22
A. RECORD OF ENDORSEMENT OF GEF OPERATIONAL FOCAL POINT(S) ON BEHALF OF THE
GOVERNMENT(S):): (Please attach the Operational Focal Point endorsement letter(s) with this form. For SGP,
use this OFP endorsement letter).
NAME
George Salaru
POSITION
Minister of Environment,
GEF OFP and Convention
Focal Point for UNFCCC
MINISTRY
MINISTRY OF
ENVIRONMENT OF
MOLDOVA
DATE(MM/dd/yyyy)
AUGUST 17, 2012
B. GEF AGENCY(IES) CERTIFICATION
This request has been prepared in accordance with GEF/LDCF/SCCF/NPIF policies and procedures and meets the
GEF/LDCF/SCCF/NPIF criteria for CEO endorsement/approval of project.
Agency
Coordinator,
Agency Name
Signature
Date
(Month, day, year)
July 18, 2014
Adriana Dinu
UNDP – GEF
Executive
Coordinator and
Director a.i.
GEF5 CEO Endorsement ESCO Moldova Project
Project
Contact
Person
John O’Brien
Regional
Technical
Advisor EITT
Telephone
Email Address
+421 259 337
413
[email protected]
23
ANNEX A: PROJECT RESULTS FRAMEWORK (either copy and paste here the framework from the Agency document, or provide reference to the page in the
project document where the framework could be found).
Project Results Framework
This project will contribute to achieving the following Country Programme Outcome as defined in CPD:
CP Outcome 3.2 – Low Emission and Resilient Development: Strengthened national policies and capacities enable climate and disaster resilient, low emission economic
development and sustainable consumption
Country Programme Outcome Indicator: Energy Intensity reduced by 7% till 2017 in comparison with 2010
Primary applicable Key Environment and Sustainable Development Key Result Area (same as that on the cover page, circle one): 1. Mainstreaming environment and
energy OR 2. Catalyzing environmental finance OR 3. Promote climate change adaptation OR 4. Expanding access to environmental and energy services for the poor.
Applicable GEF Strategic Objective and Program: Climate Change Objective 2: Promote market transformation for energy efficiency in industry and the building
sector
Applicable GEF Expected Outcomes: CC Objective 2: Sustainable financing and delivery mechanism established and operational
Indicator
Baseline
Targets
Source of verification
Risks and Assumptions
End of Project
Project Objective
The project objective
is to create a
functioning,
sustainable and
effective ESCO
market in Moldova, as
the basis for scaling
up mitigation efforts
in the whole
municipal building
sector in Chisinau and
Moldova in line with
the Green Urban
Development Plan
Number of EE
projects implemented
under the EPC
modality and loan
guarantee to ESCOs
Loan Guarantee Fund
is successfully
working
0
20 projects financed using EPC
modality
Project monitoring system
and reporting.
EE projects completion
reports
Number of ESCO
submitting proposals
–
–
–
Loan guarantees of at least $2.7
million USD have been signed
with the financial institution
managing the Loan Guarantee
Fund
–
Energy Service
Providers (ESPs) in
Moldova are
operating as ESCOs
-
Feasibility studies prove costeffectiveness of EE projects
Required investments are
forthcoming through the EEF and
the selected commercial bank.
Private investors (ESCOs) can get
access to project financing from
the financial institution and are in
a position to invest about 20 to
25% equity of the EE project
costs.
The Municipal Council is willing
to approve the Green Urban
Development Plan
At least 5 companies in
Moldova which previously
worked as ESPs now operate
as ESCOs (it could also be
new companies)
-
GEF5 CEO Endorsement ESCO Moldova Project
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Outcome 1:
Green Urban
Development Plan
Adopted by City of
Chisinau
Outcome 2:
ESCO Business
Model is operational
in Moldova
Energy savings and
Cumulative direct,
post direct and
indirect CO2
emissions reduction
from the building
sector
0
Cumulative (20 years) energy
saving of 295 GWh as a result of
20 demo projects (20
Cumulative (2014-2038)
Direct: 68 ktonsCO2
Post-project (2014-2038): 40
ktonsCO2
Indirect bottom-up (2018-2038):
240 kton CO2
Total: 381 ktonsCO2
Green Urban
Development Plan
(GUDP)
There is no green
urban development
plan but Chisinau
has already
approved the Urban
Development Plan
Chisinau Green Urban
Development Plan approved and
the Resource Mobilization Plan is
implemented..
The municipal Green
Procurement Plan
prepared
There is no Green
Public Procurement
guidelines enforced
in Chisinau
(i) ESPs shift toward
the ESCO business
model
(ii) municipal staff
members are capable
of implementing EPC
projects and evaluate
results
(iii) Financial
institutions are in a
position to evaluate
EPC projects and
ESCO proposal
ESCO business
model does not exist
in Moldova and
there are no
dedicated trainings
in the area for the
relevant
stakeholders
GUDP Report
Decision of the municipal
council
Sustained and consolidated political
support and commitment to promote
low-carbon development.
Public Green Procurement Plan
applied by Chisinau.
Report and decision
Key stakeholders understand the
benefits of the greening the policy
document and engage in
implementation.
The donor community is responding
and supports the GUDP
implementation.
3 target beneficiaries groups and 3
training sessions:
- At least 20 ESPs are trained on
the ESCO business model
- Public Building managers and
Maintenance Managers, at least 20
staff are trained on ESCO business
model
- Financial Institutions (5),
including the EEF are trained on
the ESCO business model.
Training session
evaluation reports;
Quality of ESCOs’
technical and financial
proposals;
FIs readiness to analyse
and approve (or reject)
loan and loan guarantee
request
GEF5 CEO Endorsement ESCO Moldova Project
ESCOs must agree to attend the
training sessions, no fee.
EEA agrees to intensively support the
project by providing key experts to
attend the training sessions and further
to serve as trainers in other
municipalities.
EEA and the municipality express
their willingness to work together
25
(i) Long-term
agreement between
the EEA, Chisinau
and PMU
Although the EEA is
active in the
building sector, the
EEA did not develop
any special
acquaintance with
the municipal sector
to advance EE in the
public and
residential building
sector owned and
operated by the
municipality.
9 EA have already
been carried out by
Chisinau
Framework Agreement jointly
signed by 3 parties
Framework Agreement;
EEA’s readiness to
provide effective, quality
and relevant TA.
40 Energy Audits carried out in
buildings owned and operated by
the municipality
Energy Audit Reports
The municipality includes a budget
provision in its annual budget to
outsource a series of 40 EA
Short-list of 20 EE
projects selected for
investment using
EPC contracting
modality
No EE projects are
identified yet
20 EE projects selected and
documented
Joint decision: Chisinau,
PMU and EEF
EE projects meeting the selection
criteria in term of cost, payback and
measurable savings
Steady stream of
payments by
Chisinau in line with
the EPC modality
There are no EE
projects using EPC
modality currently
under
implementation in
Moldova
20 EE projects are under
implementation using EPC
modality
Quarterly LGF activity
reports from the selected
financial institution.
Project financing available from the
financial institution and grants
provided by the EEF to shorten the
payback period.
Documented long-list
of EE projects
carried out
The municipality is in a position to
face its obligations in regard to EPC
Quarterly payments)
EE projects reach on target in term of
energy savings and timeliness to carry
out quality EE projects.
ESCO are in a position to provide the
expected co-financing
GEF5 CEO Endorsement ESCO Moldova Project
26
Outcome 3:
Financial Mechanism
is set up and
functional, providing
financing to ESCOs
Reliable and updated
data is readily
available in regard to
actual ESCO
Moldova progress
UNDP BAU M&E
guidelines
M&E plan drafted and
implemented within 3 months after
the project start-up.
M&E Plan
Quarterly and Annual
progress reports
The UNDP project monitoring
reporting systems and template are
appropriate for the purpose of the
current project. If needs be the UNDP
CO will provide guidelines and
guidance to this end
Loan Guarantee Fund
(LGF) Regulation
and Operational
Guidelines
EE project loan
guarantee scheme is
already available in
its draft version
LGF regulation enforced
Financial Framework
Agreement between
the Project (PMU),
the municipality, and
the Energy Efficiency
Fund (EEF):
- Number of projects
approved by the
EEF
- Total project-based
co-financing
(EEF’s grant)
The EEF agreed on
the principles of the
Financial
Framework
Agreement, but this
is not finalized yet
LGF Regulation Document
negotiated and duly signed by all
parties: Chisinau, PMU, UNDP
and the financial partner (bank) to
be selected through a Request for
Proposal Procedure by the PMU
and UNDP.
Financial Working Agreement
dully signed
Tripartite joint agreement on the way
to manage the LGF bank account is
drafted at the earliest stage of the
project.
The LGF trust bank account belongs to
the UNDP up to the end of the project
(EOP).
The EEF will redesign the grant
component to support ESCOs rather
than energy users.
GEF5 CEO Endorsement ESCO Moldova Project
Framework Agreement
27
- 20 Loan Guarantee approvals:
(i) 5 in year 1; (ii) 10 in year 2,
and (iii) 5 in year 3.
- $At least 2.7 million approved
(LGF and loans)
- There is no target in regard to
default of payment. A default of
payment means the project
investment is not fully repaid.
- If the training program has the
expected impact in term of EE
projects design and financial
analysis, the rate of rejection
should be very low. No special
target.
- LGF approval delay should be 1
month if the request does not
need improvements.
LGF Performance
indicators:
- number of projects
approved by the FI;
- Total amount of
loans ($)
- Total amount of
loan guarantees
(commitment)
- Default of payment:
total amount and %
- Number of requests
rejected by the FI
- Duration of the
decision making
procedure from the
LGF request and
the final approval
Outcome 4:
EPC Projects and
GUDP replicated in
other municipalities
and Information
shared and
disseminated, project
M&E carried out.
EPC projects are
implemented in at
least one other city
EPC projects were
not implemented in
Moldova: no case
studies or lessons
learnt reports were
drafted. EPC and
ESCO concept
(model) start from
scratch.
-
-
-
-
10 EPC Case Studies
identified and made
available;
One short project
video is made
available on the EPC
projects carried out
by the project
At least 3 EPC
projects are
implemented inat
least in one other
city.
At least another city
will have developed
or started to develop
a Green Urban
Development Plan
GEF5 CEO Endorsement ESCO Moldova Project
LGF quarterly and Annual
Activity reports
Documents:
- EPC projects and
GUDP lessons learnt
report
- Mid-term and
Final Project Review
reports
- Project final report
ESCOs are in a position to submit a
quality technical project design and
comprehensive and reliable financial
analysis in accordance with guidelines.
ESCO are in a position to co-finance
20% of the whole project cost (out of
the financing cost)
The selected FI is efficient as
expected.
EEF provides grants to EE projects
At least 1 other city will be willing to
develop a GUDP and carry out energyefficiency investment projects using
the ESCO business model and EPC
modality.
28
ANNEX B: RESPONSES TO PROJECT REVIEWS (from GEF Secretariat and GEF Agencies, and Responses
to Comments from Council at work program inclusion and the Convention Secretariat and STAP at PIF).
Responses to Comments from GEF Secretariat Review
Responses to Comments from GEF Secretariat Review
GEF Secretariat Comments
Responses
Details of at least 20 energy savings projects financed by
the ESCO Moldova
Table B3-2 provides specific details about the types of
projects which could expecte to be implemented with the
support of this project. . At the stage of the project design,
the UNDP or the municipality cannot make a decision on the
number of buildings (i) in the residential sector; (ii) in public
buildings because the decision must be made by the
municipality based on 40 energy audits reports. EA reports
will provide a comprehensive set of information (equipment
and specifications-cost- implementing – payback period,
etc). Taking into consideration these reports will not be
available before the Q2 of the project timeframe, a decision
at this stage is irrelevant. For the purpose of the GHG
evaluation, the project design team included 15 residential
buildings and 5 public buildings. Again, the decision will be
made later during year 1 of the project timeframe by the
municipality.
The municipality, the final selection of EE projects (sites and
buildings) will be made based on the result of the energy
audits reports. Through its co-financing, the municipality
agreed to carry out 40 energy audits in targets buildings both
residential multi-storey and public buildings. Main criteria
for selecting EE projects are: i) the project-based average
payback period based on the ratio savings on cost; ii) the
investment cost; and iii) the easiness and reliability of EE
measures impact.
The UNDP project intends to implement 15 EE projects in
the residential sector and 5 projects in public buildings. Such
a strategy is based on criteria mentioned above and
knowledge that for the same investment ESCOs will get more
energy savings in the residential sector than in public
buildings.
Based on available data and a survey of some typical
buildings, details related to EE projects are provided in tables
below. The EE measures considered at this stage are the
following:
-
Roof insulation (EPS 100 mm)
Windows replacement
Walls insulation (EPS 100 mm)
Implementation of efficient heating substation (public
buildings)
- Internal heating system (residential)
It is important to understand that the final decision about
improvements, technologies and EE measures will be made
when the energy audit reports will be submitted at the early
stage of the project implementation.
Detailed estimation of GHG emissions reduction,
including indirect emissions reduction, with applied
methodologies and assumptions
GEF5 CEO Endorsement ESCO Moldova Project
The project design team evaluated the GHG emissions
reduction and the estimated impacts should be as follows:
Direct:
- 15 residential buildings: the cumulative (2018-2038) GHG
emissions reduction is 50.3 ktons CO2;
29
- 5 public buildings, the cumulative GHG reduction is 11.2
ktons CO2 for the same period.
Total direct: 68 ktons CO2
The team also evaluated the impact of additional EE project.
The project activities include providing assistance to
Chisinau City in various aspects of EE building project
through the implementation of EE measures. Such assistance
could be on the supervision of feasibility analyses and
replication of 20 building retrofitting design in accordance
with the Chisinau energy savings target of 20% in the
building sector. These additional 20 EPC projects carried out
over a period of 6 years after the ESCO MOLDOVA
PROJECT completion will be impacted by the GEF/UNDP
activity. Those projects would potentially account for at least
the same savings per EPC project than the EPC demo projects
implemented during the project timeframe, that is to say up
to 2018.
As a result the Post Indirect impact account for 40 ktonCO2
Total Direct and Post Indirect: 101 ktonCO2
The evaluation of Indirect impact as a result of the project
influence, and taking into consideration the municipal target
of improving 20% of existing buildings over the upcoming
20years, the project influence impact (bottom-up and
causality factor of 0.4), the theoretical additional impact is
240 ktonCO2.
Based on cumulative Direct impacts (20 EE projects) the
abatement cost is: $21
Based on cumulative Direct and Post Direct impacts the
abatement cost is: $12.8
Based on cumulative Direct and Post Direct plus the
influence impact, the abatement cost is: $3.4
Replication strategy for other cities
GEF5 CEO Endorsement ESCO Moldova Project
In regard to the Green Urban Development (GUD) in other
cities, the replication strategy for ESCO activities towards
the green urban development will be elaborated at the stage
of the preparation of the Green Urban Development Plan for
Chisinau (Outcome 1). At the stage of the project design, we
are not in a position to draft the comprehensive GUDP
replication strategy because the first step is to draft the GUDP
for Chisinau. Since the GUDP is not yet outlined, the project
design team has not been asked to outline the replication
strategy for something that does not yet exist. Nevertheless,
the project Component 4 encompasses workshops and TA
with the aim of replicating the GUDP in at least one other
city. Major cities will also attend 2 workshops at the stage of
the GUDP preparation for the City of Chisinau. The project
design makes the strategic assumption that based on the
information shared with the major cities; at least one other
city will embark on the GUDP.
In regard to replication strategy of EE projects:
The project will involve other major cities (TBD) at
workshops during the preparation stage of the Chisinau
Green Urban Development Plan with the aim of
strengthening their capacity to replicate the GUDP at their
level. At the stage of the EE projects implementation through
the Energy Performance Contact approach, other
municipalities will be invited to attend the training session
related to the municipal sector. In addition, the project will
provide other municipalities with all report or study
templates and TA. As a result the project expects that at least
30
1 other major city (TBD) in Moldova will embark on the
GUD pattern and EE efficiency improvement with the
support of ESCOs
ANNEX C: STATUS OF IMPLEMENTATION OF PROJECT PREPARATION ACTIVITIES AND THE USE OF FUNDS15
A. PROVIDE DETAILED FUNDING AMOUNT OF THE PPG ACTIVITIES FINANCING STATUS IN THE TABLE BELOW:
PPG Grant Approved at PIF: $ 60,000
Project Preparation Activities Implemented
International consultants
Local consultants
Total
GEF/LDCF/SCCF/NPIF Amount ($)
Budgeted
Amount
40,947
19,053
60,000
Amount Spent To
date
25,387
13,165
38,552
Amount
Committed
15,560
5,888
21,448
Of the PPG budget of $60,000 all of the funds have been committed as of April 2014. The PPG funds were used to
hire a team of four consultants (2 international consultants, 2 national consultants) to work with UNDP to develop the
fully fledged UNDP project document and the GEF Request for CEO endorsement over an eight month period from
September 2013 to April 2014. Two national consultants worked on legal/regulatory issues related to ESCO operation
in Moldova and on baseline data collection as well as playing a leading role in organizing the stakeholder consultations
and the outputs of this work were a legal/regulatory report and a baseline data report. Two international consultants
worked on the design of the project strategy with the first international consultant and team leader taking the lead role
in preparing the UNDP project document and GEF request for CEO endorsement and the second international
consultant taking a lead role in designing the public private partnership (PPP) and securing private sector partners for
the PPP. Once the decision was taken to focus on a broader ESCO market development approach after it became clear
that it was not going to be feasible to establish a PPP , funds were reallocated away from the design of the PPP to the
design of the loan guarantee fund and the international consultant team leader provided greater inputs and support for
the design of the loan guarantee fund (LGF).
15
If at CEO Endorsement, the PPG activities have not been completed and there is a balance of unspent fund, Agencies can continue undertake
the activities up to one year of project start. No later than one year from start of project implementation, Agencies should report this table to
the GEF Secretariat on the completion of PPG activities and the amount spent for the activities.
GEF5 CEO Endorsement ESCO Moldova Project
31