Case Studies » OTP Sub-Sovereign Schools Energy Efficiency Program (OTP ESCO MUNI EE)
OTP Sub-Sovereign Schools Energy Efficiency Program (OTP ESCO MUNI EE)
Project Name: OTP Sub-Sovereign Schools Energy Efficiency Program (OTP ESCO MUNI EE)
Country: Hungary
Highlights:
Country-wide program for energy efficiency improvements in municipal schools in Hungary
National Government led program with centralized tender to select an ESCO and a bank (small municipalities can then contract directly with the selected ESCO, or choose another ESCO through competitive procurement)
OTP Bank lends to ESCO to implement EE projects at public schools
Equipment owned by ESCO and leased to school operator
Lease payments over long period (5 to 15 years) paid by energy savings
About the Consortium:
The winning consortium for the energy efficiency program in municipal schools was integrated by the following companies: Caminus (Esco/agent), OTP (project financier), GE Hungary (supplier of lighting products), Viessmann (supplier of heating products), and Ratherm (heating modernization company).
Financing objective:
IFC’s involvement gave more comfort to the bank in the consortium (OTP) to assume part of the municipal risk allowing OTP to finance more than it could have financed without IFC’s participation.
The structure of the project :
IFC provided a loss sharing facility for 50% of OTP’s up to HUF50 billion ($250 MM) loans. IFC and OTP both share the risk of local governments and other public school operators. There is a €2 million first loss tranche provided by the Global Environmental Facility (GEF). The structure also included escrow accounts that provide liquidity and first loss protection.
The outcome :
IFC’s loss sharing facility and GEF first loss tranche allowed OTP to do more business with the ESCO and accept more municipal risk, enabling a larger program
Schools and local governments recover costs through energy savings
Developmental Impact:
- Better lighting and heating even in smaller municipal schools
- Reduction in polluting emissions (NOx, Greenhouse Gases)
- Increased private sector participation in public services
