EERSF operates as an independent legal entity though manages and allocates its financial resources to energy efficiency projects in line with the Bulgarian National Energy Strategy, the Energy Efficiency Act (EEA), the Energy from Renewable Resources Act (ERSA), current legislation and agreements with the principal donors.

Four main sources or donors provided capitalisation to the EEFRS during the period 2004 through 2008:

• Global Environmental Facility (World bank): 15,5M BGN  or approximately 8,0M €
• Government of Bulgaria: 3 million BGN or approximately 1,5M €
• Government of Austria: approximately 3M BGN or 1,5M €
• Private donors and contributors:  0,4M BGN or  0,2M €

The initial funds were used to provide investment capital for the Fund, to cover initial setup and operating expenses until the EERSF reached financial self-sufficiency and to partially cover for capacity building expenses such as project development and financial packaging.

In 2013 the Fund has been secured with a 5M € grant from the European Bank for Reconstruction and Development (EBRD) and the Bulgarian Ministry of Economy and Energy to finance further partial credit guarantees for ESCO projects in public buildings and in 2014 another 5M € have been secured from KIDSF (Kozloduy International Decommissioning Support Fund) earmarked to assist municipalities in reducing the energy footprint of public buildings.

EEFRS’ General Donor Assembly, which is represented by the main sources of financing, formulates regulations related to the operation, organisation and management of the Fund, the Fund’s assets and overall activity of the Fund. It meets in principle once per two years.

The Management Board is the managing body of the Fund. It consists of 9 members, 5 elected by the General Donor’s Assembly and 4 represented by Bulgarian government agencies.  It is responsible for the overall strategic management of EERSF in compliance with its established objectives and principles of operations. It approves, among other things, the Fund’s financing and credit guarantee policy, the Fund’s strategy, the criteria for assessment and selection of the projects, the financing of the projects and the contracts related to the credit guarantees. It also elects and releases the Executive Director (leads the Fund manager). The Management Board meets once per month.

Fund Manager EEE Consortium, a Canadian-Bulgarian tri partite consortium comprised of an international EE consulting firm and two local Bulgarian businesses elected through international procurement,  is the executive body of the Fund. It is responsible for the entire day-to-day operation of EERSF and for ensuring the successful  implementation of the project cycles.

EERSF supports only projects directly related to:

• Improved energy efficiency in industrial processes
• Rehabilitation of buildings in all sectors including industrial, commercial, municipal and residential
• Improvements to heat sources and distribution systems
• Rehabilitation of municipal facilities such as street lighting
• Other energy end-use applications including energy management control systems, power factor correction measures, air compressors and fuel switching
• Demand side off –grid RES small projects and measures

As a lender, the EERSF provides loans at interest rates of between 4,5% to 9% for up to 5 years.  A minimum equity contribution of between 10 and 25% is required from project developers, depending on the proposed financing type i.e.: minimum 10% equity requirement applies to co-financing projects (EERSF and commercial bank lending), the maximum 25% equity requirement applies to projects seeking EERSF-only financing. EERSF focuses on commercially viable projects that use well-proven technologies with maximum payback periods of 5 years, and applicants must undergo detailed energy audits before their projects are considered for funding.

EERSF provides partial credit guarantees (PCGs) which can cover either 50% (first loss basis after the bank-creditor) or 80% (pari-passu  basis) of a project’s total credit value. Individual guarantees are normally capped at 400K €. The credit guarantees provided by EERSF are recognised as first rate collateral equivalent to bank guarantees.

The EERSF has also developed two types of portfolio guarantee products:

Portfolio guarantee for energy performance contracting: Designed for energy service companies (ESCOs) and derived from Energy Performance Contracting (EPC) this guarantee covers up to 5% of potential delayed payments of the covered portfolio. The guarantee could allow ESCOs to negotiate lower interest rates from commercial lenders.
Residential portfolio guarantees: Designed for condominium buildings or a portfolio of condominiums this guarantee covers the first 5% of losses (defaults) within the condominium building or portfolio of condominiums.

EERSF also offers targeted technical assistance in support of ESCOs in preparing projects and programs for investment and partner financial institution promotion and delivery of energy efficiency projects with a view to stimulate deal flow and uptake of financing offered.

EEE Consortium  and the candidate beneficiaries follow a fixed credit application process including 8 steps:

Step 1:   Project identification (results of detailed energy audit (DEA) or energy-saving measures implementation proposal)
Step 2:   Initial project screening
Step 3:   Completion of the Initial Project Proposal (IPP)
Step 4:   Submission of IPP and accompanying documents to Fund
Step 5:   Assistance in project design and completion of related documents
Step 6:   Project appraisal and creditworthiness assessment
Step 7:   Formal decision on approval for financing
Step 8:   Preparation and signing of the contract for financing and disbursement of funds

EEFRS proposes credit products at commercial-market interest rates.  The fact that it does not distribute profits allows it to be very competitive and offer attractive financing conditions to project developers.

It does apply very low credit fees or not at all, it reimburses administration fees when the credit agreement is signed or when the project is disapproved by EERSF and it does not apply charges for early repayment of the loans.  It also lowered its guarantee fees to 0,1% to keep its position in the guarantee market.

At the end of 2014 Municipalities account for 53% of the total loan portfolio in terms of EEFRS funding, 29% were corporates/enterprises and ESCOs and the remainder 19% included mainly universities and hospitals.

The amounts reimbursed by the beneficiaries are being used by EEFRS to fund other energy efficiency  projects. Since 2011, all its funds raised through the initial capitalization have been fully invested in projects. As EEFRS is a revolving type fund it has been only relying on revenues from the repayment of the loans.