Investment Financing
Policy measure

According to World Bank documentation (2009), the ‘Energy Efficiency GEF Project’ was launched in 2003 with the objective to “enable companies in the industrial sector and other energy consumers to adopt and utilize energy-efficient technologies, financed under commercial criteria by the Romanian Energy Efficiency Fund (FREE) and co-financiers”.


Component 1 of the ‘Energy Efficiency GEF Project’, Investment Financing, provided loans on a commercial basis to creditworthy customers from FREE that revolved with interest and principal payments flowing back into it for additional loans. Borrowers with good growth prospects were targeted and their positive cash flows generated by investments in energy savings were used to repay the loans. (World Bank, 2009)

The total financing requirements of the ‘Energy Efficiency GEF Project’ amounted to USD 106.0 million of which USD 34.2 million were spent on Component 1. However, clients and commercial banks financed 66.6 percent of the USD 34.2 million (World Bank, 2009).


FREE focused primarily on financing projects within restructured and/or privatized industries that could establish basic creditworthiness. Eligible projects were limited to those meeting criteria for minimizing risk and maximizing the potential for success. The World Bank (2009) summarizes the guidelines for eligible projects as follows:

  • “The projects and/or the Fund's financial support were expected to be in the range of US$100,000 to US$1,000,000.

  • A well diversified portfolio of projects to assure a balanced risk-return to the Fund.

  • Projects to have a relatively short payback time (generally under three to four years).

  • At least 50 percent of each project's benefits to come from energy savings (e.g., process or capacity improvements that have ancillary energy savings benefits are not eligible)

  • The technology must be well proven in the proposed application to avoid technological risk.”

“The main energy efficiency technologies that met these criteria were burners and boilers, variable speed drives, condensers for power factor improvement, compressors, controls, and steam traps” (World Bank, 2009).


The World Bank (2009) reports that the project “experienced considerable difficulties during the early stages from 2002-2004. The Fund Manager team was strong and had international experience, but the learning curve was steeper than expected for FREE executives, the Board of Administration and investment committee, and turnover of key officials exacerbated these difficulties. This slow start caused significant concerns of performance among decision makers, which was also accentuated by similar experience with failures of earlier EE projects. In mid-2004 the FM contract was revised to enlist more local expertise to improve interactions with potential clients and generate a more robust business plan. These changes brought some rapid successes – nine loan contracts committing US$3.35 million within 18 months.”


The following outcomes of Component 1 have been identified (World Bank, 2009):

  • “Of the 18 sub-projects financed by the Fund before close of project, 16 have already been completed and the remaining 2 are expected to be commissioned by mid-2009. All commissioned projects are delivering energy savings and cost reductions to host enterprises, in most cases higher than expected.

  • FREE signed 18 loan contracts for US$11.4 million (US$8 million from original GEF grant and $3.4 million from repaid funds) for a total investment (including co-financing) of US$34.2 million in energy efficiency projects by close of Project.

  • By June 2008, 12 projects were completed with an average payback period of 3.5 years, and saved about 123,458 cumulative tons of CO2 for the period 2003-2007. Actual savings as reported by FREE have exceeded estimated savings presented in sub-project appraisal by over 60% through 2007. The GHG reductions resulting from these completed investments cumulated over their lifetimes at current levels of energy savings is estimated to be 1.1 million tons of CO2e.

  • By end-2008, 4 more projects had been completed, resulting in cumulative CO2 savings of 183,237 tons. The GHG reductions resulting from these 16 completed projects cumulated over their lifetime is estimated to be 2.18 million tons of CO2e.

  • As of June 30, 2008, FREE disbursed US$9.71 million, including 100 percent of the US$8.0 million GEF allocation for investment financing. All loans are being repaid in a timely fashion, without any late payments or defaults.

  • Twelve of the 18 projects were implemented in the private sector, encompassing 83 percent of loan value and 93 percent of overall investment facilitated by FREE; the remainder was in the public sector.

  • Technologies include a wide range: replacement of old energy generation equipment (boilers, CHP, hydro, geothermal), modernization of technological equipment in process industries, public lighting (4 projects).

  • The project has clearly demonstrated the viability of commercial financing for EE investments, and one important outcome is that several commercial banks are now interested in lending for EE projects.

  • The industrial sector accounted for more than 86 percent of total investment.

  • Estimated energy savings by end-2007 were 36,533 toe (tons of oil equivalent) from the completed projects.

  • After five years of operation FREE has officially recorded 100 requests for financing; financing requests of about US$51 million for investments amounting to US$144.75 million.”


World Bank, 2009. Implementation Completion and Results Report (TF-50705) on a Global Environment Facility Trust Fund Grant in the Amount of US$ 10 million to Romania for an Energy Efficiency Project. Washington, DC. Available at: