When the 1st of June Kindergarten in the town of Karlovo, central Bulgaria, closed for two months in 2006 for energy efficiency improvements, the local community didn’t react well at all. Parents had to find alternative accommodation for over 100 children.

Two months later they knew the inconvenience had all been worth while. The once dark and often freezing kindergarten had now become a warm and welcoming environment. Other parents are queuing up to send their children to the kindergarten that had changed beyond recognition. Parents talked about a fairy tale transformation.

“We needed to improve the heating system and insulate the roof and exterior walls to bring temperatures in the kindergarten to normal levels,” says school director Diana Georgieva, who has been a member of staff since 1976. “We needed new doors and new window frames. We needed a brand new kindergarten.”

Enemona, a local engineering and construction company specialising in energy efficiency improvements, audited the building and came forward with a plan to totally revamp the school while also cutting its energy bill.

The municipality simply couldn’t afford the improvement costs all at once. Enemona came up with a solution: an Energy Services Company (ESCO) contract which would allow the kindergarten to improve now pay later.

It’s not magic – it’s an ESCO

Under an ESCO contract, a company invests its own funds to design, implement and finance projects that decrease the overall energy consumption of public sector institutions.

“The creative thing about ESCO contracts is that the kindergartens and hospitals are not put under pressure to pay costs all at once,” says Prokopi Prokopiev, Enemona’s Corporate Policy Manager. “Instead, the energy savings achieved in these public institutions pay off the investment costs typically in five to six years.”

Take the 1st of June Kindergarten: since the energy efficiency improvements took place, the school has cut its energy costs by 60 per cent.

“An ESCO is the perfect financing vehicle to fund projects that municipalities operating under tight budgets would never be able to fund,” says Peter Hobson, a senior banker in the EBRD’s Energy Efficiency Team.

Enemona has carried out energy efficiency work in 10 kindergartens, eight schools and two hospitals in Bulgaria. Its rapid development stems partly from the Bulgarian government’s decision in 2004 to introduce mandatory energy efficiency audits for state and municipal buildings.

The Bulgarian government has made energy conservation a priority. After all, the country’s energy consumption for one unit of GDP exceeds that in the other EU member states. Rising energy prices and high consumption of electric power for heating aren’t helping either.

“Turning to energy efficiency to cut the energy consumption is a wise move for any country,” explains Mr Hobson, who points out that Energy Efficiency is key to the EBRD’s strategy to help put EBRD countries onto a sustainable energy footing.

Backing the best

In order to further assist the spread of ESCO contracts in Bulgaria, the EBRD agreed to provide a €7 million loan to the Bulgarian ESCO Fund. Enemona created the fund to generate much-needed finance for improving energy efficiency in the public sector.

“Although commercial banks in Bulgaria are offering longer maturities to their traditional clients and the public sector, the ESCO market is still not understood by the financial community,” says Mr Hobson. “Companies such as Enemona are not able to attract the longer term financing they need for their projects.”

“The Bulgarian ESCO Fund is unique in Bulgaria and was established in response to the new European energy policy. It achieves energy savings that the public sector would find hard to address with its own resources,” Mr Prokopiev explains.

“Enemona is now working on a pipeline of 17 ESCO projects and the EBRD finance will make them happen. The finance is translated into warmer kindergartens and hospitals, happier children and patients,” he adds.

With news of slashing energy costs coming from kindergartens in the Bulgarian towns of Montana, Svilengrad and Karlovo, public and private sector alike are realising that they could do more with less.

“We want to spread innovation and turn Enemona into a catalyst for the development of the energy efficiency market in Bulgaria,” Mr Hobson says.

By Marjola Xhunga, Communications Adviser
Photos: Enemona
Contact: Sofia Resident Office