Банкеръ Weekly

Briefs

THERE IS NO REASON TO FEAR OF DIRTY MONEY IN THE ENERGY SAVING FUND

Tasko Ermenkov, Executive Director of the Energy Efficiency Agency, to the BANKER weeklyMr. Ermenkov, the first Bulgarian Law on Energy Efficiency was adopted late last week. Would you explain what benefits it would provide to consumers and companies?- In terms of energy efficiency, we are now at the very start of the competition. One of the initial stages is the adoption of a law which to define the obligations of the state authorities and also to regulate additional incentives for improving the energy efficiency in both domestic and industrial aspect. A basically new moment in this law is the definition of the emerging energy saving companies which require payment of the services based on the level of implemented economies. Another new point in the Bulgarian legislation is the energy efficiency fund which will be both state- and privately-owned. The state and the private sector will be partners in it and its management will include three state officials as well as four representatives of the private sector and non-government organisations.When will this fund start operations?- I hope that in August the fund will already be functioning efficiently and will be concentrating on two types of operations. The first one is direct financing of projects aimed at improving the energy efficiency in the industry, households, and municipalities. A part of the fund's money will be used for issuing guarantees to financial institutions which credit energy saving projects. At the same time, the fund will act as an instument in encouraging this type of activity, as it will provide the resources in return to interests that are quite lower than those offered by commercial banks.A financial structure of this kind requires significant resources in order to function regularly. What is the amount accumulated by the fund so far?- The state is going to make a one-time BGN3MN installment in it. Other USD10MN are expected to come from the World Bank's Global Ecological Fund. We are also negotiating with other international donators in order to provide at least USD5MN. Our ambition is to start the fund with an EUR17MN initial capital. In Hungary, for example, an analogical structure started operations with a similar amount and has so far attracted over USD170MN.There were some problems with the method for choosing representatives from the non-governmental quota in the fund's management board. World Bank representatives expressed fears that if the money was collected through donators, people representing capital with unknown origin might enter the fund, too.- We should be able to make a difference. It's true that donators will have a decisive vote at the first meeting of the fund in August, when the non-governmental quota in the management board will be chosen. But it doesn't mean that the donators themselves will be chosen. Most probably, the first management will include representatives of the National Union of Municipalities in Bulgaria, of branch chambers, and organisations. They should not have official or working relations with any governmental structures. Besides, we have written in the law that the board members should be professionals in the energy saving field, not people with huge resources looking for ways to legalise them. Some extra guarantees will be included in the fund's organisational documents which are currently being prepared under the supervision of the World Bank. Therefore, all fears of draining the fund or of dirty capital entering it are groundless. Moreover, the Law on Measures against Money Laundering obliges us to inform the authorities about any single donation. Is it clear who will represent the state?- The only member of the board known so far is the executive director of the agency, as it is written in the law. The rest will represent the ministries of energy and environment and will be chosen by the respective ministers. According to the transitional and final regulations of the law, the first chairman of the board will be the person who represents the energy ministry. He will gather a general assembly and will call the donators who in turn will choose the representatives from the non-governmental quota. We should not forget, however, that the World Bank is the main donator and since it has no practice in participating directly in the executive part, I suppose it will delegate its rights to some of the state representatives. Therefore, it is very improbable that dishonest people enter the management board.The law also provides some tax relieves. What kind of relieves are they and when will they become valid?- The first one is under the Corporate Income Taxation Act - donations to the fund worth up to 10% of the companies' profit will be exempt from taxes. Besides, donators will be exempt from taxes on buildings for a certain period of time. According to the results achieved in terms of energy efficiency, the buildings will be classified in two groups - A and B. The exact criteria will be defined in a separate regulation that we're currently preparing. There will be a different grace period for each class - ten years for class A and five years for class B. The relieves are to become valid from January 1, 2005, as stipulated by the law.Will you try to attract banks?- Of course, the establishment of the fund does not aim at replacing the banks or creating their alternative. This structure will help us give a positive example that would attract the banks to launch financing without seeking the highest profit possible. That is why a part of the money in the fund will be used for guarantees. We should be utter idealists in order to think that the fund will solve all problems with the energy efficiency in the country.Is it true that the agency is about to be restructured in the summer?- Restructured is quite a strong word. With regard to the law, we are obliged to prepare an organisational regulation. In the 2005 budget framework, we have planned to add one more directorate to the agency. It will be called Control, Estimate, and Measure.

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