Submitted by: International Finance Corporation
Posted: Aug 23, 2006 – 11:56 AM EST
Washington, D.C.--The International Finance Corporation, the private sector arm of the World Bank Group, is supporting an innovative effort to bring heating and lighting improvements and energy savings to locally run schools across Hungary.
IFC is providing a local currency risk sharing facility to OTP Bank, guaranteeing one half of the up to HUF 50 billion ($231 million equivalent at today's rates) in loans to support energy efficiency upgrades under a modernization program launched by the Hungarian government. OTP Bank, the largest commercial bank in Hungary, is a member of the private sector consortium that won the government tender to implement the effort.
The GoH Szemunk Fenye program is the first effort in the region to mobilize energy efficiency finance on a wholesale basis, and could be a blueprint for other initiatives. Approximately 2,000 schools are being assessed so far for participation.
"Update a school's heating or lighting systems and you improve the students' learning environment while reducing energy costs and greenhouse gas emissions," said Jyrki Koskelo, IFC's Global Financial Markets director. "Thanks to the unprecedented scale that this public-private partnership provides, the program will bring economic, environmental, and social benefits to communities throughout Hungary and may be replicated elsewhere in emerging markets."
Replacing old inefficient incandescent lamps with modern fluorescent lighting systems can cut energy consumption by 15 to 35 percent. Installing more efficient gas-fired condensing boilers in place of burning oil stoves can save up to 30 percent in energy consumption.
When fully implemented, the program is expected to reduce the volume of carbon dioxide (CO2) emissions by an amount equal those of a medium-size coal-fired power plant. The expected CO2 savings are estimated to reach 10,000 to 30,000 tons per year.
The planned improvements are expected to make classrooms brighter, cleaner, and more comfortable, which can benefit students' academic performance and health. Replacing oil stoves alone can reduce indoor air pollution, which is a source of respiratory problems in children.
The voluntary program centralizes procurement, saving municipalities and school administrators time and money. Energy savings will cover the schools' costs. OTP Bank is the financier and leads the consortium of energy service providers and suppliers that won the government tender to implement the program.
Supporting renewable energy and energy efficiency are strategic priorities for IFC as part of its response to climate change and its commitment to sustainable development.
Since 1997, IFC has partnered with local financial institutions by providing long-term financing, risk sharing, and capacity building for the sector in industrial, municipal, and residential sustainable energy projects in Eastern and Central Europe, the Balkans, Russia, and China. IFC leveraged $1.8 billion in sustainable energy projects in FY06.
IFC's donor partners to date include the Global Environment Facility, the European Commission, and the governments of Austria, Finland, the Netherlands, Spain, and the United States.
IFC's participation in the Hungarian program is cofunded by a grant of 2 million from the Global Environment Facility. The investment is also part of IFC's Municipal Fund initiative, which, in cooperation with the World Bank, provides financing to local and provincial governments and public entities for essential infrastructure and services without requiring sovereign guarantees.
The International Finance Corporation is the private sector arm of the World Bank Group and is headquartered in Washington, D.C. IFC coordinates its activities with the other institutions of the World Bank Group but is legally and financially independent. Its 178 member countries provide its share capital and collectively determine its policies.
The mission of IFC is to promote sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC's worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications. For more information, visit www.ifc.org.
About OTP Bank
OTP Bank is the leading commercial bank in Hungary. As of 30 June 2006, it had a 23.5 percent market share. The bank group is a market leader in retail and municipality lending and deposit collection, investment and pension fund management, the number of bank cards issued, mortgage lending. It is a major player in corporate lending and project financing, lending to and deposit collection from small and medium enterprises, vehicle financing, as well as insurance services. Through its subsidiaries in Bulgaria, Croatia, Romania, Russia, Serbia, Slovakia, and Ukraine, OTP Bank is one of the key participants in the banking sector in Central and Eastern Europe and one of Europe's most profitable credit institutions, serving more than 11 million customers in eight countries.
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