presentation of the public call for the award of...

PRESENTATION OF THE PUBLIC CALL FOR THE

AWARD OF GRANTS FOR CONSTRUCTION OF

BIOMASS/BIOGAS HEAT AND POWER GENERATION

PLANTS

UNDP-GEF Project: “Reducing Barriers to Accelerate the Development of

Biomass Markets in Serbia”

Maja Matejić

Portfolio Manager – Energy

UNDP Serbia

Istanbul, 07 September 2015

Content:

• Key information about the project

• Public Call

• Model contract

• Application Form

• Sequence of activities

KEY INFORMATION ABOUT THE PROJECT

• Title: Reducing Barriers to Accelerate the Development of the Biomass Market

in Serbia

• Project goal: to increase the share of energy from renewable sources in

energy mix of Serbia

• Total value of the Project: USD 30,475,000 as follows

o The Global Environmental Fund (GEF): USD 2,845,000

o United Nations Development Programme (UNDP) : USD 310,000

• Other project participants: USD 27,630,000 (institutions of the RS and

investors)

• Project implemented by:

o UNDP (4 components) and

o NIM - Ministry of Mining and Energy (1 component) in cooperation with the

Ministry of Agriculture and Environmental Protection.

• Project duration: 2014 – 2018

EXPECTED PROJECT OUTCOMES

1. Improved capacity of investors to identify, develop, fund and manage

bankable biomass projects for energy generation;

2. Improved institutional and legal framework for investments in biomass

projects;

3. Successful operation of Biomass Support Unit (BSU) within the Ministry

of Mining and Energy;

4. Successfully funded, constructed and operational 6 to 8 heat and power

co-generation plants using biomass/biogas of total installed capacity of

4 MW;

5. At least another 12 projects supported by the BSU.

PROJECT CONTEXT

• Availability of great volumes of biomass in Serbia:

o 61% of the total potential of renewable energy sources

o Agriculture: 1.7 Mtoe

o Forestry: 1 Mtoe

• As member of the Energy Community, Serbia has undertaken to

harmonize its legislation with the EU, which means specifically

the application of the Directive 2009/28/EC on renewable energy

sources:

o The share of renewable energy in gross final energy consumption is to

increase to 27% by 2020, compared to 21.2% in 2009.

o In 2013 the National Action Plan for RES of the Republic of Serbia was

adopted defining objectives and measures, with biomass playing an

important role

PROJECT CONTEXT

• Incentives in Serbia for power producers from RES (as of 2009):

o Decree on incentives for privileged power producers. According to the

Decree the Electric Power Company of Serbia (EPS), acting as single

buyer, is obliged to offer a 12-year contract with guaranteed price to all

investors who have a status of privileged power producer

o Decree on conditions and procedures for the acquiring the status of

privileged power producer, etc.

• The New Law on Energy, adopted in December 2014, introduced a

number of improvements with respect to use of RES and opened

new potential for investing in the free market.

• Bylaws complementing the New Law on Energy in respect to RE are still

pending.

PROJECT CONTEXT

• Biomass – types of plants of privileged producers:

Biomass plants

Installed capacity

R (MW)

Incentive feed-in tariffs

(c€/kWh)

Up to 1 13.26

1 - 10 13.82 – 0.56*P

Over 10 8.22

Biogas plants

Up to 0.2 15.66

0.2 – 1 16.498 – 4.188*R

Over 1 12.31

Plants using biogas of animal origin 12.31

0

2

4

6

8

10

12

14

0 1 2 3 4 5 6 7 8 9 10 11 12

CHP Biomass plants

EURc

MW4

6

8

10

12

14

16

18

0 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1.2 12.4

CHP Biogas plants

EURc

MW

PROJECT CONTEXT

• Despite the incentives for generation of power from biomass, the

number of constructed plants is relatively small considering the

biomass potential.

• Currently installed capacity of biomass/biogas CHP plants in Serbia

is only 4.8 MW

• The share of RES in gross final energy consumption did not

increase (Progress report on implementation of NAPRES,

December 2014.).

KEY CHALLENGES

• Unfavourable investment climate due the negative macroeconomic

trends

The biggest concerns are lasting high unemployment rate, growing public indebtedness rate (currently 20%

higher than the legal limit) , lack of liquidity of private sector and high foreign trade deficit. Recent floods

(05/2014) caused sharp decline of GDP, which is why Serbia ended 2014 in recession.

• Frequent changes in institutional set up

In the period between 01/2011 (when the PIF was submitted to GEF for the first time) and 20/ 2014 (when

the Inception Workshop was held) Serbia had two elections (05/2012 and 03/2014) and each resulted in

forming of the new government. Additionally, in between the elections in the same period two

reconstructions of the government occurred (03/2011 and 08/2013). In the aforementioned period the

ministry in charge of energy operated, with different competences and was headed by the four ministers.

The same applies for the ministry in charge of environment.

• Undeveloped financial mechanisams for financing biomass

projects

Only financial mechanisms that are available are loans or direct financing by investors’ own means.

Energy services as per EU Directive 32/2006/EC, such as supply contracting or energy performance

contracting, are foreseen by the Law on Efficient Use of Energy but are still in very initial phase of

• The text of the Public Call includes:

o The introduction and the scope of the call;

o Instructions to applicants on how to compile their applications

o Protection of applicants’ rights;

o Place, date and hour of bid opening;

o Criteria for grants award;

o Application Form.

PUBLIC CALL FOR AWARD OF GRANTS

• Introduction and subject matter

o The total value of grants: USD 1,6 mil;

o Awarded by the MME through a public call to interested investors;

o Type of project: CHP plant of capacity 0.4 MWe -1 MWe using

agricultural/forest biomass;

o Technologies: biogas, gasification and direct combust. (boiler+turb.);

o Focus on private investors;

o Individual grants per project up to 15% of investment value, or max. USD

266,000;

o Payment method: 30% after contract signature and 70% after plant

construction and connection to the grid;

o Deadline for submission of project proposals: 15 October 2015



• Key eligibility requirements for submission of bids:

o Open to companies, cooperatives and physical persons performing the

registered economic activity (entrepreneurs and agricultural estates) of

predominantly private or cooperative ownership;

o Must fulfill requirements for construction and commissioning of CHP plant;

o The plant uses as primary fuel biomass as defined by the Law on Energy;

o Total value of investment exceeds USD 1,200,000;

o The project is developed and ready for financing:

Approved loan for project funding by a bank;

Positive assessment by a technical consultant of a bank/financial

institution that the project is viable and bankable

o The plant shall not be connected to the grid before the announcement of the

public call, etc;


• Providing evidence of eligibility:

o excerpt from the company registry – farming estate registry;

o certified design for the construction permit;

o bank document approving the loan to the applicant;

o feasibility study, or business plan;

o the report of the bank technical consultant;

o confirmation of the relevant branch of the Tax Administration confirming

payment of all taxes and contributions;

o confirmation by the relevant authority that the applicant has not been

sentenced by an enforceable prohibition of economic activity during the past

two years;

o filled in and signed model contract ;

o preliminary contract or contract on heat supply (if any).


• The feasibility study / business plan shall include data on:

o the type, origin, lower heat value and the planned quantities of energy

sources at annual level;

o each energy source (fuel) to be utilised by the plant;

o the planned annual generation and supply of electricity to the grid;

o the planned annual generation and supply of heat to the DH

network/technological process;

o the installed electric power capacity of the plant;

o the installed heat capacity of the plant;

o the total value of investment.

• Criteria for grant award:

1. Criterion of environmental viability P1;

2. Criterion of development of the region where the investment is made P2;

3. Criterion of how modern is the applied technology P3;

4. Criterion of efficiency and cost-effectiveness of the plant P4;

5. Criterion of full utilization of the technical potential of the plant P5.

The total number of points is calculated as a sum of individual points by all

criteria for evaluation and equals:

P = P1 + P2 + P3 + P4 + P5


• Criterion of environmental viability:

Maximum number of points P1=40

Calculated on the basis of the mass share M1, M2 and M3 of each planned

energy source, defining ratios K1.1, K1.2 and K1.3 as follows:

o K1.1 = 40 for the biodegradable portion of the waste, manure,

biodegradable industrial waste, by-products of animal origin, plant residues

from agriculture (straw, corn residues, branches, stones, beans, etc.), plant

residues from forestry (residues after felling, residues from wood industry);

o K1.2 = 20 for biomass from direct agricultural production of tree felling,

silage, energy crops, products of wood processing, and biofuels;

o K1.3 = 0 for all other energy sources, including fossil fuels;

The number of points under this criterion is calculated as follows:

P1 = K1.1 * M1 + K1.2 * M2 + K1.3 * M3


• Criterion of level of development of the region where investment

is made:


According to the group to which the specific unit of local self-government is

classified depending on the level of its development according to the

Decree on the list of development of regions and units of local self-

government (ULSG) for the year 2014 („The Official Gazette RS, Nr.

104/14) by awarding:


P2 P2 P2 P2 P2

Number of points 25 20 15 10 5

Region development

group

4.

Devastated regions4. 3. 2. 1.

• Criterion of how modern is the applied technology:


based on the ratio of total value of the investment and the total installed

electric power capacity of plant expressed in kW (specific investment costs,

where the maximum possible calculation value is I ≤ 5000 USD/kW). For all

plants where specific investment expenditures exceed USD 5,000/kW

(I > 5000 USD/kW), it shall be considered for calculation purposes that

specific investment expenditures for the given plant are I = 5000 USD/kW.

The number of points under this criterion shall be determined in accordance

with the following formula :

P3 = 20 * I / 5000

where I is amount of investment per kW of installed electric power capacity of

plant expressed in USD/kW.


• Criterion of efficiency and cost-effectiveness of the plant :


Calculated according to the ratio of the total value of investment and total

annual supply of electricity according to the following formula:

P4 = 10 * C1 / Ci

Ci = Ii / Ei

o Ci – ratio of total value of investment and total annual supply of electricity

to the grid, for the given plant, expressed in USD/MWh;

o Ii – total value of investment, for the given plant, expressed in USD;

o Ei – total annual supply of electricity to the grid , for the given plant,

expressed in MWh;

o C1 – ratio of total value of investment and the total annual supply of

electricity to the grid, for the plant with the lowest value of the ratio in the

competition, expressed in USD/MWh.


• Criterion of full utilization of the technical potential of the plant:


Calculated according to the way in which the heat is planned to be used:

• P5 = 5 points if preliminary contract, or contract for supply of heat from the

plant to another entity is submitted, when it can clearly be established from the

provided documents what the technical potential is for this purpose;

• P5 = 2 points if the provided application form and the technical documentation

demonstrate that the heat from the plant will be utilized for heating purposes

of a specific facility and/or in the technological process;

• P5 = 0 points if the provided documentation does not demonstrate clearly and

unequivocally how the heat generated in the plant is to be used.


• Rules for grant award:


Description - rule Value of investment

[USD]

Amount of grant

Total budget for award of grants 1,600,000 USD

The general rule for all selected

projects

1,200,000 – 1,773,333 15%

The general rule for all selected

projects

> 1,773,333 266,000 USD

Minimum amount of grant that can

be paid to the lowest ranked

selected project

> 160,000 USD

o If, after the grants are distributed, there remains an amount lower than the minimum

amount of individual grant under this public call (160,000 USD) such amount shall be

evenly distributed to all selected projects.

• The Ministry of Mining and Energy has, on 14 January 2015,

published a public call to banks and other financial institutions to

cooperate on the project.

• Applications for cooperation in the project have been filed by the

following interested banks which:

o extend loans for financing of construction of CHP plants from credit lines

provided by international financial institutions (IFI) and/or from their own

assets, and

o perform the analysis of technical and financial feasibility of investment in

constructing CHP plants during the process of loan approval, with the

assistance of a technical consultant within the available credit lines

provided by international financial institutions or by engaging a licensed

technical person for assessment of such projects.


• The following banks have applied to the public call :

1. Banca Intesa a.d. Beograd;

2. Komercijalna banka a.d. Beograd;

3. Unicredit Bank Srbija a.d. Beograd;

4. ProCredit Bank a.d. Beograd;

5. Sberbank Srbija a.d. Beograd.

• KfW and EBRD have also expressed their willingness to participate in the

project either by means of their direct lending facilities (DEG or

WeBSDFF/WeBSFF), or indirectly by means of their credit lines available

through financial intermediaries (commercial banks).

• Bidders shall not be obliged to provide financing through any of the above

banks, they shall have full freedom to freely select a bank or another financial

institution of their choice which is willing to provide the funding of the project

proposed by the specific investor.



• Model contract form for the award of grants for construction

of biomass/biogas heat and power generation plant

• The contract regulates:

o The scope of the contract;

o The grant (amount, calculation, manner of payment, conditions for payment

of second part, etc.);

o Report on plant construction (content and control of the report);

o Project publicity;

o Termination and amendment of contract;

o Compliance with prevailing laws and regulations;

o Resolution of conflicts and other provisions.


• Application Form – serves the purpose of clear and uniform entry of

key data for evaluation of project proposal:

o General information about the applicant;

o Key information about the plant (name, location, technical data, fuel data,

etc.);

o Financial data (value of investment, loan amount, etc.);

o Attached design and performance documentation;

o Attached documentation related to registration of the applicant and ensuring

of the project funding loan.

SEQUENCE OF ACTIVITIES

• January 2015: public call to banks to participate in the project

• May 2015: public call to investors to participate in the project

• 15 October 2015: Closing of the public call

• November 2015: Selection of bidders

• December 2015: Signing of contracts between the MME and investors

and payment of 30% of approved grant amount

• 2017: Commissioning of the plants and payment of the remaining 70%

of approved grants

Thank you for your attention

Maja Matejić, Portfolio Manager - Energy

United Nations Development Programme

e-mail: [email protected]

www.undp.org.rs

http://biomasa.undp.org.rs

mailto:[email protected]

http://www.undp.org.rs/

http://www.biomasa.undp.org.rs/

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