Tashkent, Uzbekistan (UzDaily.com) -- The World Bank Board of Executive Directors approved a US$25 million credit to the Republic of Uzbekistan for the Energy Efficiency Facility for Industrial Enterprises Project (UZEEF). The Project’s objective is to improve energy efficiency in industrial enterprises by designing and establishing a financing mechanism for energy saving investments.

The Government of Uzbekistan has declared energy savings and efficiency improvements in industrial enterprises as one of its key economic priorities. Improving energy efficiency and reducing energy consumption in the production process will improve Uzbek industries’ overall competitiveness, free up scarce gas resources for exports and reduce greenhouse gas emissions. Two state-owned banks (Asaka Bank and Uzpromstroybank) and a private bank (Hamkorbank) are the financial intermediaries for the Project.

“The potential for energy savings through implementation of energy efficiency measures in industrial enterprises in Uzbekistan is large,” said Franz Gerner, the World Bank’s Task Leader for the Project. “The use of financial intermediaries to promote energy efficiency investments is an approach which has been successfully applied by the World Bank in other client countries. This Project will initiate the development of a new business line by local Uzbek banks targeting energy efficiency investments.”

Although the industrial sector is quite varied, typical energy efficiency investments involve simple replacements or upgrades of boilers, replacement of outdated equipment and machinery, and the use of waste for heat and other purposes. Energy intensive industries, such as building materials, food processing and the textiles industry, with a relative high share of energy consumption in total production costs, are particularly good candidates for energy efficient investments.

The Project will have two components:

• An Energy Efficiency Credit Line to Asaka Bank, Uzpromstroybank and Hamkorbank: Each bank will receive US$8 million to on-lend to industrial enterprises to carry out energy efficiency investments. Sub-loans will be up to US$1.5 million and can be denominated and repaid in US dollars, Uzek Som linked to the US dollar or in Uzbek Som. Industrial enterprises will follow standard loan application procedures including demonstrating profitability and loan repayment capacity. In addition, enterprises will need to demonstrate and verify that the proposed energy efficiency investment will generate annual energy savings of at least 20 percent.
• Development of Energy Efficiency Capacity: This component aims to assist the government to develop an energy efficiency strategy for industrial enterprises to systematically target investments, to address the lack of knowledge, experience and expertise in indentifying, preparing and implementing energy efficiency projects in the industrial sector and banks through targeted training (e.g. energy efficiency workshops, demand side management, energy auditing) and to develop an energy efficiency communication strategy to raise awareness.

The Project will be implemented over 5 years and the total investment volume is US$34.6 million. The International Development Association of the World Bank Group will provide US$25 million credit and Uzbekistan banks and industrial enterprises will co-finance US$9.6 million.

Uzbekistan joined the World Bank in 1992. The World Bank’s mission in the country is to improve people’s livelihoods through being a partner in economic reforms, supporting the modernization of the country’s social sectors and infrastructure, and sharing its knowledge and experience with the government and the people of Uzbekistan.

Total World Bank commitments to Uzbekistan amount to about US$860 million.