Procedures for Processing and Issuing Energocredit SMEloans
This document is the internal document of Bank and it describes the procedures for processing and issuing Energocredit SMEloans. The users of this document are the SMEdepartment staff of the bank.
The document describes only the procedures relating to Energocredit, and all internal procedures of Bank must still be followed.
It contains the following sections: 
For SME bankers

For management
CONTENTS
1. DEFINITION OF TERMS USED IN THE DOCUMENT ............................................................. 4 2. WHO DOES WHAT IN GEEP ......................................................................................................... 5 3. WHO DOES WHAT IN BANK ........................................................................................................ 7 4. MANAGEMENT AND COORDINATION ..................................................................................... 8 4.1. 4.2.
Reporting To EBRD ............................................................................................................................ 8 Coordination with GEEP ................................................................................................................... 8
5. ENERGOCREDIT – CORPORATE LOAN .................................................................................... 9 5.1. 5.2. 5.3. 5.4. 5.5. 5.6. 5.7.
Description of Product ..................................................................................................................... 9 Product Benefits for Companies: .................................................................................................. 9 Energocredit Loan Conditions ....................................................................................................... 9 General Approach to Implement Energocredit .....................................................................11 Eligibility of proposed investment and Examples ................................................................13 Eligibility of client ............................................................................................................................14 Non-eligibility of client ...................................................................................................................15
6. RESPONSIBILITIES OF THE BANKER .....................................................................................16 7. STEPS TO SELL A LOAN ..............................................................................................................16 7.1. 7.2.
Identification of Client ....................................................................................................................16 Initial Contact with the Client ......................................................................................................16
8. STEPS TO PROCESS A LOAN ......................................................................................................17 8.1. 8.2. 8.3. 8.4. 8.5. 8.6. 8.7.
Preparation of Recommendations from the GEEP Team ...................................................17 Revision of the Loan Application ................................................................................................17 Notification to GEEP about decision after loan approval ...................................................18 Documenting Process .....................................................................................................................18 Issuing Loan .......................................................................................................................................18 Payments to suppliers ....................................................................................................................18 Monitoring of Loan Purpose .........................................................................................................18
9. ENERGY AUDIT .............................................................................................................................19
1. DEFINITION OF TERMS USED IN THE DOCUMENT
Loan – Energocredit – Loan for the purpose of achieving energy efficiency or renewable energy resources in the premises of the company in order to make sustainable use of energy resources and reduce operational costs. EBRD – European Bank for Reconstruction and Development (represented locally in Georgia and in London) GEEP – Georgian Energy Efficiency Programme,EBRD consulting team in Georgia Client – Legal person applying for the loan Energocredit Application Form – Special form, filled out by the Banker and the Client together in order to apply for a loan through the Energocredit after the Loan Application has been approved Loan Application – Application form prepared by the bank, which is filled out by the Client in order to apply for a loan Borrower – A legal entity, which has obtained an approval for a loan from the bank Banker – Staff member appointed by the Small/Medium Enterprises (SME) Banking Department, which is responsible for receipt of the application, loan processing and its issue Bank Procedures– Ordinary Bank procedures which exist in the SME banking department for processing loans, theirreviewby the credit committee, documenting and issue, whether loans are through Energocredit or not.
2. WHO DOES WHAT IN GEEP The address and contact details of the GEEP office are: 17, PaliashviliStr, III Floor, 0179 Tbilisi, Georgia Email: office@geep.ge Phone/Fax: +995-32-2224962 Web-site: www.energocredit.ge
The members of the GEEP Team based in Georgia are as follows: Team Leader (overall responsible, deals with general banking issues, marketing, promotion, management of team, financial and risk assessment, quality assurance for reports) Helene Ryding Email: helene.ryding@geep.ge Mobile: +995-595-210215 Deputy Team Leader (contacts with banks, marketing, promotion, coordination of local staff,) George Zurashvili Email: george.zurashvili@geep.ge Mobile: +995-599-288624 Lead Engineer (responsible for all engineering issues, production of reports) KyriakosArgyroudis Email: kyriakos.argyroudis@geep.ge Mobile: +995-599-993702 Local Lead Engineer Murad Kharaishvili Email: murad.kharaishvili@geep.ge Mobile: +995-595-611110
EBRD Tbilisi Representatives for GEEP Banking: Irakli Mekvabishvili Email: mekvabii@ebrd.com EE and RES: Irakli Vardigoreli Email:vardigoi@ebrd.com
COMMUNICATIONS FOR ENERGOCREDIT All written communications with GEEPare to be in English.
All communications are in
electronic form, except approvals by GEEP which are sent in both electronic and paper form.
3. WHO DOES WHAT IN THE BANK Due to the differentParticipantBanks (PB) responsible persons for implementing Energocredit may vary, please contact Energocredit Team for detailed information for each PB bank.
Head of SME Banking Vazha Menabde Email: vmenabde@bog.ge Mobile: +995-77-434050
Project coordinator from the Bank of Georgia side Giorgi Arveladze Email: garveladze@bog.ge Mobile: +995-577-441114
Weekly Reporting Reporting Officer makes two-weekly reporting to GEEP about the clients transferred to the team or the status of negotiations.
4. MANAGEMENT AND COORDINATION
4.1.
Reporting To EBRD
Reporting requirements to EBRD are specified in the Credit Line agreement between EBRD and BoG. In particular, loans reported by bank should be checked against loans reported monthly to EBRD by GEEP.
4.2.
Coordination with GEEP
Informal coordination meetings with GEEP should be held at 2 weekly internals to discuss the following:
potential clients to visit,
pipeline of projects,
progress on GEEP reports
status of loans approved for disbursement
Reporting Officer makes weekly reporting to GEEP about the clients transferred or the status of negotiations to GEEP.
5. ENERGOCREDIT – SME LOAN 5.1.
Description of Product
GEEP is the programme implementing Energocredit, aiming to help companies reduce their energy intensity and increase their competitiveness through the following means:
a) Reduction of operating costs for energy b) Increased production with the same cost for energy.
Energocredit is the brand name of the loan product sold by bank, which is funded by EBRD through the dedicated GEEP credit line to bank.
5.2.
Product Benefits for Companies:
Using Energocredit, the company has the chance to:
Get an energy audit for free (if required and if the expected loan is above 200,000 USD)
Receive international consultancy from specialists
Obtain lower interest rate on loans
5.3.
Energocredit Loan Conditions
The upper limit for the size of the loan is set by the Bank and is up to 500,000 USD per customer. The lower limit is set by the bank for administrative reasonsand is minimum 20,000 USD.
Loan amount: 20 000 – 500 000 USD;
Loan period: 12-60 months;
Interest rate is set by the Bank: o Loan amount: 20 000 – 50 000 USD – from 14%; o Loan amount: 50 000 – 150 000 USD – from 12%; o Loan amount: over 150 000 USD – from 11%
The Bank sets collateral requirements.
It is possible to reduce annual interest rate of the loans with initial agreement of Head of SME Banking department/Deputy Head of SME Banking department (in this case minimum loan interest rate from 10%)
5.4.
General Approach to Implement Energocredit
There are 2 different approaches to implement Energocredit, each of which has 2 stages:Identified and Not Identified Identified - Screening Report (SR) and Project Assessment Report (PAR) is used where client knows what he wants the loan for. Example of project implementation process:
Client applies for loan to Bank
Bank approves Client as creditworthy for size of loan
Bank passes loan application to GEEP for screening to make sure loan is eligible
GEEP screens project and issues Screening Report (SR) showing indicative amount of loan or rejection
Client and Bank agree to proceed further (if no rejection and size of loan is appropriate)
GEEP produces Project Assessment Report (PAR), approving amount of loan withany conditions or recommendations to the Bank.
Bank finalises loan agreement including conditions and recommendations
Bank monitors loan investment implementation according to recommendation by GEEP
Client produces Completion Report and submits via the Bank to GEEP
Not Identified - Energy Audit Report (EA) and PAR is used when the Client does not know what he wants to do, and the Energy Audit will provide recommendations for possible energy efficiency projects. Example of project implementation process
Client applies for an EA to Bank
Bank approves Client as creditworthy
GEEP carries out EA and produces report with recommendations on options for action.
Client considers options and applies for loan for preferred options
Bank passes loan application to GEEP for preparation of Project Assessment Report
GEEP produces PAR, approving amount of loan with any conditions or recommendations to the Bank.
Bank finalises loan agreement including conditions and recommendations

Bank monitors loan investment implementation according to recommendation by GEEP

Client produces Completion Report and submits via the Bank to GEEP.
5.5.
Eligibility of proposed investment and Examples
From a technical point of view, the project proposed for investment must make sufficient energy savings in respective time period, in order to ensure the payback of the loan. The GEEP team works with the bank and their clients to reduce the investment risks to the minimum and develop good projects, which enables the bank to offer low interest rates to their clients, reduce the size of collateraland fix longer period for payback of the loan. The loan payback is achieved through the energy savings or the income from increased production as a result of investment. GEEP helps the clients in finding and calculating savings or possibilities toincrease income. According to the GEEP calculations the justification for the loan payback is made, on the basis of which the banks express their intentionfor funding under the credit line. The Client selects the equipment and plant according to the technical demands of the company and the equipment’s availability and price. GEEP may recommend to the Client to purchasemodern technologies at a higher price in order to ensure that the energy efficiency is achieved at its maximum. The loan may also cover installation costs and expenses for the preparation of detailed engineering documentsprior to installation. Examples of Eligible Energy Efficiency projects (EE): On site co-generation of heat and electricity Rehabilitation of boilers (enhanced controls, economizers, improved insulation, regenerative burners, automatic blow-down, etc.) Replacement of old gas boilers with condensing boilers Switch from electricity heating for fuel based direct heating Process improvements including enhanced controls Rehabilitation of steam distribution systems: installation for steam traps, increased condensate recovery, etc. Installation of heat recovery from processes (e.g., installation of economizers for preheating purposes, heat recovery for space heating, heat recovery for drying, etc.) Installation of absorption chillers Installation of new chillers
Installation of Variable Speed Drives on selected electric motors Rehabilitation of compressed air systems (e.g., decentralisation and/or resizing of air compressors, replacing of old air compressors with new efficient ones) Replacement of cooling equipment (old type ammonia compressors with modern Freon operated ones) Rehabilitation of power distribution systems (e.g., replacement of old or oversized transformers, installation of capacitors to reduce reactive power consumption, etc.) Implementation of Energy Management Systems (“EMS”) or Building Management Systems Implementation of energy saving and renewable energy measures in the built environment (e.g. insulation of walls, roofs and floors; installation of rolling doors; installation of new windows; installation of new heating and ventilation systems; installation of high energy efficiency lighting; etc.) Other equipment not listed above
Examples of Renewable Energy Investment Projects (RES): Wind farms Run-of-river hydro plants less than 10MW Solar water systems generating hot water for processes and/or heating Biomass systems generating heat only or heat and electricity Gas engines using biogas Diesel engines using biodiesel Geothermal heat pumps Biodigesters producing biogas.
5.6.
Eligibility of client
Any private sector companymay apply for an Energocredit SME loan if they are:
Existing borrower clients if the loan or its part maybe considered as energy efficient (provided loan was disbursed less than six months ago, the investment is not yet completed, and the client is willing to go through the Energocredit application process)
b) Potential borrower clients
c) Existing and potential non-borrower clients
5.7.
Non-eligibility of client
The company may not use Energocredit finances for the following purposes:
Projects in enterprises producing strong alcohol and tobacco
Construction projects for sale
Construction activities unrelated to energy saving components
Working capital for companies.
A full list of excluded company activities is available in the GEEP Operation Manual (Appendix 4). Pending a change in the Georgian legislation clarifying their legal duties and obligations, housing associations are also not eligible.
6. RESPONSIBILITIES OF THE BANKER These are as follows:
To identify suitable clients for the loan
To suggest the loan to the client
To manage the application process
To assist the communication between GEEP and the client
To communicate the status of the process to management and the client
To present the final application to the Credit Committee
To inform the client, GEEP and the relevant persons in bank when the loan is approved.
To monitor Loan Purposes
To present final reporting form (Completion Report)
7. STEPS TO SELL A LOAN 7.1.
Identification of Client
Clients can be identified in three ways:
The Banker identifies the possible Energocredit clients, from the existing or potential clients of the bank
GEEP may initiate informal discussion with the potential client as well, but the Client should be accepted by the Bank before making a formal application.
The Bank and GEEP together may organise events to promote the Energocredit product, e.g. in the regions, or for a particular industry.
7.2.
Initial Contact with the Client
The Banker meets the Client together with GEEP, preferably at the Client’s premises, so it is possible to walk through the premises and make initial suggestions for discussion. This is a free service for the Client. The Banker and the member of GEEPgive detailed information to the Client about Energocredit. They explain the purpose of the product to the client as well as the benefits and the advantages itwill obtain in case of implementing an energy efficient investment project.The Banker and GEEP provide the client with brochures, information materials and the web-site: (www.energocredit.ge), where more detailed information about energy efficient products are indicated.
8. STEPS TO PROCESS A LOAN The Agreement about Loan Conditions with the Client is developed as follows: The Banker explains to the client about the following:
Loan conditions
Possible Commission fees
Certain collateral terms and insurance (if any)
The Client and the Banker agree on the collateral of loan, monthly payment and the loan terms. After the Client agrees to the conditions mentioned above, the Banker together with the Clientfills out an electronic loan application form (see Annex 1) in accordance with the ordinary procedures existing in the bank and the loan processing begins.
8.1.
Preparation of Recommendations from the GEEP Team
After the financial documentation is presented in the bank and meets the Bank’s Credit Committee requirements, the Bank refers the Energocredit loan application form to GEEP(Annex 2) in order to proceed withSR. Copies should be sent also to the Bank Head of the sector, manager and reporting officer, in the subject heading – “Energocredit Application – Title of The Company” should be mentioned.
On the basis of the application submitted toGEEP, the agreement is made between the Client and GEEP about preparation of SR, which is prepared within 1 week after the Client provides the necessary documents. The Screening Report may reject the loan, or approve only part of it, as well as give a full approval. In the case of a partial approval the Client and the Bank decide whether they wish to proceed. Following a written “go ahead” from the Client and the Bank, GEEP preparesthe PAR. The deadline for preparation of the PAR is 2-3 weeks after the submission of the necessary documents. The PAR is sent to the designated Coordinator, Director of the SME banking department and EBRD.
8.2.
Reviewof Loan Application
After PAR approval, the Banker, with assistance of the GEEP team, if required, makes a final request to the Credit Committee, to consider the content of the PAR, the risk assessment and the recommendations, according to the procedures existing in the SME banking department, within the framework of which the limit of Energocredit loan and the interest rate will be fixed.
After the positive decision about issuing the loan, Banker will notify the credit committee decision to borrower by the phone using the contact details given in the loan application form or sends him a written notice.
If the borrower agrees to the conditions of the bank, the Banker notifies him of the necessary documents which need to be presented to the bank.
8.3.
Notification to GEEP about decision after loan approval
After positive or negative decision on the loan, the Credit Officer notifies GEEP by sending an email on the following:
In case of the positive decision with the subject “Energocredit Approval – Title of Company”
In case of negative decision with the subject “Energocredit Reject – Title of the Company”
8.4.
Cc sent to: Manager and Reporting Officer
Documenting Process
Documenting process is implemented according to the standard procedures existing within the bank.
8.5.
Issuing Loan
The loan is issued by the procedure fixed within the bank
8.6.
Payments to suppliers
After the issue of the loan, the payment with supplier/s is made by the bank transfer, or in case this is impossible, in cash, with an obligation to present the document on purchase to the bank.
8.7.
Monitoring of Loan Purpose
After installation of the Energy Efficient facilities the borrower must prepare the final reporting form (Completion Report in Annex 3) and enclose the documentation confirming the purchased facilities. In the final report, the Client must present the financial documentation proving the energy costs (gas, electricity and water payment bills), the Banker is obliged to send the indicated documentation with the credit filing Overview Of The Energocredit SME Loan Approval Process.
9. ENERGY AUDIT GEEPassesses the scope and potential projectsthrough preliminary investigations, site visits and acquisitions of information. GEEPundertakes a preliminary technical screening with the following: A brief description of the Client with basic information of its business and operations; A brief description of the project concept with the general project scope and anticipated cost of investment; Preliminary assessment of compliance with eligibility criteria. GEEP defines the scope and potential for energy saving measures, including No/Low, Medium and High cost measures. Where alternative solutions exist, these alternatives are described and evaluated. The evaluation will cover a discounted cash flow forecast and its profitability (IRR, NPV, etc.), analysis of technical risks associated to construction, maintenance and operation of the equipment, proposed implementation plan, review of compliance of the project with applicable environmental, health & safety laws/standards. The EA Report will cover the following issues: Energy balance of the industrial operations (if applicable) Analysis of production costs associated to energy use (if applicable) Technical feasibility analysis of the proposed measures Identification of additional feasible energy savingopportunities Cash flow analysis of a proposed measures and profitability analysis (including as a minimum: IRR, NPV) Assessment of anticipated energy saved and/or generated through the proposed investments Financial plan for the investment Assessment of compliance with applicable environmental, health & safety laws, regulations and standards Analysis of reduction of emissions of greenhouse gases