Washington, D.C., August 23, 2006—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
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 10,000 to 30,000 tons per year. It
is also expected to reduce the energy output equivalent to a medium-size
coal-fired power plant.
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
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
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
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.