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european energy efficiency fund highlights 135.4 million euros committed capital 126.5 million euros invested capital 314.938 thousand tonnes carbon dioxide equivalents (cumulative carbon savings from fund inception to q4 2017) 8 countries in the investment portfolio 2 signed eeef taf projects in 2 member states 245.537 thousand megawatt hours (cumulative primary energy savings from fund inception to q4 2017) 12investments and 35 one commited project public authorities, of which • 4 public authorities are related to the eeef taf • 1 is the financing of a community project • 5 investments from the eeef’s portfolio go directly into cities

welcome dear reader, in november 2016, the commission adopted its proposal for europe’s most ambitious and comprehensive energy package (the clean energy for all europeans package), comprising eight legislative acts and accompanying measures to deliver secure, sustainable and competitive energy by 2030 and contributing to our paris climate agreement commitments. this improved regulatory framework, and in par- ticular the new regulation on governance of the energy union, will help to spur sustainable investment to support the clean energy transition in the eu. energy efficiency is a critical element of the energy transition, but it needs high investment to reap its many benefits. the right policy framework can encourage both public and private investment to reduce the cost of finance for energy efficiency projects. an example of this is the september 2017 update of eurostat guidance on the recording of energy performance contracts (epcs) in eu member states’ gov- ernment accounts: a regulatory change that helps remove barriers to energy efficiency investment in the public sector. the public sector has to lead by example and demonstrate efficient building renovation- and show how its impact can be great because of public ownership of building stock. the new eurostat guidance will allow wider use of energy performance contracting which, combined with private sector funding, will help to support the development of a stronger eu market for energy service companies. 4 eeef annual report 2017

letter from the chairman dear reader, when prime minister justin trudeau announced the climate theme for canada’s 2018 g7 presidency, ‘working together on climate change, oceans and clean energy’, he stated: ‘it is more urgent than ever that the world comes together to fight climate change, including by investing in clean energy and developing innovative clean technologies…’ in june 2018, leaders gathered at the 44th g7 summit to develop strategies to facilitate this global is- sue. within 30 years, around 70% of the world’s population will live in cities. operational efficiency, cost reduction and environmental sustainability will be key drivers to accommodate this development. sectors such as energy, lighting and transport have the most impact in the smart city universe, as effi- cient energy is the cheapest energy of all. cities should be leading the energy transition. the european energy efficiency fund (eeef) continues to support the ‘advancing sustainable energy for europe’ initi- ative through its successful collaboration with public authorities, in particular by working towards the achievement of the newly agreed 32.5% energy efficiency target for 2030 within the european union. in august 2017, the fund entered its seventh year of operation, and we proudly reflect on the success of the eeef over the last 12 months – the successful start of the eeef technical assistance facility (taf) with two signings achieved and the continued expansion of the fund’s geographical footprint through reaching financial close for a pv project in portugal. as per 31 december 2017, the fund has been actively involved with 35 public authorities across europe via the eeef’s investment portfolio, the european commission technical assistance facility (ec taf) and the newly launched eeef technical assistance facility (eeef taf), which received funding from the elena facility under the european union’s horizon 2020 programme. as of year end, the eeef port folio comprised of 13 different projects in eight member states of the european union. the over- all fund allocation as of 31 december 2017 stands at €135.4 m. the total income for the fund was €5.5 m, and operating profit was at a new high of €2.2 m. the profit enabled the eeef to pay the 2017 target dividend as well as a complementary dividend to its shareholders. additionally, the fund was able to replenish the eeef’s taf with over €270,000. the fund launched its own eeef technical assistance facility (eeef taf) in 2016. in addition to its own funds, the eeef taf secured elena funding under the horizon 2020 programme. the new facility builds on the experience gained from the ec ta facility and introduces improved features helping public au- thorities to realise a higher project implementation rate. one of these features is the shorter project development timeframe. on average, the development of an energy efficiency project in the public sector takes around 4.5 years – conceptual phase to implementation. the eeef taf efficiently reduces this timeframe to two years by directly allocating consultancy services to the ta beneficiaries (tender completed by the eeef). the city of gijón (spain) was the first beneficiary of the eeef taf, closely followed by the province of ferrara (italy). both public authorities have embarked on ambitious journeys to develop their pro- jects (public building and street lighting upgrades) within a two-year timeframe. with the continuous guidance of the eeef and the expert consultancy teams selected to deliver the necessary services, we believe the near-term future will see these projects develop into around €35m worth of green invest- ment programmes. the eeef taf will be an additional driver to reinforcing the fund’s project pipeline, as was seen with the european commission ta facility (ec taf), which closed its operations in 2017. 6 eeef annual report 2017

letter from the investment manager dear reader, 35 public authorities with investments across eight countries – france, germany, italy, the netherlands, romania, spain, portugal and the uk – are working with the eeef since its inception. the fund has actively pursued investments of €135.4 m in the sectors of energy efficiency, renewable energy and clean urban transport. with- in these sectors, the eeef is financing a variety of technologies starting with build- ing upgrades, public lighting refurbishments and, pv installations to more complex chp and tri-generation plants. ‘in total, the eeef portfolio now consists of 13 projects, with total investments of €135.4 m spread across eight different eu member states.’ the new eeef technical assistance (ta) facility, which received funding from the elena facility under the horizon 2020 programme of the european union, launched at the end of 2016 and successfully closed the first call for proposal in march 2017. the new facility attracted interest among various pub- lic authorities seeking support to develop their sustainable project plans. the programme provides the public authorities with consultancy services to enable the realisation of the project. the eeef achieved two signings for ta projects, including the city of gijón (spain) and the province of ferrara (italy) – main- ly for public building renovation and street lighting upgrade. both ta beneficiaries have embarked on ambitious journeys to develop their projects within a two-year timeframe. each beneficiary is support- ed by the eeef and the allocated consultancy team to deliver around €35 m worth of green investment programmes for the eeef pipeline. by completing feasibility studies, energy audits and evaluating the economic viability of the investments in a timely manner, the ta beneficiaries aim to publish their first tenders only six to 12 months after signing the ta agreement with the eeef. for the city of ferrara, the tender publication is expected within the first half of 2018. the new facility builds on the experience gained from the european commission ta facility, which was managed by the eeef, but introduces improved features, helping public authorities to realise a higher project implementation rate. one of these features is the shorter project development period, which has been demonstrated already in practice as described above. on average, the development of an energy efficiency project in the public sector takes around four and a half years (conceptual phase to implementation). the eeef ta facility aims to reduce this period to no more than two years by direct- ly allocating consultancy services to the ta beneficiaries. the eeef is currently in the selection process of two further ta projects, including the italian ministry of defence (ducal palace of modena, italy). the european commission (ec) ta facility – which closed its operations in december 2017 – was also a powerful tool for public authorities to receive the internal and external required resources. initially, 16 ta projects were approved by the facility, of which 10 projects have been facilitated, with a total 8 eeef annual report 2017

the eeef in 2017

new financial arrangements for projects sector: street lighting spain santander project profile the municipality of santander has 174,612 inhab- itants and is located in the cantabria region in spain. it benefitted from funding from the europe- an commission technical assistance facility (ec ta facility) managed by the eeef in order to conduct feasibility studies and, subsequently, launch the esco tender for the renovation works. the main objective of the project is to upgrade around 22,300 lighting points using led lumi- naires and wireless sensors to connect each lumi- naire with the municipality’s digital communication network and the remote control system. the pro- ject is expected to realise 80% in primary energy and co2 savings annually compared to baseline, which is 39,848 mwh and 4,395 t p.a. in absolute terms, and will result in €5.4 m of monetary ben- efits for the municipality over the 15-year period of concession. the project reached completion in december 2017, when elecnor s.a. and the fund signed a forfait- ing facility of €9.2 m to finance the replacement of old sodium vapour lamps with led luminaires. the fund invested in the project immediately upon completion of the installation works. project partner elecnor s.a. is an international company from bilbao with 60 years of experience in developing, build- ing and maintaining infrastructure assets and ex- perienced in renewable and energy efficiency pro- jects. it is working on numerous private and public projects in the region and has expertise in produc- ing renewable energy and implementing energy- efficient building refurbishment projects. highlights santander is a member of the covenant of may- ors and a founding member of the spanish net- work of smart cities (reci), which includes 62 cit- ies. as a leader in the smart cities initiative, the city is managing a unique in the world city-scale experimental research facility in support of typi- cal applications and services for a smart city. the smart street lighting upgrade financed by the eeef is adding value to the pioneering role that the city is playing in the initiative. key figures type of investment: financial close: forfaiting facility 18.08.2017 total project size (¤m): eeef investment size (€m): 9.2 9.2 maturity estimated tco2e emission savings (p.a.): 13.88 years 4,396 12 eeef annual report 2017

projects completed construction phase the award winning energy efficiency upgrade of italian university hospital s. orsola malpighi is completed the energy efficiency upgrade of the italian uni- versity hospital s. orsola-malpighi in bologna has been completed by the european energy efficiency fund (eeef). antonella messori, director general of the hospital, describes its main development goals as twofold: firstly, to address the obsolescence of its energy systems, and secondly, to meet the in- creasing energy demand driven by the need for the hospital to grow and innovate. once the project concept was validated in 2012, it became clear the biggest challenge would be to secure financing for a major infrastructure project at a critical time for capital raise in italy. gy consumption, costs and pollution. the project, now complete and in full operation, achieved final commissioning in 2017, with inauguration taking place on 20 october 2017. the new production and distribution efficiency lev- els, together with the use of energy recovery, will lead to primary energy savings equal to the annu- al consumption of 3,072 household boilers. the project was realised within the complex network of the hospital, including 87 operational units, without disrupting medical services provided to patients – namely 20,000 visitors daily. the eeef provided the university hos- pital with a project and vat bond facil- ities of €31.8 m in 2013. together with its project partners progetto isom (con- cessionaire), manutencoop and siram (epc/o&m consortium and sponsors) and sinloc (financial arranger and spon- sor), the eeef has been pursuing the implementation of this award-winning project over the last four years. the project consortium upgraded the entire fluid production and distribution system of the hospi- tal, including the construction of its own tri-genera- tion plant and a district heating and cooling (dhc) network of 15 kilometres. the facility is located in the centre of the ancient city, which added further complexity to the implementation. a team of 750 workers and 60 engineers worked on new gener- ation power plants and a tri-generation system producing a combination of electric, thermal and cooling energy for the hospital to lower its ener- for the local public healthcare, it is a significant step forward, as the university hospital is one of the largest in the country, making it a model for others to follow. this project was one of the most important operations in energy efficiency for the healthcare sector in italy. recognised in 2015 at the cesef energy efficiency awards in the financial category, this is a great achievement demonstrat- ing how positive energy efficiency investment in a hospital through a public-private partnership can improve the service for citizens and create better working conditions for staff, while at the same time contributing to a healthier environment for the community. ‘i believe the citizens of bologna were waiting for a project of this kind, for bologna qualifies as the city of health, and it’s important that the city of health does not pollute. the new tri-generation plant will allow us to avoid pollution and at the same time save energy’, said virginio merola, mayor of bologna.‘ at the end of the day, we can say we have worked well because we have worked together’, he concluded. antonio rigon: ceo sinloc (financial arranger and sponsor): ‘the overall project was very ambitious and achieved outstanding results.’ picture from left to right: mr stefano bonaccini (president of region emilia-romagna), mr virginio merola (mayor of city of bologna), mrs antonella messori (director general of university hospital s. orsola), mr francesco ubertini (rector of university of bologna), mr claudio levorato (manutencoop) 14 eeef annual report 2017

low carbon agenda for european cities cities have much to gain from embracing the low carbon agenda by i) shaping the built environment for the future, ii) contributing to climate action and iii) using environmental data as a powerful communication tool. institute of environmental management & assessment (iema): ‘the ghg emissions from all projects will contribute to climate change – the largest interrelated cumulative environmental effect.’ with many local governments understanding that climate change is a pressing issue and that con- tributing to eu greenhouse gas (ghg) emission re- duction targets lies in their responsibility, there are numerous challenges associated with incorporat- ing climate concerns in their political agenda. em- bracing the low carbon agenda requires that cities incorporate this mission into their development vi- sions and investment plans. to do so, they should define specialised resources in order to understand which projects add the most value to their current status and development plans. furthermore, many cities are already contributing technical data points (e.g. carbon emissions of municipality buildings) to the regional carbon budgets – energy audits, calculations of ghg emission savings, contribu- tion to regional carbon saving programmes etc. are necessary for the collection of this data. the ag- gregation of such data may require expertise and can often be complex but can provide a powerful tool in the creation of successful communications promoting their low carbon agenda to share with local constituents and beyond. if cities choose to action climate change by mi- grating to a low carbon society, they will not only limit the cost of delaying actions and complement cost savings through increased efficiency and en- ergy security but may also contribute to social and well-being improvements within the local area. the implementation of policies relating to the reduc- tion of ghg emissions via the implementation of energy efficiency projects can result in significant reductions in energy bills, and these energy sav- ings can compensate for the initial investment. whilst it is easy for many to relate to benefits con- nected to cost reduction measures, e.g. reduced energy bills, the advantages of reducing ghg emis- sions may be less obvious or more challenging for cities to communicate to their stakeholders. whilst many accept the theory that the higher the carbon emissions, the higher the contribution to global climate change is, for many this is challenging to contextualise into everyday life. the successful communication of environmental data into a di- gestible form can prove to be a very powerful tool and should not be limited to internal reporting (e.g. contributions to local and national carbon budgets). cities can have specific publications regarding the low carbon transition they are undertaking, includ- ing the city’s carbon footprint. presenting carbon footprints in a relatable way to the citizens (e.g. by expressing it in terms of the population or by av- erage household size) will enhance digestibility. another successful way to communicate ghg emis- sions (using carbon equivalents) is by using well- known items including household consumption of electricity etc. to contextualise savings. the eeef annually saves the equivalent of 50000 people’s consumption* in terms of carbon emissions and cumulatively has saved enough energy to power 16300 households for a year**. the reduction of ghg emissions also relates to a number of local and national environmental benefits and their im- pacts, which in turn have cyclical advancements for the entire city. ghg emission reduction should not be limited to the number of tonnes of carbon equivalents a pro- ject saves each year but should inculde how this translates into benefits for the local community and national targets. *calculation based on the consumption of 6.3 tco2 per capita within the eu in 2015; sourced from the “co2 emissions from fuel combustion” report; international energy agency **calculation based on the consumption of 15 mwh/household within the eu in 2015; source: eurostat and statista. this relates to eeef‘s cumulative primary energy savings as of end 2017. 16 eeef annual report 2017

the european energy efficiency fund at a glance

the mission the eeef’s mission is to contribute to advancing sustainable energy for europe in the form of a public-private partnership (ppp) with a layered risk/ return structure, to enhance energy efficiency and foster renewable energy within the european union, primarily through the provision of dedicated financing to municipal, local, regional or national authorities or public or private entities acting on their behalf. financing is generally provided directly or through partnerships with financial institutions. investments by country * 3% united kingdom 6% netherlands 1% germany 4% portugal 9% spain 35% france 18% romania 23% italy * based on commitments signed to projects, not including repayments or accrued interests. 20 eeef annual report 2017

the framework will help to: - provide affordable energy -increase the security of the eu’s energy supplies - reduce dependence on energy imports - create opportunities for growth and enhance environmental and health conditions the eeef’s objectives the eeef aims to support the climate goals of the europe- an union (eu 2030 framework for climate and energy) to promote a sustainable energy market and foster climate protection by: • contributing to the mitigation of climate change • achieving economic sustainability for the fund • attracting private and public capital for climate financing 22 eeef annual report 2017 eu framework targets for climate and energy2030

the fund’s setup the supervisory board represents the fund’s shareholders. it conducts a permanent supervi- sion of the management of the fund and provides strategic advice to the management board on the overall development of the fund’s activities. it is appointed by the general meeting of shareholders. the investment manager conducts the fund’s business on behalf of the management board and the investment committee. the investment manager also manages the european commission technical assistance facility (ec taf) and the eeef taf at arm’s length. the management board acts on behalf of the fund, oversees its activities and is responsible for strategic decisions. it is the legal representative of the fund. in compliance with the eeef’s founding documents and applicable laws and regulations, it has the power to administer and manage the fund. 24 eeef annual report 2017 partnership dedicated to mitigating climate change

development of the eeef since inception 2013 may • financing of energy efficiency upgrade of the university hospital s. orsola-malpighi in italy • the city of córdoba benefits from the ec ta facility june • the eeef achieves financial close on its first equity investment, the city of orléans’ chp plant in france • la palma cooperates with the eeef on technical assistance september • the eeef enters into a green on-lending facility with banca transilvania in romania november • the municipality of ringkøbing- skjern signs a technical assistance agreement • the ore valley housing association and the région of rhône-alpes benefit from the ec ta facility december • the eeef achieves financial close for its second equity investment, the city of rennes’ chp plant, and the bolloré transaction (green transportation initiative for the cities of paris, lyon and bordeaux) • the cities of marbella, terrassa and elche cooperate with the eeef on technical assistance 2011 july • the eeef is created and capitalised by the initiators ec and eib and the founding investors cdp and db 2012 january • operational and procedural setup of the fund finalised march • the jewish museum berlin foundation joins the eeef as its first partner institution via the esco of johnson controls november • financing of building retrofit project at the university of applied sciences munich december • the city of santander cooperates with the eeef on technical assistance 26 eeef annual report 2017 2014 april • financing of street-lighting upgrades for the city of venlo • the eeef achieves financial close for a senior financing facility for the société publique locale d’efficacité énergétique (spl) in the région rhône- alpes june • the university hospital of liège and the university of liège sign a technical assistance agreement july • the limerick and clare education and training board benefits from the ec ta facility august • gre-liège cooperates with the eeef on technical assistance september • alentejo central signs a technical assistance agreement december • the municipality of zaanstad and the roscommon county council benefit from the ec ta facility

2017 activities report: investments

the eeef’s investments since its inception, the eeef has invested a total of €135.4 m in 13 partner institutions, of which €126.5 m have so far been disbursed. germany (berlin, munich) €1.6 m • € 1.0 m forfaiting loan to the jewish museum berlin foundation via the esco of johnson controls • € 0.6 m forfaiting loan to the university of applied sciences via the esco of johnson controls france (orléans, rennes, paris, lyon, bordeaux, région rhône-alpes) €47.4 m • € 5.1 m shareholder loan and equity for the city of orléans’ chp plant • € 7.3 m shareholder loan and equity for the city of rennes’ chp plant • € 30.0 m senior debt to bolloré • € 5.0 m senior debt to the société publique locale d’efficacité énergétique (spl) in the région rhône-alpes spain (madrid, santander) €11.7 m italy (bologna) €31.8 m • senior loan and vat facility to progetto isom for the upgrade of the university hospital s. orsola-malpighi united kingdom (cardenden) €4.3 m • senior debt facility to the ore valley housing association via the spv cardenden heat and power • € 2.5 m forfaiting loan to the universidad politécnica de madrid via enertika • € 9.2 m forfaiting loan to the city of santander to upgrade existing street lighting portugal (lisbon) €5.1 m • junior funds to be invested in the installation: add the space of solar panels on municipality buildings 30 eeef annual report 2017 netherlands (venlo) €8.5 m • senior debt facility to the city of venlo romania (various locations inc. cluj-napoca, bucharest) €25.0 m • subordinated loan to banca transilvania

france bolloré the french company bolloré, a provider of car-sharing services for electric cars, signed a bond agreement worth €30 m with the eeef in 2013. the investment financed electric cars and the infrastructure (i.e. charging stations, rental places, etc.) required for bolloré’s european electric car rental concessions. the project, providing cities with environmentally friendly electric cars, started in paris (6,500 charg- ing stations in more than 90 municipalities), and has subsequently been extended to lyon and bordeaux. the eeef’s bond has mainly been uti- lised in these locations. at the end of 2016, bol- loré had 4,000 cars and 6,500 charging stations installed across france. the project has expanded throughout europe to italy (turin) and the uk (lon- don) as well as to asia (singapore) and the usa (indianapolis and los angeles). key figures sector: clean urban transport type of investment: financial close: senior debt 23.12.2013 total project size (¤m): eeef investment size (€m): 30.0 30.0 maturity * estimated tco2e emission savings (p.a.): 5 years 8,893 france city of orléans sector: renewable energy / biomass chp the operating combined heat and power (chp) plant has an installed capacity of 7.5 mw in electricity and 17 mw in thermal heat. the plant supplies heat to the city of orléans and sells electricity via a power purchase agreement (ppa) to électricité de france (edf). orléans biomasse énergie, the project’s special purpose vehicle (spv), is major- ity owned by the eeef (purchase of 84.4% of its shares). this project was the first equity invest- ment by the fund. the project enables a decentralised energy sup- ply for the city of orléans using an existing district heating network. the plant, which is fired by wood biomass from a sustainable source, allows 15,000 households in the city to achieve annual savings of around €200 with the new energy source and increases the environmental sustainability. key figures type of investment: financial close: junior funds 12.03.2013 total project size (¤m): eeef investment size (€m): 36.0 5.1 maturity observed tco2e emission savings (p.a.): perpetual 17,920 * based on asset value notice information for locations in france. 32 eeef annual report 2017

sector: renewable energy / biomass chp cogeneration plant, rennes biomasse énergie sas was authorised to build and operate a combined heat and power facility with an electrical output of 10.4 mw and a thermal output of 22 mw for the next 20 years. rennes biomasse énergie, the pro- ject spv, is majority owned by the eeef (purchase of 85% of its shares). this is the second equity in- vestment signed by the eeef. the project enables a decentralised energy sup- ply for the city of rennes using an existing district network. the plant will allow 21,000 households in the city both to save money with the new en- ergy source and to increase their environmental sustainability. the chp biomass plant achieves significant carbon savings whilst still generating heat aligned with baseline requirements. france city of rennes following a bid for tenders launched by the french commission de régulation de l’énergie (cre3) for the production of green energy using a biomass key figures type of investment: junior funds total project size (¤m): financial close: 12.12.2013 eeef investment size (€m): 47.6 7.3 maturity observed tco2e emission savings (p.a.): perpetual 11,286 netherlands city of venlo project video link: www.eeef.lu/video-venlo.html the city of venlo and the eeef signed a long-term financing contract for €8.5 m. the city’s existing public lighting is the biggest contributing factor to its electricity bill. the city therefore prioritised up- grading its street lighting in order to reduce its en- ergy consumption and co2e emissions, as well as to save costs for the public budget. in 2017, the project was completed, with a total of 17,169 led luminaires being replaced and 1,674 lighting poles. the project was able to fund additional lighting points compared to the feasibility audit (16,000) as a number of lighting poles were in sufficient con- dition and did not require replacement, resulting in funds being available for additional leds. the project is achieving primary energy savings of circa 50% and is further proof of the city’s commitment to environmental sustainability. key figures sector: energy efficiency / street lighting this street lighting project is linked to preparation works resulting from technical assistance. venlo benefited from funding from the european com- mission technical assistance facility (ec ta facil- ity). this enabled the city to tender and select the equipment manufacturer for the provision of the led equipment. type of investment: senior debt total project size (¤m): financial close: 03.04.2014 eeef investment size (€m): 8.6 8.5 maturity observed tco2e emission savings (p.a.): 15 years 977 34 eeef annual report 2017

sector: energy efficiency/ system upgrade/ tri-generation system/ implementation of a tri-generation system italy university hospital s. orsola-malpighi project video link: www.eeef.lu/video-bologna.html the project entity progetto isom signed a con- cession agreement with the university hospital s. orsola- malpighi, one of the biggest hospitals in italy (1,758 beds). the eeef provided a project and vat bond facility totalling €31.8 m. of heat exchange substations and the inclusion of an underground tri-generation plant for combined cooling, heat and power production (cchp) based on the energy consumption of the hospital facility, fuelled by methane gas. the project comprises a number of initiatives that improve the energy efficiency of the entire fluid production and distribution system and reduce energy consumption. such measures include the adoption of energy efficient equipment such as cen- trifugal chillers and absorbers, the reconstruction of the heat distribution networks, the renovation in 2017, carbon savings were 28% compared to baseline, and primary energy savings were at 25%. this upgrade of the entire energy system of the uni- versity hospital has been the biggest energy effi- ciency upgrade in italy completed as part of a ppp. key figures type of investment: financial close: senior funds 08.05.2013 total project size (¤m): eeef investment size (€m): 41.0 31.8 maturity observed tco2e emission savings (p.a.): 20 years 12,662 36 eeef annual report 2017

romania banca transilvania the eeef provided banca transilvania (bt), one of the largest banks in romania in terms of assets, a facility for a green on-lending programme to sup- port energy efficiency and renewable energy in- vestments by the public sector in romania. in bt, the eeef has gained a strong local partner with a history of financing several energy efficiency pro- jects and a solid footprint in financing smes. this cooperation is helping to strengthen the romanian banking sector by providing financing to energy ef- ficiency and small-scale renewable energy projects. sector: energy efficiency / renewable energy / clean urban transport bt is using eeef funding to give financial support to public and private building owners, homeown- er / condominium associations and municipalities, public sector entities and private sector companies acting on behalf of the public sector. this is the first cooperation between the eeef and a financial institution, as well as the eeef’s first in- vestment in eastern europe. the eeef is support- ing bt in sourcing and evaluating underlying pro- jects where needed, and the latter ensures that the financed projects comply with the eeef’s require- ments with respect to a co2e emission/primary energy consumption reduction of at least 20%. furthermore, the eeef can jointly finance projects with bt if larger financing amounts are required. at the end of 2017, bt had financed and enabled 11 projects. the annuel savings of the projects im- plemented up to the end of 2017 are 20,925 mwh in primary energy savings. key figures type of investment: subordinated debt 26.09.2013 financial close: total project size (¤m): eeef investment size (€m): 25.0 25.0 maturity 10 years 34.3 million euros total volume financed through the facility 11 subprojects funded 262,704 cumulative primary energy savings 3 technologies funded 13 different project locations reached 61,908 cumulative co2e savings portfolio facts

2017 activities report: funding ‘another remarkable effect of the eeef facility is that local and national financial institutions found the way paved and provided short- and long-term financing.’ eric fournier, vice président à l‘environnement du conseil régional auvergne rhône-alpes and mayor of chamonix 125

funding situation the european energy efficiency fund s.a., sicav-sif, was initiated by the european commission in cooperation with the european investment bank. the initial capital provided by the european commission (€125.0 m) was increased by contri- butions from sponsors comprising the european investment bank (€75.0 m) cassa depositi e pres- titi (€59.9 m) and the fund’s investment manager, deutsche bank (€5.0 m). the eeef has initiated its fundraising activities, ready to ensure constant investor commitments from the private and public sectors to grow the fund sustainably. shareholder structure based on called amounts 1.4 m (1.0 %) deutsche bank 21.2 m (15.5 %) european investment bank 136.5 million euros total 16.9 m (12.4 %) cassa depositi e prestiti spa 97.0 m (71.1 %) european commission current division of investments committed to the eeef 125.0 m (47.2 %) european commission (ec) 75.0 m (28.3 %) european investment bank (eib) 59.9 m (22.6 %) cassa depositi e prestiti spa (cdp) 5.0 m (1.9 %) deutsche bank (db) 264.9 million euros total 42 eeef annual report 2017

technical assistance support

european commission technical assistance facility since 2011, the fund has benefited from the european commission tech- nical assistance facility (ec ta facility), which supports the mission and strategic direction of the fund and is primarily for assisting public partner institutions in their project development activities by preparing valuable investments. the application phase for securing grants under the ec ta facility ended on 31 march 2014, and 2017 saw the facility draw to a close. the facility proved to be a powerful tool for public authorities to receive the capacity needed (wheth- er internally or externally) for elaborating on their potential investment plans for green investment programmes, in particular the feasibility and bank- ability of planned projects. the ta beneficiaries have been working intensive- ly over the past years in the fields of energy effi- ciency and renewable energy, with the intention to implement a series of measures to keep their cities clean and sustainable. the ta programmes aimed to launch: i) building retrofit projects through energy perfor- mance contracts (epc); ii) upgrades of street lighting systems; iii) public vehicle replacement schemes and iv) small-scale renewable energy projects includ- ing photo voltaic (pv) and wind installations. the public authorities have recognised energy efficiency as an important tool to reduce opera- tional costs and at the same time to contribute positively to their economy and environment by creating new jobs. the ta support was also pivotal to keep all mayors and municipal technicians involved in the devel- opment of the project and in achieving the main goals. some ta projects contributed to the prepa- ration of renewable energy production infrastruc- ture to be developed within municipalities, to re- duce environmental pollution. purpose to raise municipal awareness of lowering or even neutralising carbon footprints, the european com- mission provided the eeef with the ec ta facility. this facility aimed to accelerate investments in the fields of energy efficiency, small-scale renewable energy and clean urban transport. the ec ta facility supported its beneficiaries, which were exclusively public entities, in developing their green project ideas further by providing grants for up to 90% of the total development costs, subject to subsequent partial financing by the eeef. the technical assistance grants aimed to facilitate project implementation by supporting the prepa- ration of feasibility studies, business plans, ten- dering processes, etc. 46 eeef annual report 2017

9.6 million euros ta funding provided for realised projects the eeef has already invested in four ta projects, with a combined total project volume of 53.9 million euros the spl oser (région rhône-alpes) demonstrated that each euro spent on ta was able to generate over 22.3 times its value in long-term investments. this met and exceeded the required leverage ratio of 1:20. 48 eeef annual report 2017

eeef technical assistance facility €389,500 approved to ferrara province €400,000 approved to city of gijón following the european commission ta facility managed by the eeef, the fund set up the eeef ta facility to support ambitious public beneficiaries in developing bankable sustainable energy investment programmes. these projects shall relate to the energy efficiency sector, small-scale renewable energy and/or public urban transport. the eeef ta facility aims to bridge the gap between sustainable energy plans and real investments by supporting all activities necessary to prepare invest- ments into sustainable energy projects. eligible applicants are regions, city coun- cils, universities, public hospitals and other public entities located in the member states of the european union. on average, the development of an energy efficien- cy project in the public sector requires around 4.5 years from the conceptual phase to implementation. the eeef taf efficiently reduces this time frame to two years by directly allocating consultancy ser- vices to the ta beneficiaries (tender completed by the eeef). this means that the eeef selects ap- propriate experts with the required know -how and expertise via a tender process (completed entirely by the eeef) and assigns them to the relevant in- vestment programmes. the ta beneficiaries can use the consultant services to, for example, carry out feasibility studies and energy audits and eval- uate the economic viability of their investments. legal support for the investment programmes, on the other hand, will be mandated by the ta bene- ficiary directly, while costs can be covered by the eeef. the eeef has selected a pool of consultants who will work closely with the public authorities during the preparation of feasibility studies, ener- gy audits, public tender processes, etc., as well as providing legal support. the eeef ta facility has received funding from the elena facility under the horizon 2020 programme of the european union. the first call for proposal of the eeef ta facility was successfully closed on 1 march 2017. the recently launched facility at- tracted interest among various public authorities seeking for support to develop their sustainable project plans. in addition to numerous early-stage ta enquiries, the eeef received six ta applications from public authorities. application by public authority • submission of standard application • selection in case eligibility criteria are met scoping of the ta project ta implemen tation monitoring and reporting public procurement financing • allocation of eeef • advisory services • monthly time • upon positive • entering into consultant • scoping of work jointly by ta beneficiary and consultant according to agreed implementation timeline sheets to monitor ta progress • further reporting outcome, invest- ment programme to be procured • selection of esco ( s) financing phase with eeef • financing contract signing 50 eeef annual report 2017 maximum two years

gijón is the first city joining the eeef to collaborate on the new eeef technical assistance facility ayuntamiento de gijón is the first public authority participating in the new eeef technical assistance facility of the fund with the full commitment of its mayoress, the city of gijón has embarked on an ambitious journey to finalise energy audits for 98 public buildings and 40,000 street lighting points, identifying a set of energy efficiency and/or renewable energy relat- ed interventions as well as publishing the tender- ing documentation to launch a €20 m investment programme (estimated) in renovation works and selecting an esco company to realise the meas- ures within a two year time-frame. the eeef will be accompanying the city during the whole process whilst collaborating with the management team proposed by the city side by side. the eeef is confident of being the right partner for medium-sized european cities which have the drive and willingness to elaborate and implement investment programmes and as a result offer their citizens cleaner and more livable environment. project partner the city of gijón is the largest munici- pality with a population of 270,000 cit- izens in the community of austurias in spain. for three years, the city has been developing its european agenda and po- sitioning itself as ‘gijón en europa’ with a number of projects and initiatives at the european level. 52 eeef annual report 2017

carbon, environment & impact management

project assessment and monitoring eligible projects the eeef can invest in a range of energy efficiency, clean urban transport and small- scale renewable energy technologies, providing the carbon or primary energy sav- ings investment criteria are met. each project must achieve at least 20% primary energy and/or carbon savings compared to baseline. the fund may only invest when savings are in addition to other investment criteria. project assessment and monitoring as the eeef can finance a variety of technologies, the initial technical assessment and ongoing monitoring of investments must strike the correct balance between accuracy and practicality of im- plementation. how the eeef evaluates technical eligibility is based on the project’s technology and loan size; for ex- ample, small standard (e.g. street-lighting) project savings can be calculated using validated calcu- lations from the investment manager’s carbon and environment impact management (ceim) tool, greenstem™. for larger and more complex technol- ogy projects, detailed energy analysis is required in the form of third-party-validated reports. as part of the due diligence process and through- out the lifespan of the loan, the eeef evaluates and monitors the project savings performance in alignment with the international performance mon- itoring and verification protocol (ipmvp), which re- quires every project to establish baseline energy consumption and then to conduct a post-project implementation assessment. the investment manager’s ceim team reviews the technical details of all eeef investments and works with project managers to enter relevant data points into greenstem™. greenstem™ all of the eeef portfolio-report impact indicators are tracked in greenstem™, a proprietary web based tool from the investment manager which automat- ically and consistently calculates anticipated and realised energy, primary energy and carbon sav- ings. for small loans and standard technologies, greenstem™ completes calculations based on project-specific data inputs and project location/ technology conversion factors. the tool stores en- ergy and emission conversion factors to ensure a consistent reporting approach across the portfo- lio. factor sources include the chartered institu- tion of building services engineers for technology benchmark data and the intergovernmental panel on climate change for the conversion of energy da- ta into greenhouse gas emissions. all calculations and data sources used within the tool have been validated by a third-party engineering company. greenstem™ provides comprehensive, timely and accurate reporting charts and dashboards which have been configured specifically for eeef user groups. the tool is flexible and can be customised to include additional technologies in the portfolio. 56 eeef annual report 2017

primary energy and greenhouse gas emission savings 2017 eeef projects aim to achieve at least 20% primary energy savings on an annual basis (higher for the building sector) and a 20% reduction of co2 equivalents for transport and renewable energy projects. the quality of the methodology used to calculate the expected savings of projects is crucial. this allows the eeef to ensure its projects satisfy international standards regarding co2e and primary-energy- saving reporting. due to the wide variety of technologies included in the eeef’s portfolio, the investment manager has developed a standardised approach to calculating the project energy, primary energy and carbon savings for the eeef’s most common project technologies. carbon emission savings and primary energy sav- ings were reported for the entire portfolio of 13 investments / signed commitments for a range of energy efficiency and renewable technologies in- cluding chp biomass, small-scale wind and electric vehicles. once a project has been in operation for a full year, the eeef receives annual audits stating its actual energy consumption. year-on-year consumption variances are expected due to a number of factors, such as weather ad- vances in static data, and therefore project sav- ings can change annually. as shown below, these projects achieved total accumulated savings of 314,938 tco2e and 245,537 mwh of primary en- ergy savings through the end of 2017. 58 eeef annual report 2017 13

financial statements

balance sheet statement of financial position (in €) assets loans and receivables investments in subsidiaries interest receivable prepaid expenses and other receivables cash and cash equivalents total assets liabilities derivative financial instruments payable on eeef technical assistance facility accounts payable and accrued expenses distribution to holders of redeemable ordinary shares net assets attributable to holders of redeemable ordinary a shares net assets attributable to holders of redeemable ordinary b shares net assets attributable to holders of redeemable ordinary c shares 31 december 17 31 december 16 118,617,404 110,639,917 4,256,138 3,326,809 812,796 20,189 881,355 31,349 18,243,683 26,510,091 141,950,210 141,389,521 1,254,516 555,159 1,264,967 587,680 1,409,365 281,723 2,336,299 644,450 32,881,080 32,881,080 6,602,445 6,602,445 98,804,363 97,234,159 total liabilities 141,950,210 141,389,521 62 eeef annual report 2017

statement of changes in net assets statement of changes in net assets attributable to holders of redeemable ordinary shares (in €) as of 31 december 2015 issue of redeemable shares redemption of redeemable shares increase in net assets attributable to shareholders from transactions in shares increase in net assets from operations attributable to holders of redeemable ordinary c shares as of 31 december 2016 issue of redeemable shares redemption of redeemable shares increase in net assets attributable to shareholders from transactions in shares increase in net assets from operations attributable to holders of redeemable ordinary c shares as of 31 december 2017 net assets attributable to shareholders 136,361,772 – – – 355,912 136,717,684 – – – 1,570,204 138,287,888 64 eeef annual report 2017

cash flow statement statement of cash flows (in €) operating profit after distributions to holders of redeemable ordinary a shares and b shares net changes in operating assets and liabilities (increase)/decrease in fair value of investments in subsidiaries (increase)/decrease in prepaid expenses and other receivables (decrease)/increase in accounts payable and accrued expenses (decrease)/increase in unrealised loss on derivative financial instruments increase in contribution to the technical assistance facility increase in interest receivables (increase)/decrease in receivables on subscription distributions paid to holders of redeemable ordinary shares net cash flow (used in)/from operating activities cash flows used in investing activities increase in loans and receivable financial assets net cash flow used in investing activities for the year ending 31 december 2017 for the year ending 31 december 2016 1,570,204 355,912 (929,329) 11,160 (1,071,332) (154,849) 273,436 68,559 (191,236) (9,228) 947,240 392,202 (5,433) (279,291) – 22,358,042 (56,770) (288,921) 2,654 23,570,862 (7,977,487) (7,977,487) (3,669,320) (3,669,320) net increase/(decrease) in cash and cash equivalents (8,266,408) 19,901,542 cash and cash equivalents at beginning of the year 26,510,091 6,608,549 cash and cash equivalents at end of the year 18,243,683 26,510,091 66 eeef annual report 2017

contact: info@eeef.eu www.eeef.eu