European Energy Efficiency Fund Highlights 127 million euros cumulative invested capital 166 million euros current committed capital 15 1 active investments matured investment Cooperated with 34 public authorities since fund inception Investments into 8 member states 4 signed eeef TAF projects in three member states 367,401 thousand megawatt hours cumulative primary energy savings from fund inception to Q4 2018 389,743 thousand tonnes carbon dioxide equivalents cumulative carbon savings from fund inception to Q4 2018 Did you know?

Introduction Welcome Dear Reader, The 24th UN Climate Conference (COP24) took place in December 2018 in Katowice, Poland, and the attendees agreed on rules for implementing the 2015 Paris Agreement. This was in the form of a rulebook and will allow the parties of the Paris Agreement to implement, track and gradually increase their contributions to com- batting climate change in order to meet the Agreement’s long-term goals (including the 2 °C goal).1 The Agreement lays down how countries’ national climate contri- butions should be measured, compared and forwarded to the UNFCCC secretariat. Additionally, the international community reviewed global emissions reductions since 2015. The conference gave the political signal that the participating govern- ments will not stand by the previous climate protection commitments but intend to further improve their national climate protection measures in the future, as agreed in Paris.2 It is estimated that USD 250 – 400 bn is needed in order to meet the UN 2030 goal on energy efficiency.3 The International Energy Agency state that cities represent almost two-thirds of global energy demand and produce 70% of carbon emissions from the energy sector. According to ACEEE, previous invest- ments into the energy efficiency sector were into the building sector (60%) via the renovation of existing building stock followed by 26% of investments into the transport sector, and it is assumed that future years will mirror this investment trend.4 Retrofits of existing infrastructure are challenging tasks for public authorities in our cities; however, reducing existing energy consumption via energy efficiency related investments is a way to accelerate the energy transition process. By implementing such invest- ments, cities can reduce costs, remove pressure on their budgets and support the stimulation of their local economies to create jobs. 4 eeef Annual Report 2018

Letter from the Chairman Dear Reader, When Patricia Espinosa, UN Climate Change Executive Secretary, delivered remarks in March 2019 at the 25th anniversary of the UN Framework Convention on Climate Change, she remarked, “While we’ve made enormous progress in 25 years, the world is still running behind climate change. Today, the urgency to address climate change has never been greater. We have the Paris Agreement, and we have the guidelines strengthening that agreement. What we need now are results.” The EU has been at the forefront of international efforts to fight climate change and was amongst the first to submit its intended contribution to the Paris Agreement through a variety of financial mecha- nisms such as the European Energy Efficiency Fund (eeef). Over the last 12 months, the eeef continued to promote the efficient use of energy at the public level, and to date has successfully collaborated with 34 public bodies across Europe. These partnerships have enabled the Fund to directly invest and commit circa EUR 170 m in various projects and technologies with a range of SMEs and large energy companies to facilitate the enhancement of public infrastructure, including building renovations, pub- lic lighting upgrades, and renewable energy installations. Since its launch, the eeef has gained first-hand experience of public entities’ challenges and has de- veloped innovative financing solutions specifically designed to facilitate the financing for a range of energy efficiency and small-scale renewable energy projects composed of debt and equity solutions. Building on an established track record, the eeef has been instrumental in supporting recent small-scale energy efficiency projects, which when aggregated can have a large impact through the reduction of public spending and carbon emissions. During 2018, the eeef successfully closed two joint ventures, firstly with Siram, which aims to implement energy efficiency projects in Italy, on the basis of the smart cities model and public-private partnerships. The newly established Città Illuminate S.r.l. (transl. Il- luminated Cities) will enable public entities to implement technically advanced solutions, which rely on so-called smart lampposts and the integration of multiple services in street lighting infrastructure. The second partnership sees the Fund joining forces with Sinloc with the mission to enhance energy efficiency in the healthcare and education sectors. The joint venture, Smart H&U, targets a portfolio of investments in public hospitals and universities distributed across several locations in Italy. Sinloc and the eeef will pool smaller projects together under the same umbrella and inject a total of EUR 15 m of risk capital in special purpose vehicles. The structure of both joint ventures will facilitate a project finance approach even for projects of a limited size, which fall beyond the scope of traditional project financing, while significantly lowering the structuring costs. Whilst it is paramount to continue working directly with municipalities to reduce public spending on energy consumption, it is also essential that the public sector is engaged to build further public-private partnerships to ensure that the necessary investments into the sector are mobilised. A further demonstration of the need for innovative financing solutions for an aggregated portfolio is demonstrated via CIMAC (Comunidade Intermunicipal do Alentejo Central) and their street lighting up- grade project. CIMAC was constituted in 2009 and is an inter-municipal community consisting of 14 municipalities. They benefitted from the European Commission’s TAF through providing the resources to conduct the feasibility studies that resulted in aggregating numerous smaller street lighting upgrade projects into a single sizeable project of 56,000 lighting points. This year the Fund entered into its first aggregated street lighting infrastructure transaction benefitting CIMAC via a forfaiting agreement, fol- lowing an energy performance contract format. 6 eeef Annual Report 2018

Letter from the Investment Manager Dear Reader, Over the last seven years, the European Energy Efficiency Fund (eeef) has built tangible relationships with 34 public entities across 12 countries including France, Germany, Italy, the Netherlands, Romania, Spain, Portugal, Lithuania and the UK. To date, the Fund has committed EUR 170.5 m to projects where a public entity is the beneficiary in the energy efficiency, renewable energy and clean urban trans- port sectors. Within these sectors, the Fund is investing into a range of technologies including building upgrades, public street lighting refurbishments, PV installations and complex CHP and tri-generation installations. A highlight of 2018 was the closing of the Fund’s first aggregated street lighting infrastructure transac- tion to upgrade a consortium of municipalities’ public lighting. The eeef signed a forfaiting facility of EUR 12 m to finance the renovation of street lighting infrastructure in Alentejo Central Region, repre- sented by CIMAC (Comunidade Intermunicipal do Alentejo Central). The project includes the UNESCO World Heritage site of Évora. The signing of this agreement illustrates the successful implementation of the eeef’s strategy, from project development to financing. The European Commission Technical As- sistance Facility, previously managed by the eeef, was instrumental in supporting CIMAC with the fea- sibility study that resulted in aggregating numerous smaller projects into a single sizeable project to upgrade 56,354 street lighting luminaires. Following a public call for the works, the project was awarded to I-Quatro, a project company jointly owned by I-Sete (45%) and FomentInvest (55%). The project envisages replacement of existing sodium vapour lamps with energy efficient LED luminaires with- in a nine-month construction period. This upgrade is expected to realise approximately 74% primary energy and CO2e savings annually compared to baseline. In addition, the project will also generate EUR 7.1 m in monetary benefits for the 14 municipalities over a 12-year period of concession. The eeef has built on its experience from the CIMAC project and been able to further establish its prominence in supporting recent small-scale energy efficiency projects through the launch of two joint ventures with key industry partners. When small-scale initiatives are aggregated, there is not only the potential for prominent public spending reductions through reduced energy consumption, but also the ability to achieve positive environmental impacts through the reduction of carbon emissions. This original approach provides a sustainable solution to upgrading public infrastructure in smaller commu- nities through reliable third-party established industry players and energy service companies (ESCO). A successful example of this financing structure is through the joint venture in which the eeef and SIRAM S.p.A. (Siram) are partners with the aim to advance smart cities in Italy. The newly established Città Illuminate S.r.l. (transl. Illuminated Cities), respectively owned 80% / 20% by the eeef and Siram, will enable public entities to implement technically advanced solutions that rely on so-called smart lampposts and the integration of multiple services in the street lighting infrastructure. Projects such as these will facilitate more liveable cities while also lowering the rates of energy consump- tion, thanks to measures including the instalment of LED technology, management systems, video surveillance, Wi-Fi and charging stations for electric vehicles. The structure of this joint venture allows a project finance approach even for projects of limited size, which traditionally are not suitable for project financing, while significantly lowering the structuring costs. 8 eeef Annual Report 2018

The eeef IN 2018

Sector: Street lighting/ energy efficiency / building retrofit Introduction to the eeef’s approach to innovative and portfolio financing To meet the EU’s ambitious climate mitigation tar- gets, a variety of stakeholders need to take action to ensure relevant energy efficiency projects are im- plemented. While it is undeniable that large impact can be achieved via large individual projects, the aggregation of smaller projects can be just as (if not more) impactful to globally reduce public spending and mitigate carbon emissions. In 2018, the eeef set up a number of innovative financing models, which facilitate such investments and pool them into single sustainable projects. These approaches provide viable solutions to up- grade public infrastructure in smaller communities, through public-private partnerships between pub- lic authorities and reliable third parties from the private sector, with a particular focus on energy service companies (ESCOs). In 2018, the eeef pro- vided financing to three flagship initiatives through different financing structures including two joint ventures and one forfaiting agreement. For each project, the Fund partnered with key industry play- ers and/or ESCO companies who are able to apply for public tenders and then have liquidity to fulfil awarded public tenders. The aggregated approach reduces financing and project costs for all parties, resulting in a sustainable solution. Complimentarily, the eeef – via its own technical assistance facility (TAF), which received partial funding from ELENA as part of the Horizon 2020 programme – is able to support public entities in bringing potential energy efficiency projects to fru- ition. The eeef TAF provides public beneficiaries with the necessary consultancy services to launch public tenders. The eeef drew upon its previous ex- perience of managing the EC’s technical assistance facility when designing this programme. The TAF is supporting a number of beneficiaries in realising aggregate portfolio projects. The projects supported by the eeef are screened to ensure positive and tangible impacts, including decreased public spending due to reduced energy consumption, which contributes to primary energy and CO2e savings. Furthermore, improvements to public infrastructure will enable local end users to access state-of-the-art technology and transform even small communities into smart environments. The eeef investments closed in 2018 (Illuminated Cities Italy, Smart Hospitals and Universities Italy and CIMAC Portugal) are expected to influence over 15 communities by the end of the investment phase through the renovation of public assets with front- end applications and to scale up to the circle of European smart communities. 12 eeef Annual Report 2018 id quae nimet res aut labo. Nequiam rem rem lantota

Sector: Energy efficiency/ building retrofit Italy Smart Hospitals & Universities Project Profile The eeef and Sinloc have launched a joint venture (JV), which will contribute to enhancing energy ef- ficiency in the healthcare and education sectors. The partnership takes the name Smart Hospitals and Universities (Smart H&U) and targets a portfolio of investments in public hospitals and universities distributed across Italy. These facilities will scale up their energy efficiency profiles as well as the lev- el of services provided to the end users. Patients, students and staff will benefit from modernised infrastructures, including state-of-the-art building automation, heating and cooling systems, smart illumination and clean energy systems. On average, it is estimated that primary energy and carbon savings will equate to at least 46% com- pared to baseline and the energy performance of each facility will increase due to the installed energy efficiency measures suitable for smart buildings. Sinloc and the eeef will pool together smaller pro- jects and inject a total of EUR 15 m risk capital in special purpose vehicles. Projects will be awarded by each grantor after a public call for tender and will each have a signed concession. Smart H&U already has a promising pipeline of projects and continues to strengthen it. Project Partner Sinloc is an Italian consulting and investment com- pany that promotes the development of local public infrastructure through advisory services, feasibili- ty studies and direct investments in public-private partnerships (concessions, project financing etc.). Sinloc’s shareholders comprise 10 Italian banking foundations, and the company’s equity holding exceeds EUR 50 m, mostly invested in infrastruc- ture and local development initiatives. For further information about Sinloc, visit www.sinloc.com/ en/Highlights. This JV is a pioneering initiative that aims to prove that the healthcare and education sectors, in many European countries, have enormous market poten- tial for energy efficiency upgrades, which perfectly triangulates the interests of the public, industrial and financial sectors. Smart H&U materialises a new financing approach from the eeef that promotes the aggregation of smaller projects to offer access to finance. It also highlights the role of healthcare and education facilities in leading by example to deliver energy efficient, liable and smart public infrastructure to local communities. Key figures Type of investment: Junior funds (equity and shareholder loan) Total project size (¤m): eeef investment size (¤m): 22.0 7.0 Financial close: 21.12.2018 12 years Maturity 8,292 Estimated t CO2e emission savings (p.a.): Estimated MWh primary energy savings (p.a.): 64,616 14 eeef Annual Report 2018

The EU’s evolving energy efficiency market ACEEE’s International Energy Efficiency Scorecard for 2018 quoted that the energy efficiency (EE) market has the potential to become the single largest resource to meet the increasing global energy demand. Shifting towards an energy efficient economy is deemed to be one of the most economical ways to preserve energy resources, with the potential not only to reduce energy bills but also to enhance a country’s self-sufficiency in terms of energy by reducing energy imports. During 2017, EE investments grew globally by 3% to a total expenditure of USD 236 bn (IEA 2018). As in previous years, Europe continued to deploy the most funds for EE investments (ca. USD 80 bn), followed by China and North America. The major- ity of investments (60%) were into the building sector via the renovation of existing building stock, followed by 26% of investments into the trans- port sector. Evidence shows that global investments into the EE sector are growing year on year (y-o-y) and hav- ing a positive impact on global energy reduction (12% energy savings compared to baseline be- tween 2000 and 2017). However, between 2014 and 2017, the increase in economic activities re- sulted in a net global energy consumption increase, outweighing the positive impact from EE measures. A similar trend was observed within the context of the European Union, due to economic growth, increasing wealth, lifestyle changes and delays in policy implementation. However, on a more posi- tive note, increases in primary energy consumption have been smaller than the increase in GDP growth – showing that the movement to a more sustainable European economy is progressing. The latest Euro- pean Commission’s annual report to the European Parliament and the Council1 concluded that during 2014–2017, the primary energy intensity reduced in all member states except for Belgium, Greece, Italy, Hungary, Austria and Portugal compared to 2014. Overall, the EU’s final energy consumption has reduced by 5.9% since 2005. Recently, the European Parliament and the Council of the EU revised the Energy Efficiency Directive (EED) for 2030, which targets 32.5% energy sav- ings. The directive reiterates the importance of EE as a driver to achieve the 2030 climate targets and the EU’s contribution to the Paris Agreement. Having fallen short of the targeted savings for 2018, the EU needs to intensify efforts and take mea- sures that continue to deliver energy savings in the next decade. Collective results from 2018 demon- strate that the EU has made substantial progress in achieving energy savings, though the progress is not uniform across all member states. According to the latest European Commission’s annual report, until 2017, 17 of the 28 member states managed to reduce or keep their final energy consumption level below values required to reach 2020 targets; however, a number of coun- tries did not deliver, including Belgium, Bulgaria, Germany, Estonia, France, Lithuania, Hungary, Austria, Poland, Slovakia and Sweden. In terms of maturity, Germany and France are among the more mature and developed EE markets, followed by the United Kingdom, Spain, the Netherlands, Italy, Bel- gium and Denmark, which are catching up, while all the remaining member states, especially those in Eastern Europe, still have immature EE markets. The European Commission (EC)2 recently published that approximately one-third of the energy savings during 2014–2016 were achieved through energy efficiency obligation schemes, energy/CO2 taxes and financing/fiscal schemes. Notably, only a minor proportion of energy savings is due to the deploy- ment of national funds. These statistics only further emphasise the need to disseminate information and best practice among member states as plans (e.g. national energy efficiency action plans) are put in place to prepare to meet the 2030 targets. For member states with developed EE markets, targeted actions are needed to remove regulatory/other bar- riers towards energy performance contracting (EPC) in the public sector with regards to purchasing, annual budgeting and accounting. 16 eeef Annual Report 2018

THE EUROPEAN ENERGY EFFICIENCY FUND AT A GLANCE ‘While we’ve made enormous progress in 25 years, the world is still running behind climate change. Today, the urgency to address climate change has never been greater. We have the Paris Agreement, and we have the guidelines strengthening that agreement. What we need now are results.’ Patricia Espinosa, UN Climate Change Executive Secretary

The mission The eeef’s mission is to contribute to advancing sustainable en- ergy 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% Great Britain 5% Netherlands 1% Germany 10% Portugal 7% Spain 26% France 15% Romania 33% Italy *Based on commitments signed to projects, not including repayments or accrued interest. 20 eeef Annual Report 2018

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 Fund’s set-up The eeef aims to support the climate goals of the European 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 2018 The Supervisory Board represents the Fund’s share- holders. It provides permanent supervision 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 at the General Meeting of Shareholders. 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. The Investment Manager conducts the Fund’s busi- ness on behalf of the Management Board and the Investment Committee. The Investment Manager also manages the eeef TAF at arm’s length. Previ- ously, the Investment Manager also managed the European Commission Technical Assistance Facility. EU frameworktargets for climate and energy 2030

Investment structure Investment decision bodies Investment instruments Investees Management Board Senior & sub-debt loans Loans Debt & equity Investment Committee Technical assistance Funding structure Cities (municipal/regional/ national public authorities) € / local FX investment Sponsors Investment Manager € funding Junior tranche (C shares) Mezzanine tranche (B shares) Senior tranche (A shares) Super-senior tranche (Notes) Private partners of the public sector (ESCOs, utilities, etc.) The Investment Manager proposes potential new investment in line with the eeef’s eligibility criteria to the Investment Committee. Upon positive feed- back, the Investment Committee recommends the potential investment to the Management Board. The Management Board takes the final decision on the investment. The investees of the eeef are municipal, local and regional authorities or public and private entities acting on behalf of those authorities, such as utilities, public transportation providers, social housing associations, energy service companies (ESCOs), etc. Funding can be provided in euros and in certain cases also in local currencies. 24 eeef Annual Report 2018 Partnership dedicated to mitigating climate change

2014 2015 2016 April ► Financial close for street lighting upgrade project with 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 via the EC TAF July ► The Limerick and Clare Education and Training Board benefits from the EC TAF August ► GRE-Liège cooperates with the eeef on technical assistance via the EC TAF September ► Alentejo Central signs a tech- nical assistance agreement via the EC TAF December ► The municipality of Zaanstad and the Roscommon County Council benefit from the EC TAF January ► Irish education minister Jan O’Sullivan launches a technical assistance project with the Limerick and Clare Education and Training Board in Ireland September ► The eeef sponsors the Smart Countries and Smart Cities Congress 2015 in Paris ► The eeef’s University Hospital S. Orsola-Malpighi transaction wins the CESEF Energy Efficiency Award November ► The eeef closes its first trans- action in Spain in cooperation with Universidad Politécnica de Madrid April ► The eeef joins the Investor Confidence Project Europe to boost investments in the energy efficiency sector June ► The eeef cooperates with ADHAC, the business association for the promotion of sustainable district heating and cooling networks, in Spain September ► The eeef deploys final EC TA amount to the city of Santander in preparation for a pioneer PPP contract for the street lighting upgrade in Spain December ► The eeef fully disburses financ- November ► The eeef closes its first ing to the Société Publique Locale d’Efficacité Énergétique (SPL), which has launched 10 refurbishment programmes for buildings with four different local authorities in the Région Rhône-Alpes in France ► The eeef fully deploys the construction phase financing of the energy efficiency upgrade to the University Hospital S. Orsola-Malpighi in Italy community-based transaction in the UK in cooperation with the Ore Valley Housing Association and the Renewable Energy Investment Fund (Scotland) December ► The eeef initiates the Fund’s own technical assistance scheme, the eeef TAF ► Investment activity ► Fund operations ► TA activity 26 eeef Annual Report 2018

2018 ACTIVITIES REPORT: INVESTMENTS

The eeef’s investments Since its inception, the eeef has invested a total of EUR 170.5 m in 16 partner institutions, of which EUR 127 m have so far been disbursed. Germany (Berlin, Munich) €1.6m • € 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 Italy (Bologna, Northern Italy) €54.8m France (Orléans, Rennes, Paris, Lyon, Bordeaux, Rhône-Alpes) €42.4m • € 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 (matured) • € 31.8 m senior loan and VAT facility to Progetto ISOM for the upgrade of the University Hospital S. Orsola-Malpighi • € 16.0 m equity investment in the JV Illuminated Cities with Siram by Veolia for a portfolio of invest- ments (EE: smart public lighting) • € 7.0 m equity investment in the JV Smart Hospitals & Universities with Sinloc for a portfolio of investments Spain (Madrid, Santander) €11.7m Romania (various locations inc. Cluj-Napoca, Bucharest) €25.0m • Subordinated loan to Banca Transilvania for on-lending into energy efficiency and renewable energy projects Portugal (Lisbon, Alentejo region) €17.2m • € 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 • € 5.1 m junior funds to be invested in the installation of solar panels • € 12.1 m forfaiting facility to CIMAC I-Quatro to upgrade existing street lighting 30 eeef Annual Report 2018 United Kingdom (Cardenden, Scotland) €4.3m • Senior debt facility to the Ore Valley Housing Association via the SPV Cardenden Heat and Power Netherlands (Venlo) €8.5m • Senior debt facility to the city of Venlo

France Bolloré The French company Bolloré, a provider of car-sharing services for electric cars, signed a bond agreement worth EUR 30 m with the eeef in 2013. The invest- ment financed electric cars and the infrastructure (i.e. charging stations, rental places, etc.) required for Bolloré’s European electric car rental concessions. The project, which provides cities with environmen- tally friendly electric cars, started in Paris and has subsequently been extended to Lyon and Bordeaux. The eeef’s bond has mainly been utilised in these regions. At the end of 2018, Bolloré had 4,000 cars and 6,500 charging stations installed across the lo- cations where the eeef’s funding was utilised. Sector: Clean urban transport Key figures Type of investment: Financial close: Senior debt 23.12.2013 Total project size (¤m): eeef investment size (¤m): 30.0 30.0 Maturity Estimated t CO2e emission savings (p.a.): 5 years 8,658 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 regional source, allows 15,000 households in the city to achieve annual savings of around EUR 200 each with the new energy source and increases the environmental sustainability. Key figures Type of investment: Total project size (¤m): Equity and shareholder loan eeef investment size (¤m): 36.0 5.1 Maturity Observed t CO2e emission savings (p.a.): Perpetual 15,294 Financial close: 12.03.2013 32 eeef Annual Report 2018

Germany Jewish Museum Berlin Foundation The Jewish Museum Berlin and the energy service company (ESCO) Johnson Controls entered into an energy performance contract (EPC) for the m useum buildings in 2012. The eeef’s initial investment totalled EUR 1.7 m. In 2015, the project scope was revised and consequently the eeef’s investment size was reduced to EUR 1.0 m. The project includes a number of energy efficiency measures, including the optimisation of the heating, ventilation and air conditioning and an efficient energy management system. The first energy audit for the project was completed in 2017 and 2018 annual primary energy savings equated to 3,856 MWh. This years’ audit identifies that the project is achiev- ing increased savings compared to last year due to full and consistent operations. Primary energy savings in 2018 equated to 12,872 MWh. Sector: Energy efficiency/ building retrofit Key figures Type of investment: Financial close: Forfaiting loan 20.03.2012 Total project size (¤m): eeef investment size (¤m): 1.4 1.0 Maturity Actual t CO2e emission savings (p.a.): 10 years 2,936 Germany University of Applied Sciences Munich Sector: Energy efficiency/ building retrofit/ CHP plant The University of Applied Sciences Munich and the energy service company (ESCO) Johnson Controls entered into an energy performance contract (EPC) for both of the buildings on the university’s cam- pus in Munich-Pasing, with a total EPC volume of EUR 1.1 m. The ESCO and the university agreed to energy effi- ciency measures composed of the optimisation of the heating, lighting, metering, building management and pumping systems, as well as the installation of a 49.5 kW combined heat and power (CHP) plant. The project was implemented in 2013 and continues to achieve savings aligned with projections. In 2018, it achieved 1,768 MWh of primary energy savings compared to baseline, which is equivalent to 30%. Key figures Type of investment: Financial close: Forfaiting loan 15.11.2012 Total project size (¤m): eeef investment size (¤m): 1.1 0.6 Maturity Observed t CO2e* emission savings (p.a.): 10 years 148 * The University of Applied Sciences purchases a renewable energy electricity blend; impacting the actual observed carbon savings. 34 eeef Annual Report 2018

Italy University Hospital S. Orsola-Malpighi Project video link: www.eeef.lu/video-bologna.html The project entity Progetto ISOM signed a conces- sion agreement with the University Hospital S. Or- sola-Malpighi, one of the biggest hospitals in Italy (1,758 beds). The eeef provided a project and VAT bond facility of EUR 31.8 m. tion of heat exchange substations and the inclu- sion of an underground tri-generation plant for the combined production of cooling, heat and power (CCHP), based on the energy consumption of the hospital facility, which is fuelled by methane gas. The project comprises a number of initiatives which 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 centrifugal chillers and absorbers, the reconstruc- tion of the heat distribution networks, the renova- In 2018, carbon savings were 32% compared to baseline, and primary energy savings were at 28%. 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 t CO2e* emission savings (p.a.): 20 years 16,153 * Numbers based on contracted conversion factors. Sector: Energy efficiency/upgrade of entire energy system 36 eeef Annual Report 2018

Portugal CIMAC The eeef entered into a 12-year forfaiting facility of EUR 12 m with I-Quatro LDA (an ESCO company) to implement its first aggregated street lightning infra- structure transaction, with the mission to upgrade over 56,000 luminaires within 14 municipalities, including the UNESCO World Heritage site of Évo- ra, represented by Comunidade Intermunicipal do Alentejo Central (CIMAC). The project will realise 74% in primary energy (of 40,655 MWh) and car- bon savings (of 5,192 t CO2e) annually compared to baseline consumption. Furthermore, it will result in EUR 7.1 m in economic savings for the munici- palities over the 12-year concession. Key figures Sector: Street lighting In December 2018, I-Quatro signed a forfaiting facil- ity with the eeef to fund EUR 12.14 m of the up front costs for renovation. The facility will have been ful- ly repaid within the concession period of 12 years. Type of investment: Financial close: Forfaiting facility 27.12.2018 Total project size (¤m): eeef investment size (¤m): 16.6 12.1 Maturity Estimated t CO2e emission savings (p.a.): 12 years 5,516 Portugal Wattosun The eeef signed a memorandum of understanding (MoU) with Wattosun, Portugal, for a EUR 5 m equity facility to finance a portfolio of self-consumption PV installations. The agreement encompasses seven subprojects estimating ca. 21,100 of 1.68 m2 so- lar panels (PV). When compared to baseline (the Portuguese electricity grid), the combined subpro- jects should annually save 2,650 tonnes of CO2e and 20,736 MWh of primary energy. The electricity is for self-consumption and would provide municipalities, state-owned companies and other public authorities with a financially attractive and environmentally friendly way to lower effective Sector: Renewable energy electricity costs and reduce their exposure to the volatile energy market. Two different business models are being consid- ered to attract public clients: • UPAC model: the public entity receives electricity for self-consumption and in turn pays rent for the new PV set-up. • UPP model: the small subproject owns the new PV set-up on public properties and receives a payment from the utility company for energy fed into the grid. Currently, the Fund is evaluating individual self- consumption subprojects submitted by Wattosun thatwould deliver benefit to public authorities. The construction of the subprojects will be performed under a fixed-price turnkey energy performance contract (EPC) with a qualified EPC and operations and maintenance (O&M) partner. The selected O&M contractor will comply with all industry best practices and follow international standards. The subprojects are intended to have long-term tenors to ensure economic feasibility. Key figures Type of investment: Junior funds (equity and shareholder loan) Total project size (¤m): eeef investment size (¤m): 10.0 5.1 Maturity Estimated t CO2e emission savings (p.a.): 15 years 2,726 Financial close: 29.12.2017 38 eeef Annual Report 2018

Spain Universidad Politécnica de Madrid The recent 2018 annual energy audit validated that carbon and primary energy savings were above 20% compared to baseline. Following directive 2012/27/UE of the European Parliament, in June 2015, Universidad Politécnica de Madrid (UPM) invited energy service companies (ESCOs) to present their proposals to improve the heat and water supply systems across the cam- pus and to reduce CO2e emissions by switching to a cleaner fuel source. In August 2015, the project was awarded to Enertika (Ingeniería y Servicios de Eficiencia Energética S. L.), an engineering company specialising in energy generation, energy efficiency and remote management services. The project replaced 63 gas oil boilers, consuming on average 946,479 litres of gas oil per year, with 66 natural gas boilers in all 32 campus buildings. Sector: Energy efficiency/building retrofit Key figures Type of investment: Financial close: Forfaiting loan 18.11.2015 Total project size (¤m): eeef investment size (¤m): 2.8 2.5 Maturity Estimated t CO2e emission savings (p.a.): 9 years 1,225 Spain Municipality of Santander The municipality of Santander is located in the Can- tabria region in Spain. It benefitted from funding from the European Commission Technical Assis- tance Facility (EC TAF) managed by the eeef in order to conduct feasibility studies and, subsequently, launch the ESCO tender for the renovation works. The tender was awarded to Elecnor S.A., an inter- national company from Bilbao with 60 years of ex- perience in developing, building and maintaining infrastructure assets and in renewable energy and energy efficiency projects. The eeef provided a forfaiting facility to Elecnor S.A., where the latter received EUR 9.2 m to finance the works. The facility will be fully repaid within the concession period. The project is to upgrade 22,700 lighting points to LED luminaires. Each luminaire will also have wireless connectivity to the municipality’s digi- tal communication network and control system. In addition, it will result in EUR 5.4 m in monetary benefits for the municipality over the 15-year pe- riod of concession. The municipality plans to sign the final acceptance of the renovation works in February 2019. Sector: Street lighting 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 t CO2e emission savings (p.a.): 13.88 years 4,224 40 eeef Annual Report 2018

The eeef’s matured investments France SPL – Région Rhône-Alpes Project video link: www.eeef.lu/video-lyon.html The Société Publique Locale d’Efficacité Énergétique (SPL) benefitted from funding from the European Commission Technical Assistance Facility (EC TAF) managed by the eeef for the initial preparation works and the finalisation of the project scope. Subsequently, the SPL signed a loan agreement of EUR 5.0 m to manage the short-term financing needs to refurbish public buildings during their construction phase and to pave the way for rais- ing further long-term financing. During 2018, the SPL fully repaid the debt facility as all 10 building retrofit projects were fully com- pleted and commissioned, fulfilling the purpose of the project. Aligning with carbon accounting standards, the project will continue to contribute to the eeef’s carbon balance until the end of its economic maturity. Sector: Energy efficiency/ building retrofit Total project size (¤m): eeef investment size (¤m): 25.0 5.0 Maturity Estimated t CO2e emission savings (p.a.): 5 years 992 Key figures Type of investment: Financial close: Repayment: Senior debt 03.04.2014 12.02.2018 SPL The SPL states that the real estate sector accounts for 40% of the regional primary energy consump- tion, of which 15% comes from public buildings, so local authorities have a duty of distinguished nature. However, for local authorities it is difficult and costly to renovate a range of public infra- structure, and thus financial assistance is invalu- able for them. The Auvergne-Rhône-Alpes region proves a good example of a public entity looking to promote sustainable practices. The region has put into place substantial means for the refurbishment programme of public buildings in order to reduce the region’s energy consumption. ‘The eeef provided a flexible financing scheme for energy refurbishment projects. With this start-up financing, the eeef was key in getting things started. The Fund created awareness in the field of energy refurbishment and assisted in creating a great momentum in the region Auvergne-Rhône-Alpes.’ Éric Fournier, Vice President of the Auvergne-Rhône-Alpes region 42 eeef Annual Report 2018

2018 ACTIVITIES REPORT: FUNDING ‘The early repayment of the eeef’s funding has been beneficial for the SPL OSER because it has facilitated the successful “design” and implementation of the energy refurbishment programme.’ Philippe Truchy, Managing Director of the SPL OSER

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 Com- mission (EUR 125.0 m) was increased by contri- butions from sponsors comprising the European Investment Bank (EUR 75.0 m), Cassa Depositi e Prestiti (EUR 59.9 m) and the Fund’s Investment Manager, Deutsche Bank (EUR 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 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 S.p.A. 97.0 m (71.1%) European Commission Current division of investments committed to the eeef 97.0 m (69.3%) European Commission (EC) 21.2 m (15.1%) European Investment Bank (EIB) 16.9 m (12.1%) Cassa Depositi e Prestiti S.p.A. (CDP) 5.0 m (3.6%) Deutsche Bank (DB) 140.1 million euros total 46 eeef Annual Report 2018

TECHNICAL ASSISTANCE SUPPORT

The eeef’s technical assistance facility EUR 389,500 approved to Ferrara Province EUR 400,000 approved to the city of Gijón EUR 340,000 approved to Italian Ministry of Defence EUR 180,000 approved to Kaunas District Municipality Following the European Commission TA Facility managed by the eeef, the Fund set up the eeef TAF to support ambitious public beneficiaries in developing bank- able sustainable energy investment programmes. These projects shall relate to the energy efficiency sector, renewable energy and/or public urban trans- port. The eeef TAF aims to bridge the gap between sustainable energy plans and real investments by supporting all activities necessary to prepare investments into sustainable energy projects. Eligible applicants are regions, city councils, universities, public hospitals, public-owned water companies 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 implementa- tion. The eeef TAF efficiently reduces this time frame to 1.5–2 years by directly allocating consultancy services to the TA beneficiaries (tender of these consultancy services completed by the eeef). This means that the eeef selects appropriate experts with the required know-how and expertise via a tender process (completed entirely by the eeef) and assigns them to the relevant investment pro- grammes. The TA beneficiaries can use the consul- tant services to, for example, carry out feasibility studies and energy audits and evaluate the eco- nomic and financial viability of their investments. Legal support for the investment programmes to draft the PPP tender documents is also included in the TA while costs can be covered by the eeef. The eeef has selected a pool of consultants who will work closely with the public authorities dur- ing the preparation of feasibility studies, energy audits, public tender processes, etc., as well as providing legal support. The eeef TAF has received funding from the ELENA facility under the Horizon 2020 Programme of the European Union. The first call for proposal of the eeef TAF was successfully closed on 1 March 2017. The recently launched facility at tracted interest among various public authorities seeking support to de- velop their sustainable project plans. In addition to numerous early-stage TA enquiries, the eeef has so far received six TA applications from public authori- ties, four of which are already approved. Application by public authority • Submission of standard application • Selection if 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, procure- ment of investment programme financing phase with eeef • Selection of ESCO ( s) • Signing of financing contract 50 eeef Annual Report 2018 Maximum two years

Street lighting Gijón is the first city to join the eeef to collaborate on the new eeef Technical Assistance Facility Ayuntamiento de Gijón was the first public authority to participate in the new eeef Technical Assistance Facility With the full commitment of its mayoress, the city of Gijón 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 related interventions as well as publishing the tendering documentation to launch a EUR 15–20 m invest- ment programme (estimated) in renovation works and selecting an ESCO company to realise the measures within a two-year time frame. The eeef has been accompanying the city during the whole process by collaborating with the management team proposed by the city. The majority of the feasibility studies have been completed and the street lighting upgrade part of the project is al- most ready to be tendered. The eeef is confident of being the right partner for small and medium-sized European cities which have the drive and willingness to develop and im- plement investment programmes and as a result offer their citizens cleaner, more sustainable and more liveable environments. Project Partner The city of Gijón is the largest munici- pality within the community of Asturias, Spain, with a population of 270,000 cit- izens. For over three years, the city has been developing its European agenda and positioning itself as ‘Gijón en Europa’ with a number of projects and initiatives at the European level. 52 eeef Annual Report 2018

Building upgrades The Italian Ministry of Defence is the third public authority to join the eeef to collaborate on the new eeef Technical Assistance Facility The Ducal Palace in Modena (Italy) is owned by the Italian government and is currently used by the Italian Ministry of Defence (MoD). The Ducal Palace houses the headquarters of the Military Academy, where military students are trained. Additionally, part of the Eastern Tower of the palace houses the University of Modena and Reggio Emilia’s (UNIMORE) geophysical/meteorological ob- servatory, and the first floor is used as a museum where guided tours are offered by the municipality of Modena. 54 eeef Annual Report 2018

Street lighting The Kaunas District Municipal Administration is the fourth public authority to join the eeef to collaborate on the new eeef Technical Assistance Facility The Kaunas District Municipal Administration, Lithuania, is planning the implementation of an ambitious investment programme to enhance the energy efficiency of the public street lightning infrastructure in several elderships. There is a total of 25 elderships directly involved in this pro- ject including: Akademija, Alšėnai, Babtai, Batniava, Čekiškė, Domeikava, Ežerėlis, Garliava, Garlia parish, Kačerginė, Karmėlava, Kulautuva, Lapės, Linksmakalnis, Neveronys, Raudondvaris, Ringaudai, Rokai, Samylai, Taurakiemis, Užliedžiai, Vandžiogala, Vilkija, Vilkija parish and Zapyškis. This project supports The Kaunas District Municipal Administration through their eldership structure to initiate a multitude of smaller projects which all fall under the same financing umbrella and therefore benefit from reduced investment cost. The project site is located in the Kaunas District Municipality, one of the biggest and most dense- ly inhabited municipalities in Lithuania. It is one of the 60 district municipalities in the country and has a population of nearly 100,000 inhabitants. The Kaunas District Municipal Administration seeks to become an attractive centre of tourism services and infrastructure. Furthermore, it is trying to at- tract private investments to increase the district’s attractiveness for business, citizens and tourists. The Kaunas District Municipality has identified that renovating the current public lighting infra- structure would support the transition towards a more desirable community whilst improving public energy consumption. The envisaged total project volume is between EUR 5 m and EUR 10 m – dependent upon differ- ent investment scopes. The final project design is one deliverable by the eeef TAF. With this TA project, the eeef is expanding its activ- ities to Eastern Europe, facilitating the dissemina- tion of its high-quality implementation standards for the development of these kinds of energy effi- ciency projects as well is reaching several elderships and counties in Lithuania, joining forces to succeed in attracting interest from the private sector. 56 eeef Annual Report 2018

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 savings 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. greenstem™ All of the eeef portfolio reported impact indicators are tracked in greenstem, a proprietary web-based tool from the Investment Manager which auto- matically and consistently calculates anticipated and realised energy, primary energy and carbon savings. For small loans and standard technolo- gies, greenstem completes calculations based on project-specific data inputs and project location/ technology conversion factors. The tool stores up- to-date energy and emission conversion factors to ensure a consistent reporting approach across the portfolio. Factor sources include the Chartered In- stitution of Building Services Engineers for tech- nology benchmark data and the Intergovernmen- tal Panel on Climate Change for the conversion of energy data into greenhouse gas emissions. Electricity emission factors are sourced from the International Energy Agency and are updated an- nually in line with ISO 14064-2, the carbon account- ing standard followed. 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 that have been configured specifically for eeef user groups. The tool is flexible and can be customised to include additional technologies in the portfolio. Project Assessment and Monitoring As the eeef can finance a variety of technologies, the initial technical assessment and ongoing mon- itoring of investments must strike the correct bal- ance between accuracy and practicality of imple- mentation. How the eeef evaluates technical eligibility is based on the project’s technology and loan size; for example, small standard (e.g. street lighting) project savings can be calculated using validat- ed calculations from the Investment Manager’s carbon environment impact management (CEIM) tool, greenstem™ (greenstem). For projects with higher investment volumes and/or more complex technologies, detailed energy analyses are required in the form of third-party validated reports. As part of the Fund’s due diligence process and for the duration of the loan, the eeef evaluates and monitors the project’s savings performance in alignment with the International Performance Monitoring and Verification Protocol (IPMVP), which requires every project to establish a baseline ener- gy consumption and then 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. The Fund provides guidance to pro- ject partners on how to conduct project analysis via third-party validated annual audit templates. This ensures the entire portfolio reports using a consistent methodology. 60 eeef Annual Report 2018

Primary energy and greenhouse gas emissions savings 2018 The eeef’s 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 equiva- lents 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 16 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 expect- ed due to a number of factors, such as weather advances in static data, and therefore project savings can change annually. As shown below, these projects achieved total accumulated savings of 389,743 t CO2e and 367,401 MWh of primary energy savings through the end of 2018. 62 eeef Annual Report 2018 16

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 18 31 December 17 113,193,163 118,617,404 6,303,741 816,300 – 4,256,138 812,796 20,189 23,460,528 18,243,683 143,773,732 141,950,210 1,371,565 276,575 1,433,475 548,875 1,254,516 555,159 1,264,967 587,680 32,881,080 32,881,080 6,602,445 6,602,445 100,659,717 98,804,363 Total liabilities 143,773,732 141,950,210 66 eeef Annual Report 2018

Statement of changes in net assets Statement of changes in net assets attributable to holders of redeemable ordinary shares (in €) As of 31 December 2016 Issue of redeemable shares Redemption of redeemable shares Increase in net assets attributable to shareholders from transactions in shares Complementary dividend attributable to holders of redeemable ordinary C shares Increase in net assets from operations attributable to holders of redeemable ordinary C shares As of 31 December 2017 Issue of redeemable shares Redemption of redeemable shares Increase in net assets attributable to shareholders from transactions in shares Complementary dividend attributable to holders of redeemable ordinary C shares Increase in net assets from operations attributable to holders of redeemable ordinary C shares Loans and receivables reclassified to FVPL (IFRS 9 impact) Loans and receivables loss allowance (IFRS 9 impact) As of 31 December 2018 Net assets attributable to shareholders 136,717,684 – – – 551,624 1,018,580 138,287,888 – – – 459,345 1,316,352 200,903 (121,246) 140,143,242 68 eeef Annual Report 2018

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 For the year ending 31 December 2018 For the year ending 31 December 2017 1,316,352 1,018,580 Adjustments for non-cash items (1,451,658) (929,329) (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 (Decrease) / increase in contribution to the Technical Assistance Facility (Increase) / decrease in interest receivables Distributions paid to holders of redeemable ordinary shares Complementary dividend attributable to holders of redeemable ordinary C shares Net cash flow (used in)/from operating activities Cash flows used in investing activities Decrease / (increase) in loans and receivables financial assets Acquisition of subsidiaries Net cash flow (used in)/ from operating activities 20,189 168,507 117,050 (278,584) (3,504) (38,805) 459,345 308,892 4,915,953 (8,000) 4,907,953 11,160 (1,071,332) (154,849) 273,436 68,559 (56,770) 551,624 (288,921) (7,977,487) – (7,977,487) Net increase/(decrease) in cash and cash equivalents 5,216,845 (8,266,408) Cash and cash equivalents at beginning of the year 18,243,683 26,510,091 Cash and cash equivalents at end of the year 23,460,528 18,243,683 70 eeef Annual Report 2018

Contact: info@eeef.eu www.eeef.eu