R2E2 Fund-Armenia Renewable Resources And Energy Efficiency Fund

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Armenia Renewable Resources and Energy Efficiency Fund started its operation since November 2005. It implements grant and credit projects targeted at the development of Energy Efficiency and Renewable Energy sectors in Armenia.

GPOBA project

Capital Grants to the Poor

In addition to the UHP Component B2, the Global Partnership for Output Based Aide (GPOBA) has approved provision of a grant of US$3.1 million directly to the Fund to finance the connection costs of gas and heat supply to the apartments of the poorest households. While implementing the components of the UHP and GPOBA grant project the same approach shall be applied for the utilization of both the credit and grant proceeds.

1.2 GPOBA Supported Gas and Heating Project

Background

The Global Partnership for Output Based Aid (GPOBA), a multi-donor trust fund administered by the World Bank, has provided funding of US$ 3.1 million to provide capital grants to approximately 8,000 of the poorest households living in urban multi-apartment buildings to enable them to gain access to improved gas and heating services. The goal of the GPOBA is to provide increased access to reliable basic infrastructure and social services to the poor in developing countries through the wider use of Output-Based Aid (OBA) approaches.

In addition, component B2 of the Urban Heating Project (UHP) in the amount of US$ 3 million together with the government co-financing of US $530,000 will provide funding for the connection of additional 9,000 poorest households. Both GPOBA and UHP funds will use the scheme detailed below, which has been elaborated in close consultation with the relevant ministries, HaiRusGasArd CJSC (HRGA) and the civil society.

Nature of the Scheme

The proposed OBA scheme will provide a subsidy in the form of capital grants for the eligible poor households in Armenia for gas supply/heating for:

i. Individual gas-heater based solutions involving connection of the apartments to the gas network and/or a safe gas heater.

ii. Local heating solutions including the connection of the apartments to a building or block level boiler scheme.

The amount of the subsidy under both options will be determined based on the actual connection costs. The subsidy amount will be complemented with a fixed mandatory contribution. The grant mechanism will cover connection costs only necessary for a basic level of comfort and it will be based on a demand-driven approach whereby the poor households themselves or other eligible applicants on their behalf apply for the subsidy.

Eligibility Criteria and Targeting of Beneficiaries

The OBA scheme will be targeted using the main existing social protection program supporting low-income households in Armenia; the Poverty Family Benefit Program (PFBP). Households eligible for the grant will need to satisfy the following conditions:

Reside in urban multi-apartment buildings
Have the building connected to functioning gas network, which is allowed to use gas for heating purposes.
Provide mandatory cash contribution of AMD 15,000 (US $30). The mandatory contribution requirement for the households that apply only for a gas-heater (and not gas installation) under the individual gas-heater based solution is AMD 7,500 (US $15). This contribution may be provided either by the poor households or by other co-financing partners, such as municipalities, heat suppliers and non-poor households in the case of local boiler solutions, charities, NGOs, etc. The R2E2 Fund will create and administer a bank account specifically for the mandatory co-financing. The subsidy will be provided only when the contribution has been received and secured in this account

For individual gas-heater based solutions the following additional eligibility criteria will apply:
A priority system will be adopted based on the PFBP scoring system and aimed at providing grants to the poorest households first. The eligibility will be restricted to the households with a vulnerability score of 38.01 and above. If there are funds left over, a second tranche of grants will be publicized with applications invited from households in the 34-38 bracket

For local heating solutions the following eligibility criteria will also apply:
Households will need to be enrolled in the PFBP
Evidence indicating that the majority of the apartment owners (over 50%) in the building have agreed to the local heating solution

The list of poor enrolled in PFBP will be updated annually on January 1st based on the list of PFBP enrolled households provided by the Ministry of Labor and Social Protection.

Exclusions from the scheme

Subsidy will not be available to apartments in central Yerevan, where property values are the highest in the country, whether the occupants are enrolled in PFBP or not;
Households living in rented accommodation will be excluded from the scheme;
Households that have a functioning district heating supply will not be eligible for the grant. However, there will not be restrictions on applications from households in areas that could be served by district heating (but that currently are not);
Households with a functioning and safe gas heater that is compliant with Armenian standards will not be eligible for the grant. The R2E2 Fund will provide replacement gas heaters to poor households that have gas heaters that are not compliant with Armenian standards, provided that the contractor removes and destroys the non-compliant heater.