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How to make best use of European instruments: comments by EIB Presentation at BPIE European Roundtable on financing energy efficiency in European Buildings: how to boost large scale retrofit? Edward Calthrop Economist, IAD. November 16, 2010. Overview. 1. Scale of challenge - PowerPoint PPT Presentation
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European Investment Bank
How to make best use of European instruments: comments by EIB
Presentation at BPIE European Roundtable on financing energy efficiency in European Buildings: how to boost large scale retrofit? Edward CalthropEconomist, IAD.
November 16, 2010
2
1. Scale of challenge2. Two broad issues
a. Programme design – ELENAb. Tailored use of EU funds: JESSICA,
Green for Growth Fund3. Conclusions
Annex: additional information – not to be presented.
Overview
3
1. BAU not sufficient (9% EE by 2020 only)
2. Some key actors strained..a. Fiscal crisis on public budgets
b. Capital-constrained banks (Basel III)
c. Home owners: delaying renovations?
3. ..but fundamentals still good (NPV>0)
1. Scale of challenge
Need to achieve maximum value for money in publicly-supported programmes
4
Many technical studies, but (often):•Poor capacity in house to transform ideas into bankable programmes (notably for EPC – the silver bullet?);•Insufficient scale to attract private sector
ELENA can help. e.g. Prov of Milan – schools across 30 municipalities delivered by EPC
2a. Municipal programme design
5
Use 4% ERDF! (political decision)
Use intelligently….so which market failure is being addressed?
•Poor home-owner information? (nominal vs. relative
IRS) •Risk aversion? (Guarantees; ESCO finance?)
Example 1: JESSICA
Example 2: Green for Growth fund
2b. Tailored use of EU funds
6
Large challenge
Programme design key (use ELENA)
Tailored financing solutions (JESSICA, GGF) available
EIB willing partner in this process
3. Conclusions
7
Further contact with EIB:
Ralf GoldmannSenior Engineer, Energy Efficiency division, Projects Directorate.
Tel:+ 352 4379 87761
Email: [email protected]
Edward CalthropSenior Economist, Institutional Affairs Department
Tel: +32 2 235 00 94
Email: [email protected]
8
Additional information on
1. EIB
2. ELENA
3. JESSICA
4. Green for Growth Fund
Annex
9
Additional information on
1. EIB
2. ELENA
3. JESSICA
4. Green for Growth Fund
Annex
1. EIB Energy lending
Four priority areas for EIB: Renewable energy Energy efficiencyDiversification and security of internal supply (including TEN-E)External energy security and economic development
Individual loans of EUR 13.5bn in EU in 2009:EUR 4.0bn for renewable energy projects (1)
EUR 2.0bn for TEN-E projects
Individual loans of EUR 34.2bn 2005-2009 in EUEUR 8.3bn for renewable energy projects (1)
EUR 6.9bn for TEN-E projects
(1)Includes renewable energy sources and manufacturing projects.
EIB energy lending:In 2009, €14.2bn (€13.3bn within EU-27), a 40% increase over 2008During the period 2005-2009 €37.4bn
1: EIB Contribution to EU Policy
Energy Lending
EIB Energy Lending 2005-2009 (€bn)
0
2
4
6
8
10
12
14
2005 2006 2007 2008 2009
Misc
RE
Gas grids & storage
Electricity Grids
CHP/District Heat
Gas Power plants
Coal Power plants
LNG
1. EIB: Energy Efficiency (EE)
Energy efficiency is the most cost-effective way of reducing emissions and energy demand
The EIB’s EE target areas include:Residential, commercial and public buildingsTransport (rail, road, urban transport, ECTF)Electricity production & distribution (CHP, smartgrids)Industry
EE considerations are mainstreamed into all EIB operations, working with promoters to extend the EE potential of projects
13
Additional information on
1. EIB
2. ELENA
3. JESSICA
4. Green for Growth Fund
Annex
14
INVESTMENT PROGRAMME
EE and RES investments in public and private buildings, including social housing and street and traffic lighting
DH networks Decentralised CHP Urban transport to support
increased energy efficiency and integration of renewable energy sources
Local energy infrastructure to support developments in previous sectors
ELENA (Project Development Services)
Support to Final Beneficiaries with:
• Refine Feasibility studies• Business Plans
• Technical studies (energy audits) • Procurement/tendering/contracting
• Additional technical staff• Financial structuring
ELENA - overview
15European Investment Bank / ELENA Facility
ELENA Eligible entities
ELENA beneficiaries: local and regional authorities or other public entities, or groupings of such entities, including those subscribing to the Convenant of Mayors
Eligible countries: EU, Norway, Iceland, Liechtenstein and Croatia
All or part of the investment programme may be implemented by bodies other than the abovementioned entities, including private firms
16
European Investment BankSupporting cities to cut carbon
EXAMPLE --- EE in Province of Milano
In 2006, grant-funded programme of energy audits of public buildings in
Province (180 municipalities).
Problem
Individual municipalities budget constrained; also lack of technical
capacity at municipal level to develop a flow of projects.
Solution
•adopt energy performance contracting •aggregate projects
•coordinate at Province level; standardise contracts and energy cost baseline.
17
EXAMPLE --- EE in Province of Milano
Programme: Refurbishment of existing school buildings in some 30 to 40 municipalities:
Finance provided by local Banks, supported by EIB loan, with interest rate subsidy provided by Province. Stimulate Italian ESCO market and local Financial
Intermediaries.
Implementation by ESCOs. Pay investments costs; provide guarantee for energy savings (around 20%); serve debt through portion of energy savings.
•Simple technologies: lighting (Compact Florescent Lamps; automation systems etc), heating (new condensing boilers;
heating system pumps…)
•Measures touching building envelope (roof insulation etc) may be included.
18
Partnership Agreement between DG-Tren & Prov-MI for the
Covenant of Mayors
Promotion among Municipalities
Preparation of Sustainable Energy Action Plans
Assessment of Energy Audits on Public Buildings
Agreement between EIB and Prov-MI
Tender for FI
Financial Intermediare
Call for Bids c/o Municipalities
Terms of Contracts
Winning ESCOs
Energy Performance Contracts for Energy Saving
Fuel Suppliers
Provincial Funds
EIB funds
Financial Support
MunicipalitiesFuel Payment Reimbursments
to ESCOs
Savings
Actions co-financed by ELENA
19
Additional information on
1. EIB
2. ELENA
3. JESSICA
4. Green for Growth Fund
Annex
20
European CommissionERDF – DG Regio
European CommissionERDF – DG Regio
ERDF Managing Authority / OP resources (2007-2013)ERDF Managing Authority / OP resources (2007-2013)
EU
leve
lNa
tiona
l /
regi
onal
leve
l
Holding Fund (option) Holding Fund (option)
Urban Development Fund («UDF»)
Urban Development Fund («UDF»)
Fund
leve
lPr
ojec
t lev
el
Projects
€
PPPs SPVs
Equity
Loan
Guarantee
Integrated urban development plan / strategy
Other
(public or private)
investors / partners
Other
(public or private)
investors / partners
Operational Programme (2007-2013)
Projects
€
€
€
€
€
€
€
Grant financingGrant financing
Grant
€
flexible customisation / tailored structure
JESSICA - main components
21
EIB taking a leading role, alongside DG-REGIO, in promoting and developing JESSICA instruments in MS
SF Regulations specifically provide for EIB to act as a Holding Fund (on a not-for-profit basis)
Technical assistance and dissemination of best practice, based on established expertise in lending to urban renewal/regenerations projects across the EU
Providing complementary loan financing
The role of EIB
22
Low interest loans (UDF) Grants covering project preparation costs
when “D” energy class achieved Grants of 15% of project costs when “C”
energy class achieved
JHF in Lithuania
TA provided:• Assistance on programme implementation and optimisation
• Assistance on establishing sound programme management
• Streamlining of the procedures
A
B
C
D
E
F
G
23
Additional information on
1. EIB
2. ELENA
3. JESSICA
4. Green for Growth Fund
Annex
24
GREEN FOR GROWTH FUND, SOUTHEAST EUROPE
25
Key Features
The mission of the Fund is to contribute, in the form of a public private partnership with a layered risk/return structure, to enhancing energy efficiency and fostering renewable energies in the Southeast Europe
region including Turkey, predominantly through the provision of dedicated financing to businesses and households via partnering with
financial institutions and direct financing.
•Initiators: European Investment Bank and KfW Entwicklungsbank, supported by the European Commission
•Domicile: Luxembourg SICAV-SIF
•First closing: December 17 2009
Mission Statement
26
Investors and Donors
Initiating Shareholders
Current Shareholders TA Facility Donors
27
Objectives and Instruments
Objectives
• Broadening the financing base of energy efficiency and renewable energy investments in the region
• Increasing awareness and deepening the financial sector servicing those development needs
• Harmonize and coordinate donor initiatives
Instruments
• Medium to long-term senior loans
• Subordinated loans
• Letters of credit
• Guarantees
• Mezzanine debt instruments
• Local debt securities
• Equity
• Technical Assistance support
28
Current Target Partners
Albania
Bosnia and Herzegovina
Croatia
FYR of Macedonia
Montenegro
Serbia
Kosovo1
Turkey
1under UNSCR 124/99
29
Investment Objectives
What?• Minimum 20% reduction in energy consumption• Minimum 20% reduction in CO2 emissions
Where?• Target Partners
To Whom?• Financial Institutions• Non-Financial Institutions
How?• Loans & guarantees• Mezzanine financing• Equity
HouseholdsHomeowner AssociationsCompanies, including ESCOs and RE companiesMunicipal & public entities
30
Eligibility Criteria
Investments through Financial Institutions
*Subject to strict limitations
Standard Non-standard
SME/Industrial/Muni
Recipient Households, SME HOA, SME Businesses, Municipalities, Public Sector
Min sub-loan N/A N/A €100k
Max sub-loan €500k €500k €10 million
Eligible Measures Building envelope, heat source & distribution, lighting, renewable utilization, combined heat/power, (white goods* – standard only)
EE and RE projects
31
Eligibility Criteria
Investments through Non-Financial Institutions
To/through ESCOs Energy service/supply
Recipient Public sector, industrial EE/RE service or equipment companies
Min loan €100k N/A
Max loan €10 million €10 million
Eligible Measures Energy efficiency, renewable energy, energy performance contracts, energy supply contracts
EE/RE producers or vendors, service companies