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November 16, 2010

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

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November 16, 2010

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  1. How to make best use of European instruments: comments by EIBPresentation at BPIE European Roundtable on financing energy efficiency in European Buildings: how to boost large scale retrofit? Edward CalthropEconomist, IAD. November 16, 2010 European Investment Bank

  2. Overview 1.Scale of challenge 2. Two broad issues a. Programme design – ELENA b. Tailored use of EU funds: JESSICA, Green for Growth Fund 3. Conclusions Annex: additional information – not to be presented.

  3. 1. Scale of challenge • BAU not sufficient (9% EE by 2020 only) • Some key actors strained.. a. Fiscal crisis on public budgets b. Capital-constrained banks (Basel III) c. Home owners: delaying renovations? • ..but fundamentals still good (NPV>0) Need to achieve maximum value for money in publicly-supported programmes

  4. 2a. Municipal programme design 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

  5. 2b. Tailored use of EU funds 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

  6. 3. Conclusions • Large challenge • Programme design key (use ELENA) • Tailored financing solutions (JESSICA, GGF) available • EIB willing partner in this process

  7. Further contact with EIB: • Ralf Goldmann • Senior Engineer, Energy Efficiency division, Projects Directorate. • Tel:+ 352 4379 87761 • Email: r.goldmann@eib.org • Edward Calthrop • Senior Economist, Institutional Affairs Department • Tel: +32 2 235 00 94 • Email: e.calthrop@eib.org

  8. Annex Additional information on 1. EIB 2. ELENA 3. JESSICA 4. Green for Growth Fund

  9. Annex Additional information on 1. EIB 2. ELENA 3. JESSICA 4. Green for Growth Fund

  10. 1. EIB Energy lending • Four priority areas for EIB: • Renewable energy • Energy efficiency • Diversification 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 EU • EUR 8.3bn for renewable energy projects (1) • EUR 6.9bn for TEN-E projects (1)Includes renewable energy sources and manufacturing projects.

  11. 1: EIB Contribution to EU PolicyEnergy Lending EIB energy lending: • In 2009, €14.2bn (€13.3bn within EU-27), a 40% increase over 2008 • During the period 2005-2009 €37.4bn

  12. 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 buildings Transport (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 1. EIB: Energy Efficiency (EE)

  13. Annex Additional information on 1. EIB 2. ELENA 3. JESSICA 4. Green for Growth Fund

  14. ELENA - overview • 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 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

  15. 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 European Investment Bank / ELENA Facility 15

  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: • 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. Implementation by ESCOs. Pay investments costs; provide guarantee for energy savings (around 20%); serve debt through portion of energy savings. Finance provided by local Banks, supported by EIB loan, with interest rate subsidy provided by Province. Stimulate Italian ESCO market and local Financial Intermediaries.

  18. Provincial Funds Winning ESCOs Fuel Suppliers Municipalities Agreement between EIB and Prov-MI EIB funds Partnership Agreement between DG-Tren & Prov-MI for theCovenant of Mayors Tender for FI Promotion among Municipalities Preparation of Sustainable Energy Action Plans Financial Support Financial Intermediare Assessment of Energy Audits on Public Buildings Terms of Contracts Call for Bids c/o Municipalities Actions co-financed by ELENA Fuel Payment Reimbursments to ESCOs Energy Performance Contracts for Energy Saving Savings

  19. Annex Additional information on 1. EIB 2. ELENA 3. JESSICA 4. Green for Growth Fund

  20. € € € € Projects SPVs Projects PPPs € € JESSICA - main components European Commission ERDF – DG Regio EU level Operational Programme (2007-2013) ERDF Managing Authority / OP resources (2007-2013) National / regional level flexible customisation / tailored structure Holding Fund (option) € Urban Development Fund («UDF») Other (public or private) investors / partners Grant financing Fund level € Equity Loan Guarantee € Project level Grant Integrated urban development plan / strategy

  21. The role of EIB • 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

  22. JHF in Lithuania 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 • TA provided: • Assistance on programme implementation and optimisation • Assistance on establishing sound programme management • Streamlining of the procedures

  23. Annex Additional information on 1. EIB 2. ELENA 3. JESSICA 4. Green for Growth Fund

  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 KfWEntwicklungsbank, supported by the European Commission Domicile: Luxembourg SICAV-SIF First closing: December 17 2009 Mission Statement

  26. Investors and Donors Current Shareholders TA Facility Donors Initiating Shareholders

  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 • Households • Homeowner Associations • Companies, including ESCOs and RE companies • Municipal & public entities

  30. Eligibility Criteria Investments through Financial Institutions *Subject to strict limitations

  31. Eligibility Criteria Investments through Non-Financial Institutions

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