FINANCING ENERGY EFFICIENCY AND RENEWABLE ENERGY IN BUILDINDS: THE EIB EXPERIENCE

1. FINANCING ENERGY EFFICIENCY AND RENEWABLE ENERGY IN BUILDINDS: THE EIB EXPERIENCE European Investment Bank (EIB) Promotion of investments in sustainable energy in buildings - DG REGIO information session Brussels, 19 June 2009

2. Outline • 1. EIB experience: General types of financing instruments for EE&RE for buildings • 2. Financing Energy Efficiency – Examples • 3. The specific case of RE&EE in Barcelona province • 4. EIB Financing of Social Housing Operations: Refurbishment and construction • 5. General conclusions: key issues to develop large EE&RE investments in buildings

3. 1. EIB experience: General types of financing instruments for EE&RE for buildings • Individual loans to finance large projects/programmes • Instruments to finance small investments: Global loans or framework loans • Combining of financing and TA (particularly energy audits) • Combining grants with loans: i.e. grants for direct subsidies, energy audits and higher processing costs for Financial Intermediaries. • Financing instruments involving higher level of risks than senior loans: i.e. public-private equity funds • Jaspers (in NMS) and Jessica (revolving funds) can support specific initiatives using Structural and Cohesion funds. The EC/EIB is setting up a grant fund to provide TA to local authorities to develop EE/RE programmes

4. 2. Financing Energy Efficiency – Examples Loan to EKO SKLAD (Slovenia) Purpose: cofinancing of small & medium sized energy efficiency investments in municipalities, public and private companies, and individual households. EIB loan: EUR 30 M; Term: 20 years. Loan to HSBC (United Kingdom) Purpose: cofinancing energy efficiency investments undertaken by Social Housing tenants of Local Authorities and Housing Associations, in conjunction with the UK “Affordable Warmth Programme”. Term: 12 years

5. Financing Energy Efficiency – Examples • Loan to a group of Municipalities (Italy) • Purpose: cofinancing of the refurbishment of public buildings in some 30 municipalities of the same province, through ESCOs, based on Energy Performance Contracting). The potential savings on heat and electricity are estimated at ~20% (Operation under preparation). • Loan to support Social Housing renovation (Belgium) • Purpose: cofinancing of a programme aiming at rehabilitation and upgraded of social housing units and related infrastructure, in conjunction with the Region’s Exceptional Investment Programme. • EIB loan: EUR 250 M; Term: 30 years

6. Financing Energy Efficiency – Examples • Loan to a National Promotional bank to co-finance efforts to accelerate the implementation of 2002/91/EC Directive (France) • Purpose: cofinancing of the construction and refurbishment of public buildings to achieve high EE standards in cooperation with the French Agence de l’Environnement et de la Maitrise de l’Energie (ADEME). • EIB loan: EUR 350 M; Term: 27 years • Jessica Holding Fund for Lithuania (under development) • Holding fund for energy efficiency improvements in multi-family housing • Amount: 227 MEUR • Soft loans at fixed interest rate at preferential levels

7. Financing Energy Efficiency – Examples Solar Energy Plan of a Region (France) • EIB • Funding 50% of project • cost up to EUR 200 m • Compliance with EU directives • Intermediary bank • Managing EIB funds & providing project monitoring • Providing supplementary funds • Assessing credit risk issues • Confirming compliance with EIB requirements • Staff training • Region • Marketing of PV installation opportunities • Extension of installation opportunities • (“authorisation pour occupation temporaire” ) • 25% guarantee for individual loan in favour of the Intermediary bank • Managing subsidies for PV installation

8. 3.The specific case of RE&EE in Barcelona province (under development): Context and the EIB loan • Context • Province includes 311 municipalities • Population: 5.3 M inhabitants, but 1.6 M in the city of Barcelona • Strong commitment to climate change: over 80 municipalities have joined the Covenant of Mayors initiative • Objectives of the EIB loan • Deliver CO2 reduction programmes at scale and economic benefits to the municipalities • Help medium-small municipalities to implement programmes in these areas • EIB loan of 250 MEUR (investments financed 500 MEUR)

9. 3.1 Example of the Barcelona province:Investment potential in public buildings and PV on public land Source: Market study, October 2008. * The investment cost of PV has decreased by over 30% since the study was carried out.

10. 3.2 Example of the Barcelona province: The role of the Barcelona Provincial Council • Creation of a specific entity to run the programme, including coordination with Intermediary banks • It helps municipalities in the technical preparation of projects • Regrouping projects in packages and preparation of tender documents • Verification of EIB eligibility criteria and reporting requirements, to be validated by Intermediary banks • Inform municipalities of the initiative

11. 3.3 Energy efficiency & Renewables Barcelona • Barcelona provincial council • (Diputación de Barcelona): • Structure the whole operation • Organise call for tenders • - Manages TA and assists municipalities • - Award contracts (when delegation from municipalities) European Commission: - Funds TA (not yet available) jointly with EIB • Technical assistance (TA): • Provide support to Diputación EIB: - Provides financing to intermediary banks - Provides advice to Diputación - Follows TA (if available) Private companies / Investors / ESCOs: - Bid for projects - Implement projects - Provide equity to projects - Remunerate municipalities in PV projects or receive remuneration in EE projects Municipalities of the Province of Barcelona: - Provide projects - May delegate administrative aspects to Diputación (awards, etc) - Receive remuneration from private companies in PV projects or remunerate private companies in EE projects. Intermediary Banks: - Credit assessment of final counterparties - Financing of projects (including on-lending of EIB funds)

12. 4. EIB Financing of Social Housing Operations: Refurbishment and construction • Problem of Scale: • A great diversity of sub-projects mainly medium and small-scale; • in a large number of towns and cities; • implemented by a large number of social housing associations of medium to small-scale. • Solution offered: • Intermediated loan with (i) a public intermediary (national and regional institution) or (ii) a financial intermediary (commercial or public bank); • e.g. in Flanders with Vlaamse Maatschapij voor Social Wonen, VMSW; • According to defined criteria on energy efficiency • > Contributing to the provision of social housing at high energy efficiency standards throughout the region.

13. 5. Key conclusions to develop EE&RE investment programmes in buildings • The EIB has substantial experience in developing large programmes in this area, including a large range of financial instruments • Generally to be effective, financing has to be combined with other instruments. Normally TA and grants are needed to achieve results • As projects generally small, need to standardise approach, in order to reduce transaction costs • Efficient use of subsidies to face specific barriers, as often projects are profitable