Financing EE in housing in Estonia

1. Financing EE in housing in Estonia Mirja AdlerKredEx 29 November 2011

2. KredEx Foundation, financing Enterprises and Housing • A self-sustaining and non-profit guarantee fund that offers: • Business loan guarantees • Mezzanine financing • Long term funding for commercial banks • Export guarantees • Housing financing and loan guarantees

3. Solid foundation • Founded in 2001 • Under the jurisdiction of the Ministry of Economic Affairs and Communications • State guarantee limit for: • SME guarantees EUR 96 million • Export guarantees EUR 64 million • Housing loan guarantees EUR 96 million • Fully accredited for using ERDF and SF • Member of AECM, NEFI, IUHF, IFHP • Number of staff: 35

4. Housing stock • ~17 000 multi-apartment buildings • ~95% housing stock is in private ownership: • ~60% of the housing stock has been built in 1960-1990 • ~30% before 1960 • ~ 75% population living in multi-apartment buildings • Low quality and low energy efficiency • Average energy consumption per year in buildings which have not been renovated 200-220 kWh/m2 • Energy used in buildings ~40%

5. Financial measures • Grants • From state • From municipalities • Low interest rate loan • Beneficiary can combine the measures

6. Previous measure – grant scheme 2003-2007 state grants all over Estonia: • For energy audits, building designs and technical expertise 50% of the costs (since 2003) – still continuing • Supported 3 800 buildings • Totally 1,4 million € • For renovation, 10% of the costs • Supported 3200 buildings • 17 million m2, totally 11 million € • Problems: • Insufficient funding • Singel works • Grant available after payments

7. From renovation grants to revolving fund – why? Opportunity for re-usage of the funds Funds stay in state Support scheme (10% support) versus loan scheme (state support is even bigger) Loan is needed for reconstruction anyway Opportunity also to smaller buildings Easier to administer, lower administrative costs End-beneficiary is used to take loan Innovative scheme

8. Low interest rate loan - revolving fund scheme

9. Credit from Fund to the Bank • Credit to 2 banks • Maturity: 20 years • Annuity loan • Maximum limit of risk margin for Banks • Terms for credit to multi-apartment buildings • Fixed interest rate for end-beneficiaries • Bank is responsible for credit risk of multi-apartment buildings

10. Credit to apartment buildings • Main purpose - energy efficiency measures: • to save at least 20% of energy in buildings up to 2000 m² • to save at least 30% of energy in buildings more than 2000 m² • Self-financing 15% (now grant) • Energy audit is obligatory • Renovation according to energy audit (by priorities) • Loan period: up to 20 years • Interest rate: up to 4,2% (first tranche) fixed 10 years

11. Selection of works • Thermal insulation: • of the roof • of the walls/facade • of the cellar/roof ceiling • New windows/outdoors • New heating system/renovation of the heating system • Renovation of the ventilation system / new ventilation system • Installation renewable energy devices

12. Obligations of banks • Monthly reporting about loans given • Information about building • Description of investments • Number of dwellings concerned • Date of energy audit, savings • Total investment cost • Loan amount • Supplementary Bank loan • Loan maturity • Loan interest rate / margin • KredEx can carry out audits in banks • Loan is given in maximum 8 tranches, next tranche available after previous is used

13. SF loan vs usual loan SF loan Usual loan Interest Fixed for 5 years or floating Interest ~ 7-10% Interest 64 000 € loan 7% 10 years 25 137 € Contract fee : Up to 1% from loan amount Maturity: Average 2008: 11,8 years • Interest: • Fixed for 10 years • Between 4,3 – 4,8% • Interest on 64 000 € loan 4,5% 10 years 15 573 € • Contract fee: • 0,5% - 0,75% from loan amount • Maturity: • Up to 20years

14. Combination of national and municipal funding schemes • Credit guarantee from KredEx – if needed • State grant from KredEx for: • energy audit – 50%, max 700 € • technical inspection – 50%, max 700 € • building design documents - 50%, max 4 000 € • Reconstruction grant from GIS up to 35% • Tallinn city grant 10% for apartment buildings using renovation loan

15. Grant 15, 25 or 35%Do more – get more • 15% • fulfill the terms for renovation loan, • energy saving 20 or 30%, according to the size of the building • Energy label E, energy consumption < 250 kWh/m² • 25% • roof, facade, windows (U 1,1) heating system, • energy saving at least 40% • Energy label D, energy consumption < 200 kWh/m² • 35% • roof, facade, windows (U 1,1) heating system, heat-recovery ventilation system, • energy saving at least 50% • Energy label C, energy consumption < 150 kWh/m² In all the cases it is obligatory to fulfill the criteria forindoor climate!

16. Burden of payments – building 2000 m², interest 3,8%, loan 20 years

17. Steps for end-beneficiary

18. Results so far Loan Refurbishment grant Start 30.09.2010 By 20.11.2011: 282 applications/252 buildings 7 mln € 243 pos decisions 6,4 mln €/Investment 29,3 15% 2,1 mln € 25% 2,6 mln € 35% 1,6 mln € Ca 648 804 m² Average 26 192 € • Start 24.06.2009 • By 20.11.2011: • 355 buildings • Apartments 11 004 • Ca 885 497 m² • Total 31 mln € • Average 102 915 € • Saving 36,18%

19. Lessons learned • Preparation takes long time – for Estonia 2 years • Many different partners to negotiate – parallel negotiations • Economical situation in the country can change dramatically • Legal framework to support the measure • Combine different measures • Information to market participants and end-beneficiaries

20. Problems during implementation End-beneficiaries are still careful with taking the loan No actual opportunity to persuade end-beneficiaries, only raise awareness and motivate Many documents to prepare before loan application can be finalized Loan conditions are rather difficult Reporting is burdensome

21. Information to market participants • Press-conference in public media • Infodays/seminars/workshops - to end beneficiaries, builders, energy auditors, project designers, local municipalities • Advertisements in newspapers/magazines • Internet (website, banners, news, articles) • Direct mails • Leaflets/booklets • Cooperation with banks

22. 10 campaigns since 2006

27. Technical studies by Tallinn University of Technology Studies for 4 different building types, including social studies about residents attitude and expectations • Brick • Concrete large panel • Wooden apartment buildings • Newly constructed buildings

28. BEEN-PPP: energy savings Comparison 2005-2010: Heating consumption has decreased ca 58% Heating price has risen ca 129% The costs for heating per month have decreased ca 3% * Heating consumption is corrected with degree days

29. Conclusions Building reconstruction is unavoidable 2 years for preparations– long period Economical conditions have changed drasticallyduring preparation, are getting better again Scheme has great future (low interest, high energy efficiency) – combined with grants in Estonia now best financial terms over history All-round approach - awareness raising, promotion, stateand local support, legal and financial framework – is the key for success

30. Contact: KredEx Mirja Adler Hobujaama 4 10151 Tallinn, Estonia Tel: +372 6674 100Fax: +372 6674 101 E-mail: mirja.adler@kredex.ee www.kredex.ee