The Green Deal Finance Company Briefing Pack

Transcription

1 The Green Deal Finance Company Briefing Pack The Green Deal Finance Company The Green Deal Finance Company (TGDFC) is a not-for-profit company set up to provide the lowest cost finance to the Green Deal, to enable a competitive market and maximise the Green Deal measures that can be implemented across the United Kingdom. What is the Green Deal? The Green Deal is a Government-sponsored framework to allow private firms to offer all UK consumers (households, communities and workplaces) energy efficient improvements to their buildings. Consumers will pay back the cost of such improvements through the resulting savings in their energy bills. At the heart of the Green Deal is the rule that savings on bills will exceed the cost of the work. By meeting this golden rule, customers will get energy savings for free. Consumers will pay back the cost of such improvements through the expected savings in their energy bills. Improvements can include measures such as loft and cavity wall insulation, innovative hot water systems, condensing boilers and may also include more costly measures such as solar thermal energy or solid wall insulation. For more information about the Green Deal, please visit the Department of Energy and Climate Change website here ( here is hyperlink to How the Green Deal Works Energy saving measures are currently provided by the private sector to consumers, including insulation, boilers and cavity and solid wall insulation. To fund these improvements the consumer has to finance the product themselves (mostly by dipping into their savings, although some support is available from Government schemes and energy suppliers) Historically there has been limited uptake by householders and businesses, despite a long term interest in reducing their energy bills and reducing their carbon footprint. Under the Green Deal, households and businesses can have such retrofit work done to their premises without incurring debt, but rather by paying a Green Deal payment which is attached to the property and under the Golden Rule, must be less than future savings on their energy bills as a result of the investment. Accredited assessors will recommend the measures which will meet the this Golden Rule and then private sector providers will install the energy efficient measures. Households and companies will be assessed for what Green Deal measures can improve their properties and will apply to Green Deal Providers to implement those measures. These Providers will quote a regular Green Deal repayment figure which is a function of the cost of the measures and the cost of the underlying finance which will come from The Green Deal Finance Company. For more information about the Green Deal, please visit the Department of Energy and Climate Change website here ( here is hyperlink to

2 About TGDFC The Green Deal Finance Company has been set up to provide the lowest cost of finance to the market place, which in turn will mean the widest range of energy efficient measures can meet the Golden Rule, which of course is significantly impacted by the underlying cost of finance. It is being set up as a national company with membership when it goes live open to all market participants with a view to funding Green Deal Providers to deliver the Green Deal. Its existing membership is already representative of the whole market and we anticipate a far wider group of companies joining as members leading up to our going live in October It is critical to the success of the Green Deal that the underlying cost of finance is as low as possible. This will allow the largest number of measures to be introduced on each property while still meeting the Golden Rule. This means you need the cheapest source of finance together with the lowest set-up costs across the industry, including IT and loans administrations. This leads to the obvious conclusion that the market is best served by having one central finance company which: Is being established as a not for profit company to minimise its overall cost of capital Minimises the set up and administration costs of providing finance across the industry Allows Green Deals to be quickly and regularly aggregated and refinanced in the capital markets at high investment grade Can run funding competitions between alternative sources of finance and can access any specialised, low cost sources of finance and grants Solves the question of whether Green Deal Providers have to find the finance for the Green Deal The Green Deal Finance Company is the natural source of finance for the growing number of local authority Green Deal initiatives, who will benefit from its scale and being able to access cheaper investment grade source of finance. The Green Deal Finance company will therefore provide the most economic source of finance and enable an underlying competitive and innovative market for the provision of energy investment measures. Structure The basic structure of TGDFC in the context of the Green Deal is as shown below.

3 Critical Stages in the development of TGDFC Feasibility (3 months) Developing detailed structure, security arrangements, IT planning, outline credit rating, loan loss estimates, input into secondary legislation, Memorandum of Understanding (MOU) and stakeholder agreements Set-up (6 months) Procuring IT and loans administration systems, full credit rating, recruitment of full-time employees, Articles Associations, detailed treasury management policy Implementation (3 months) Arranging debt and working capital facilities, IT going live, finalised stakeholder agreements, funds advanced Go Live (October 2012) Available to provide Green Deal finance Role of TGDFC The Green Deal Finance Company will have many roles, some of which are outlined below: Provision of finance source of finance for all Green Deal providers, providing consistent quotes for specific loan durations and amounts Establishes common IT systems across the industry for the calculation, monitoring and amortisation of individual loans, allowing supplier switching Loans Administration competent control of Green Deals outstanding, amortisation of Green Deals and keeping records of individual property details, to banking standards, to ensure households can get

4 information centrally, securitisation proceeds are maximised, switching is facilitated, and security values of houses are not impaired Treasury function TGDFC will fund itself through the most economically advantageous mix of finance instruments to obtain the lowest overall pricing, such as bond markets, commercial paper, short term loans and revolving credits. Retention of profits Over time, TGDFC will build surpluses. By retaining these it will add to its corporate strength, reduce security cover requirements and therefore its cost of funds over time. Conduit for start-up finance Before the refinancing market for GD assets is established, TGDFC will access start-up finance from a variety of sources. As a national aggregator the amount of start-up finance required across the industry will be minimised, as the long term bond markets can be more quickly and regularly accessed. Off balance sheet GD finances on TGDFC s balance sheet, not the energy suppliers or public sector balance sheet Sourcing finance TGDFC will be sourcing the most competitive high investment grade finance available, matching the duration and nature of its consolidated Green Deals. Financing local authorities Several local authorities have embarked on promoting the Green Deal on a regional basis. TGDFC anticipate they will have a ready source of finance for their schemes from the bond market mitigating the risk that they cannot refinance their Green Deal obligations. Members of TGDFC The following organisations are members of and advisors to TGDFC: British Gas Clifford Chance Carillion E.ON EDF Energy Goldman Sachs HSBC Insta Group Kingfisher Linklaters Lloyds Bank Corporate Markets Mark Group Npower

5 PwC RBC Capital Markets SSE Press releases 02/10/11: The Green Deal Finance Company - an industry-led consortium investigating how to finance the best value Green Deal option for consumers is formed Contact DECC has been referring market participants to TGDFC should they have a potential interest to participate and contribute. TGDFC can be contacted at: greendeal@uk.pwc.com The Green Deal Finance Company will provide periodic updates and if you would like to be added to this distribution list please greendeal@uk.pwc.com with your: Name Organisation Position Brief description of your interest in the Green Deal