Financing energy refurbishment in the housing sector

Transcription

1 Financing energy refurbishment in the housing sector Christophe MILIN, ADEME Infinite Solutions, 1 st Training session Stuttgart (DE), 25th - 26 th March 2014

2 Fill the gap between projects and finance Financial markets? Project for a financer Black boxes / standardized products Investment requirements and associated cash-flows Predictable profitability and risks Minimum size to cover transaction costs Which intermediaries? (ESCOs? Public operators? ) Which contractual relationships? (Energy Performance Contract? Public Service delegation? other? ) Projects developers Project for a project developer: Answer to a need Specifically tailored to fit physical constraints Best use of available technologies no financing or no subsidy?

3 Issue for financial engineering Propose a scheme compatible with usual practices of capital providers A private investor will intend to reach a level of profitability / risk / liquidity at least equivalent or higher compared to its other investment opportunities Particularly not in favor of comprehensive energy refurbishment in the housing sector (very long term commitments, low profitability and still high risks, with no real guarantees) A public investor can accept higher risks and even invest with no direct return (subsidy) Within the limits of its institutional competences, by justifying of a public interest and without distorting free competition With the possibility of improved fiscal resources A public / private partnership will be the result of a negotiation Terms defined in the partnership contractual documents (bank partnership convention, energy performance contract, shareholders' agreement, ) No great or poor scheme as such Necessary comparative analysis cost / effectiveness of the scheme resulting of the negotiation 3

4 Main market failures identified in the housing sector (justifying public intervention) Market failures Private housing Individual houses Private housing Condominiums Social housing Financial resources to be adapted Current Loans : duration too short, difficulties w/eco PTZ Collective loans not developed Very competitive existing loan Awareness rising / support to homeowners to develop Insufficient information & very limited recourse to professional support Difficulties aggravated by the weak governance of condominiums Professional homeowners Structuration of the professional offer SME separated per specialties, no comprehensive offer Insufficient work scheduling (linked to weak governance) Skilled professionals and assistance Source: Vesta Conseil & Finance

5 Homeowner charges Possible orientation followed by regional public authorities in France Homeowner charges Maximize the interest, the will and the capacity of homeowners for realizing ambitious energy refurbishment Levy effect linked to the financing of the study phase in the overall package and the inclusion of energy savings for evaluating the capacity of the homeowner to reimburse its loan Current situation Assistance Subsidy Public Goal Work Personal savings Loan Homeowner Optimized comprehensive work Long term loan Homeowner Usage Resources Assistance Usage White certificates Resources Total Heating charges Total Heating charges Financing charges Financing charges Work Source: Vesta Conseil & Finance Time Work Time

6 Calls for expressions of interest to the banking sector Examples of regional initiatives in the private housing sector (not exhaustive)

7 Calls for expressions of interest to the banking sector Subsidized loans Examples of regional initiatives in the private housing sector (not exhaustive)

8 Calls for expressions of interest to the banking sector Subsidized loans Trusted third-parties Examples of regional initiatives in the private housing sector (not exhaustive)

9 Calls for expressions of interest to the banking sector Subsidized loans Trusted third-parties Third-party financers Examples of regional initiatives in the private housing sector (not exhaustive)

10 Calls for expressions of interest to the banking sector Subsidized loans Trusted third-parties Third-party financers Energy efficiency public services Examples of regional initiatives in the private housing sector (not exhaustive)

11 Calls for expressions of interest to the banking sector Subsidized loans Trusted third-parties Third-party financers Energy efficiency public services Guarantee funds Examples of regional initiatives in the private housing sector (not exhaustive)

12 Energies POSIT'IF: public third party investment operator for condominiums Public/Private company, created in January 2013 initiated by the Ile-de-France region (France) and several local authorities (85% of the initial capital) with the support of Caisse des Dépôts et Consignations and Caisse d'epargne (15% of the initial capital) Targets deep refurbishment of private condominiums: Complements the initial support provided to condominiums by local energy agencies Provides technical coordination of work with an energy efficiency commitment and a financing offer Composed of a small team which mainly negotiates the contracts and develops the financial engineering, while all technical aspects are subcontracted.

13 Energies POSIT'IF: public third party investment operator for condominiums "Local facilitators": energy agencies, associations Mature projects Condominium Administrator Source: José Lopez, Energies POSIT'IF Equity (local authorities & private partners) Long-term loans (low interest rates) 1. Unconditional phase Design of measures Financing plan 2. Conditional phase with options Implementation of the works + Third party investment with or EPC (guaranteed savings) or O&M with shared savings ERDF Jessica fund (loans/equity) - potentially Grants and tax incentives for home owners (tbc) Soft loans for homeowners (tbc) Energies POSIT IF Sub-contracting or co-contracting agreements Architects Thermal engineers Construction companies Energy service companies

14 Energies POSIT'IF: first results and success factors Results Two on going contracts, in Meudon-La-Forêt (904 apartments) and Chelles (216 apartments) expected energy savings should achieve 40% up to 60%. Investments worth 10 million in total. Six other condominiums of 500 apartments plan to sign in The potential investment reaches 12.5 million. 15 more condominiums of about 2,700 apartments showed interest Currently in the first phases of the project preparation (energy audit, consultations with energy advisors). Investment could reach 75 million. Key success factors: Strong political support Continuous dialogue with national public authorities. Presence of crucial actors on the concerned territory such as local energy info points or consultants and local energy agencies Risks: Bank regulation

15 Main features of the Energy Public Service in Picardy Inspired by the experiences of Pay As You Save in the UK (previous to the Green Deal) and PACE in the USA Creation in September 2013 through a vote of the regional council Creation of a «régie personnalisée» in November 2013 to operate and develop the service. Financing capacity of 50M during the pilot phase, including management and information costs: 8 M from the regional council (in 4 payments) 42 M from debt.

16 Number of projects Progressive implementation 3 phases : Importance of the pilots to reach the scaling up phase Installation Pilots Scaling up Return of experience from the first pilots 5 years /year 2000 Now 06/ /2017

17 Interest of a public service over third party financing? SPEE vs SEM third party financer Use analogies with other public services to comfort the hybrid model of third party financing Allow to integrate the service provided into a larger scope, like for example access to housing. Council an optional service, paid through a charge for services provided, and a mandatory service, paid through a tax. Implementation of public service can be considered as a follow-up of the creation of a third-party financer, but also previously: Public Service facilitates the creation of an innovating activity without the difficulties linked to gathering the capital for a SEM ; Allows the local authorities to get involved progressively in the project, with the possibility to adapt their implication to their specific goals ; Adapts to the maturity of the project, allowing progressive opening to private actors.

18 And also? Financial markets! Requires critical size and standardised assets pipeline of projects Bonds Factoring fund Securitisation Initial capital + first risk coverage EESF (Bulgaria) Banks don't want to increase their debts either! Bank Loan Soft loans / interest rates buy down Estonia, Lithuania London EE Fund Guarantee fund(s) to cover first losses BGEEF (Bulgaria) Loan ESCO EPC! High interest rates kill savings potential Banks don't trust energy savings as revenues! Portfolio guarantee fund for payment delays BGEEF (Bulgaria) A. Bullier, C. Milin Alternative financing schemes for energy efficiency in buildings ECEEE Summer Study 2013

19 Scaling up Public intervention needed! EE markets To achieve the EU's 2050 objectives (Factor 4) we need (among others): Increase the number of renovations Improve the ambition of those renovations No technical breakthrough required Key obstacles are organizational and financial Public funds Tens of billions need to be invested each year Direct and indirect subsidies are not scalable Maximize the leverage of public intervention Switch from a stock refurbishment perspective to a logic of projects support Subsidy Financial engineering We have all the pieces of the puzzle! But the vision is lacking Diffusion of the existing models is essential to replicate them Massive capacity building is needed for public authorities

20 THANK YOU FOR YOUR ATTENTION Christophe MILIN ADEME, Service Economie et Prospective +33 (0)