Energy Efficiencies Practices for European Smart Cities. Athens, February 2018

Transcription

1 Energy Efficiencies Practices for European Smart Cities Athens, February 2018

2 Ingoing hypothesis Talking about energy efficiency opportunity: bn per year in Europe (investments required) Converting energy savings into monetary terms remains a challenge or a mental blocker? Energy efficiency related investments are small, approx 50,000 interventions to achieve 100bn of investments per year Energy savings concepts no one solution for all, energy audits are crucial, quick wins are not capital intensive Implementing energy efficiency related projects - challenging! Finding financingmore challenging! Political willingness to embark on the projects - decisive! Energy efficiency projects with high savings are commercially viable and bankable 2

3 City Mayors need to deal with a number of issues developing smart and resilient cities is in vogue Sustainability Smart citizens Traffic control and parking Air pollution Mobility Street lighting Smart grids Electric vehicles Green buildings Interaction with residents Managing complexity Ruling political majority at the local level Prioritise activities for the 4 years term Secure political support Use Private Public Partnerships to develop and implement innovative technological solutions is an instrument created by the European Commission to help to build resilient cities and communities 3

4 eeef results - so what works in financing currently? Examples from eeef s portfolio investments University Hospital S. Orsola, Bologna, Italy Key project characteristics Largest hospital energy efficiency upgrade in Italy Type of eeef s instrument Project bond under the newly established PPP scheme Combined Heat Power Plant Orléans, France Replacing gas with a biomass plant in the existing district heating network Equity investment in the project vehicle to supply heat to the City of Orléans and sale of electricity to EDF Banca Transilvania, Cluj, Romania First co-operation of the eeef with a financial institution Financial institution supports local EE/RE projects Street lighting upgrade City of Santander, Spain Grant to conduct feasibility study of the street lighting infrastructure an public buildings with the subsequent financing Financing in the form of purchase of receivables resulting from the upgrade of the street lighting infrastructure Universidad Politecnica de Madrid, Spain 1 st forfeiting transaction In Spain, project completed with in the record time of 10 months Purchase of receivables resulting from the upgrade of the heating infrastructure 4

5 Financing of the project is a political decision, but also a question of the financial capacity Key decision factors Potential options Direct financing Indirect financing Existing in-house capabilities to manage renovation works and O&M to assume the technical risk of installations and related energy savings realisation/ or O&M service is already run by the private company Capacity to increase indebtedness Existing facilities with the banks in place No internal capacities to manage renovation works /O&M Limited or no capacities to increase levels of debts Political will to transfer the responsibility for realisation of energy savings to the private party Internal capacities to manage tender and selection process 5

6 Direct financing mechanism: City profits most from the realised savings, increases indebtedness Direct financing structure overview Repayments eeef Loan agreement Municipality Construction and O&M contracts EPC partner O&M partner/s Tender procedure relatively simple, purchase of equipment is tendered Build-up of know-how for new technology on municipal level Advantages of direct financing The municipality handles all operational and financial matters Most likely improved financial conditions compared to PPP solution (subject to credit rating of the public entity) Full saving benefit from start of implementation (subject to loan repayment) minus financing costs 6

7 Street lighting upgrade of the City of Venlo - Venlo, Netherlands Project description Location Partners: City of Venlo (Borrower) Measures: Energy efficiency Street lighting The City of Venlo upgrades of the existing street lighting network of the city with energy efficient LED lamps The existing O&M contract for the street lighting network with a private service company stays in place and includes the upgraded lighting points Venlo, Netherlands Results: Achievement of primary energy savings of around 62% p.a. compared to baseline Project structure Investment characteristics Key data: Total project volume: 8.5m Loan Agreement eeef funded volume: 8.5m via a senior debt loan covered by the City of Venlo Duration of financing: 15 years Highlights: (Lender) Obligation to invest into energy efficiency projects (Borrower) First direct lending to a municipality by eeef. The street lighting upgrade is part of an overall green development plan of the city Reference project for European public authorities demonstrating efficient financing solutions for energy efficiency and renewable energy projects via eeef 7

8 Indirect financing mechanism: for larger investment volumes, without affect on the City s budget Classic project finance structure Purchase of receivables Junior funds (15%-30%) Senior debt ESCO Partner eeef Capital injection SPV (ESCO founded) Sub-contracts (a) Repayments Construction and O&M contracts Municipality ESCO Partner Assigning of receivables (80%-90% of the funding amount) discounted Installations/construction, O&M, energy savings guarantee Municipality EPC partner O&M partner/s Sub-contracts (b) eeef Payments based on the savings share, no increase of the City budget 8

9 Energy efficiency upgrade of Hospital S. Orsola Malpighi - Bologna, Italy Project description Location Partners: Progetto ISOM S.p.A (project SPV) University Hospital S. Orsola Malpighi (grantor of concession) Bologna, Italy Measures: energy efficiency CCHP Upgrade of entire fluids production and distribution system of the hospital Including a tri-generation plant with a district heating and cooling network of 15 kms and two new thermal plants Results: Reduction of CO2 emissions of 14,136 t p.a., approx. 31% compared to baseline Project structure Manutencoop Facility Management Siram Sinloc Project bond + VAT bond SPV Progetto ISOM S.p.A. Equity funding Concession agreement UHSOM (Grantor of concession) Regional funding of healthcare Region Emilia Romania EPC and O&M EPC & O&M consortium Investment characteristics Key data: Total project volume: 41m (equity provided by Manutencoop Facility Management, Siram, Sinloc) eeef funded volume: 31.8 via a project bond structure Duration of financing: 20 years Highlights: Largest energy efficiency upgrade in Italy under a Public Private Partnership (PPP) framework Lighthouse project for the Italian and European energy efficiency market demonstrating the positive impact of an energy efficiency investment in a complex upgrade of the public hospital 9

10 Street Lighting PPP for the City of Santander - Forfaiting - Cantabria Region, Spain Project description Location Partners: ELECNOR (Sponsor) Municipality of Santander (grantor of concession) Santander, Spain Measures: energy efficiency Conversion of existing street lights to energy efficiency LEDs (22.300) in the City of Santander (located in the Cantabria Region in Spain with a population of 174,612 inhabitants) Results: Reduction of CO2 emissions of 4,395 t p.a., approx. 80% compared to baseline. Primary Energy Savings: 39,848 MWh p.a (80%) Project structure (Purchaser) Purchase of the remuneration receivables / Drawdown at the completion of the installation 2 ESCO (Seller) Payment of remuneration (eeef s share of receivables) transferred to eeef by the Municipality Agreeing to eeef s terms & conditions according to Notification Street Lighting Management Contract (Concession) Agreed remuneration 15 yrs in accordance with the tender Investment characteristics Key data: eeef funded volume: 9.2 m via a forfaiting structure (54% purchase of existing receivables) Duration of financing: 13.5 years Highlights: One of the largest street lighting upgrades in Spain under a Public Private Partnership (PPP) framework. The project emerges from the Technical Assistance of the European Commission, with the Municipality of Santander receiving funding to conduct energy audits and prepare the investment programme Elecnor and eeef have agreed on the financing structure, signed the forfaiting agreement, completed installations in the 11 months period City of Santander savings with 360K per year after the remuneration of the ESCO partner 10

11 Lessons learned Cities are in the driver seat : technical expertise, Mayor s support No bankable project without viable feasibility study /project preparation Use of grants for project preparation is to be increased Projects with high energy savings could be commercially financed No one solution for all: City to decide whether the leverage private finance or use their own funding Full fledged procurement process in the PPP schemes is complex - should not be underestimated 11

12 Contacts European Energy Efficiency Fund (eeef) Lada Strelnikova +49 (69) Paola Rusconi +49 (69) Rahul Pratap Singh +49 (69) Zarpana Signor +49 (69) Iñigo Prior +49 (69)

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