Page 15 - European Energy Innovation - spring 2020 publication
P. 15
Spring 2020 European Energy Innovation 15
ENERGY EFICIENCY FINANCING
the proceeds for specific energy to a public authority. Another type the technical and operational risks
efficiency projects. This form of of indirect financing is a forfaiting to the I-Quatro, in return for their
financing best suits public authorities agreement with the public authority participation in the achieved savings.
with the capacity to take on more for the receivables associated with
debt on balance sheet, the in-house the planned energy savings that are The optimal financing must be
capabilities to manage the project guaranteed by the ESCOs. structured in parallel to the project
and the appetite to take on the development, as the structure
technical risk of realising the energy These structures bring the financing depends on project revenues that
savings. The benefits of this structure “off balance sheet” and so require no are inextricably linked to the tender
are a simplified tender procedure, upfront investment from the public requirements and the energy
know-how retained at the public authority. They are appropriate for performance guarantees.
authority, improved financial terms public authorities with limited or
and full realisation of the savings no capacity to increase debt levels. Projects are only bankable with a
flowing to the public authority. The public authority benefits from viable feasibility study and project
private sector expertise to design preparation, which typical commercial
An example of direct financing from and implement the project, the sub- banks do not support. Programmes
European Energy Efficiency Fund contractors manage the renovation such as the eeef Technical Assistance
(eeef) is the Dutch City of Venlo’s works and O&M on behalf of the Facility (TAF) provide grant support
upgrades to the existing street public authority and responsibility for for feasibility studies, energy audits,
lighting network with energy efficient realisation of the energy savings is evaluation of the economic viability of
LED lamps. The fund has a 15 year transferred to the private party. the investments and legal support.
loan agreement directly with the City
of Venlo and the existing Operations An example of indirect financing The eeef may then provide financing
& Maintenance (O&M) contract for the is the eeef’s 12 year forfaiting of between €5m and €25m for
street lighting network with a private facility with the ESCO I-Quatro projects in the European Union that
service company stays in place. City LDA to upgrade the street lighting avoid CO2e emissions to at least
of Venlo therefore bears the technical of 14 municipalities in Portugal, 20% of baseline, provided there is a
and operational risk of the street represented by the Comunidade public link.
lighting project whilst retaining 100% Intermunicipal do Alentejo Central
of the savings, which can then be (CIMAC). Of the estimated €7m In all cases, a strong and stable
deployed for other projects. in economic savings for the political environment with
municipalities over the 12 year commitment and support for the
Typical indirect financing instruments concession, 75% will be transferred project is key. By providing technical
include equity, mezzanine or to the eeef as remuneration for the and financial support, funds such
debt financing of a project SPV in funding of the transaction and to as eeef, in conjunction with the TAF,
conjunction with private entities such I-Quatro for O&M and 25% will be are able to bridge the gap between
as energy service companies (ESCOs), retained by CIMAC. the political will to boost energy
utilities or facility management efficiency of public infrastructure and
companies that provide services In this structure CIMAC transfers successful project implementation. l
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