Energy investment in Housing- Estonia

Mirja Adler

Head of Housing Division

21.05.2010

KredEx – Credit and Export Guarantee Fund• Founded in 2001• Under the jurisdiction of the Ministry of

Economic Affairs and Communications• Capital ~60 million €• State guarantee limit for:

– Housing loan guarantees EUR 96 million– Business loan guarantees EUR 96 million– Export guarantees EUR 192

million• Fully accredited for using ERDF and SF• 34 employees

Housing stock

• ~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%

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 3 200 buildings• 17 million m2, totally 11 million €

– Problems:• Insufficient funding• Single works• Grant available after payments

From 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, help from kfW

Steps for approval

• Preparation of measure

• Negotiations with: – Ministries– Politicians– Banks in Estonia– International banks– European commission

• Contracts

• Information to market participants

Challenges during the implementation• Convincing politicians in Estonia

– Good overall conditions for changing grant scheme to loan scheme (2008)

• Old regulation – discussions with European Commission for 8 Months– (criteria, integrated plan, new financing

scheme) – end of 2008

• Change of economical situation• State guarantee for CEB – June 2009

Revolving fund for energy efficiency

KredEx (Fund)

EUR 49 Million(+15% self-financing,

total 57 mln €)

ERDF

EUR 17 Million

Development Bank (CEB)EUR 29 Million

Swedbank SEB

3. Favorable funding to the commercial banks, intress 4% to end-beneficiaries

Apartment Building

Apartment Building

Apartment Building

Apartment Building

Apartment Building

Apartment Building

1. ERDF to equity of the fund

2. Additional funding up to 50% of total

4. Loan to the apartment associations. Commercial Bank takes the risk of the lenders

State guarantee

Banks selection• Tender for the banks, criteria:

– Rating at least Baa 3 (Moodys) or BBB (Fitch or Standard & Poors)

– Respond to credit institutions act and have license

– Budget over 15 billion EEK – Bank has at least 1 year experience with

financing multi-apartment buildings– Bank accepts loan-maturity for 20 years

Steps to implement• Terms of measure

• Approval from European

Commission

• Tender for the banks

• Agreements with banks– Terms for buildings, monthly reports– Terms for financing (tranches, interest rate,

risk margin, auditing etc)

• “Work” with end-beneficiary

Process for end-beneficiaries• Decision in General Assembly• Self-financing part (own funds or usual loan)• Energy audit for the building• Building design documents – approved by

energy auditor• Building permit • Credit from banks• Tender and agreements with builders• Guarantee (state) from KredEx if needed – up to

75% of loan amount• Construction with owner supervision

SF loan vs usual loanSF loan

• Interest: – Fixed for 10 years– Between 3,9 – 4,4%– Interest on 64 000 € loan

4,01% 10 years 13 731 €

• Contract fee:– 0,5% - 0,75% from loan

amount

• Maturity:– Up to 20years

Usual loan

• Interest– Fixed for 5 years or floating– Interest ~ 7-10% (fixed)– Interest 64 000 € loan 7%

10 years 25 137 €

• Contract fee :– Up to 1% from loan amount

• Maturity:– Average 2008: 11,8 years

Burden of payments – building 3000 m², saving 30%, loan 3 mln EEK, interest 4,0%

Status quo• Start 24.06.2009

• 31.03.2010:

70 contracts with

multi-apartment buildings, total 5,1 mln € (average 74 400 €, 2035 apartments, saving 33%)

• Interest is there, but under current economical situation the self-financing part is the problem and also people are careful with loans

Information to market participants• Press-conference on 25.05.2009,

coverage on biggest newspapers

• 67 (2009) presentations to end beneficiaries, builders, energy auditors, project designers, local municipalities

• Advertisements in local and Estonian newspapers, magazines, internet, direct mailing, articles

Campaigns 2009

Financial support to end-beneficiaries

• State grant (ERDF) from KredEx for:– Energy audit – 50%, max 10 000 EEK

(640 €)– Technical inspection – 50%, max 10

000 EEK (640 €)– Building design documents - 50%, max

50 000 EEK (3 195 €)

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

Contact:

Credit and Export Guarantee Fund KredEx

Mirja Adler

Hobujaama 410151 Tallinn, Estonia

Tel: +372 6 674 100Fax: +372 6 674 101

E-mail: mirja.adler@kredex.eewww.kredex.ee