Financing EE in housing in Estonia

Mirja AdlerKredEx

29 November 2011

KredEx Foundation, financing Enterprises and Housing

• A self-sustaining and non-profit guarantee fund that offers:– Business loan

guarantees – Mezzanine financing– Long term funding for

commercial banks– Export guarantees – Housing financing and

loan guarantees

Solid foundation• Founded in 2001• Under the jurisdiction of the Ministry of

Economic Affairs and Communications• State guarantee limit for:

– SME guarantees EUR 96 million– Export guarantees EUR 64

million– Housing loan guarantees EUR 96 million

• Fully accredited for using ERDF and SF• Member of AECM, NEFI, IUHF, IFHP• Number of staff: 35

Housing stock • ~17 000 multi-apartment

buildings• ~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%

Financial measures

• Grants– From state– From municipalities

• Low interest rate loan

• Beneficiary can combine the measures

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• Singel works• Grant available after payments

From renovation 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

Low interest rate loan - revolving fund scheme

Credit from Fund to the Bank• Credit to 2 banks• Maturity: 20 years• Annuity loan• Maximum limit of risk margin for Banks• Terms for credit to multi-apartment buildings• Fixed interest rate for end-beneficiaries• Bank is responsible for credit risk of multi-

apartment buildings

Credit to apartment buildings • Main purpose - energy efficiency measures:

– to save at least 20% of energy in buildings up to 2000 m²

– to save at least 30% of energy in buildings more than 2000 m²

• Self-financing 15% (now grant)• Energy audit is obligatory• Renovation according to energy audit (by

priorities)• Loan period: up to 20 years• Interest rate: up to 4,2% (first tranche) fixed 10

years

Selection of works• Thermal insulation:

– of the roof– of the walls/facade– of the cellar/roof ceiling

• New windows/outdoors• New heating system/renovation of the

heating system• Renovation of the ventilation system / new

ventilation system• Installation renewable energy devices

Obligations of banks• Monthly reporting about loans given

– Information about building– Description of investments– Number of dwellings concerned – Date of energy audit, savings – Total investment cost– Loan amount– Supplementary Bank loan– Loan maturity– Loan interest rate / margin

• KredEx can carry out audits in banks

• Loan is given in maximum 8 tranches, next tranche available after previous is used

SF loan vs usual loanSF loan

• Interest: – Fixed for 10 years– Between 4,3 – 4,8%– Interest on 64 000 € loan

4,5% 10 years 15 573 €

• 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%– Interest 64 000 € loan 7%

10 years 25 137 €

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

• Maturity:– Average 2008: 11,8 years

Combination of national and municipal funding schemes• Credit guarantee from KredEx – if needed• State grant from KredEx for:

– energy audit – 50%, max 700 €– technical inspection – 50%, max 700 €– building design documents - 50%, max 4 000 €• Reconstruction grant from GIS up to 35%

• Tallinn city grant 10% for apartment buildings using renovation loan

Grant 15, 25 or 35% Do more – get more• 15%

• fulfill the terms for renovation loan,

• energy saving 20 or 30%, according to the size of the building

• Energy label E, energy consumption < 250 kWh/m²

• 25% • roof, facade, windows (U 1,1) heating system,

• energy saving at least 40%

• Energy label D, energy consumption < 200 kWh/m²

• 35% • roof, facade, windows (U 1,1) heating system, heat-recovery

ventilation system,

• energy saving at least 50%

• Energy label C, energy consumption < 150 kWh/m²

In all the cases it is obligatory to fulfill the criteria for indoor climate!

Burden of payments – building 2000 m², interest 3,8%, loan 20 years

Steps for end-beneficiary

Results so farLoan• Start 24.06.2009• By 20.11.2011:• 355 buildings• Apartments 11 004• Ca 885 497 m²• Total 31 mln €• Average 102 915 €• Saving 36,18%

Refurbishment grant• Start 30.09.2010 • By 20.11.2011:• 282 applications/252

buildings– 7 mln €

• 243 pos decisions– 6,4 mln €/Investment 29,3– 15% 2,1 mln €– 25% 2,6 mln €– 35% 1,6 mln €

• Ca 648 804 m²• Average 26 192 €

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

Problems during implementation • End-beneficiaries are still careful with

taking the loan

• No actual opportunity to persuade end-beneficiaries, only raise awareness and motivate

• Many documents to prepare before loan application can be finalized

• Loan conditions are rather difficult

• Reporting is burdensome

Information to market participants• Press-conference in public media

• Infodays/seminars/workshops - to end beneficiaries, builders, energy auditors, project designers, local municipalities

• Advertisements in newspapers/magazines

• Internet (website, banners,

news, articles)

• Direct mails

• Leaflets/booklets

• Cooperation with banks

10 campaigns since 2006

Technical studies by Tallinn University of Technology

Studies for 4 different building types, including social studies about residents attitude and expectations

•Brick

•Concrete large panel

•Wooden apartment buildings

•Newly constructed buildings

BEEN-PPP: energy savingsPaldiski 171 heating consumption * 2005 2010Heating consumption MWh 392 165Price EEK MWh 431 989Heating costs, EEK 169 082 163 357Costs EEK/m²/month 4,48 4,33Average per apartment monthly, EEK 234,84 226,88

Comparison 2005-2010:

Heating consumption has decreased ca 58% Heating price has risen ca 129% The costs for heating per month have decreased ca 3% * Heating consumption is corrected with degree days

Conclusions• Building reconstruction is unavoidable

• 2 years for preparations – long period

• Economical conditions have changed drastically during preparation, are getting better again

• Scheme has great future (low interest, high energy efficiency) – combined with grants in Estonia now best financial terms over history

• All-round approach - awareness raising, promotion, state and local support, legal and financial framework – is the key for success

Contact:

KredEx

Mirja Adler

Hobujaama 410151 Tallinn, Estonia

Tel: +372 6674 100Fax: +372 6674 101

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