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Financial instruments for energy efficiency in

housing Cohesion Policy experiences & outlook

2014-2020

Bjoern Gabriel, Policy AnalystDG Regional Policy – Unit D.3: ‘Financial engineering, major

projects’

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Outline1. Financial Engineering Instruments

2007-2013

2. The JESSICA initiative

3. FEIs for EE & RES overall – State of play

4. FEIs for EE in housing – Experiences

5. Outlook: financial instruments 2014-2020

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• Financial Engineering in Cohesion Policy: Innovative way of delivering CP support through revolving financing instruments (using new structures and processes), complementary to traditional non-repayable public support through grants

• Article 44 of the GR enables support through FEIs in three thematic areas:– Art 44 (a): SMEs, including micro enterprises– Art 44 (b): Sustainable urban development– Art 44 (c): EE & RES in the building sector, including existing

housing

FEIs are e.g. referred to as venture capital funds, guarantee funds and loan funds

• FEIs represents a new approach to CP support, resulting in– different implementation structures as compared to grants,– new partnerships in promoting and delivering this form of CP

support,– the need to offer assistance to our stakeholders in the design and

implementation of FEIs.

Financial Engineering 2007-2013

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Grant support• Ex-post reimbursement • For projects or project

components without revenue-generating capacity

• One-off support

Managing AuthorityManaging Authority

BeneficiariesBeneficiaries

Grant

Background: FEI implementation structure

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Implementation phases Evaluation & design Implementation: Selection of HF

(optional) > Funds / Financial Intermediaries > final recipients for actual investments / disbursements

Key features of FEIs Providing loans, equity or

guarantees for revenue-generating (parts) of projects

Revolving scheme > budgetary efficiency

Possible leverage from public or private sector partners (all levels)

Provide finance to final recipients before actual project expenditure

Offer a high degree of flexibility > tailor-made support & delivery structures

Can be combined with grants

Holding Fund (HF)Holding Fund (HF)

Managing AuthorityManaging Authority

Fund / Financial Intermediary

Fund / Financial Intermediary

Fund / Financial Intermediary

Fund / Financial Intermediary

Final recipientsFinal recipients

Financial products

Final recipientsFinal recipients

Financial products

SF

SFSF

CoFin Additional resources

Background: FEI implementation structure

Operational Programme / public policies / resources

Market situation & appropriate promotional instruments

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JESSICA – Support to CP stakeholders (1)

Joint European Support for Sustainable Investment in City Areas - joint initiative of EC’s DG for Regional Policy, developed in co-operation with EIB and CEB, to support sustainable urban development and regeneration through financial engineering mechanisms.

Promote the use of financial engineering instruments for sustainable urban development in Cohesion Policy

Develop partnerships with regions, cities, national and regional financial institutions and other investors

Assist Member States in designing and implementing these revolving instruments

MAs may mandate EIB to act as HF manager (GR)

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JESSICA - Support to CP stakeholders (2)

65 JESSICA OP-specific Evaluation Studies commissioned in 22 Member States; 55 studies finalised (http://jessica.europa.eu; www.eib.org/jessica)

2 Horizontal Studies published: HF Handbook, UDF Typologies and Governance Structures), and

6 Horizontal Studies underway, incl. UDF Handbook; Energy-focused Urban Development Funds; Methodologies for Assessing Social and Economic Performance in JESSICA; Housing in JESSICA Operations; JESSICA for Smart and Sustainable Cities; Marketing, Communication and Knowledge Dissemination Strategies for JESSICA Operations

JESSICA Networking Platform (JNP) established in 2009 by the EC, EIB and CEB as a forum for exchange of information, experiences and best practice– JNP events: Two Networking Platforms & Annual Conference per

year– Thematic JESSICA Working Groups, initiated and co-ordinated by

stakeholders to provide recommendations to EC and its partners (JESSICA & Housing; Lessons learned by Financial Intermediaries)

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FEIs for EE & RES overall – State of play

FEIs under Art 44 (b): Sustainable urban development EUR 1.89 bn legally committed to 22 JESSICA operations in

11 MS

Of these 22 JESSICA operations, ten have an energy component amounting to a maximum of EUR 1,008 billion of possible investments in energy efficiency measures and renewable energies infrastructure in cities

Wide scope of EE & RES interventions at project level, ranging from sustainable urban infrastructure developments (e.g. London Green Fund) to the retrofitting of housing stock (Estonia, Lithuania).

15 UDFs operational by 30 June 2011; up to 30 expected to be active early 2012

First project investments undertaken in Estonia, Brandenburg, Poland and Lithuania

FEIs under Art 44 (c): EE & RES in buildings, incl existing housing

So far, one instrument reported in Greece (“Eksikonomo kat’ oikon” – EE for private housing in Greece): HF structure (EUR 241 million)

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FEIs for EE in housing - Experiences EE interventions suitable for repayable investments from FEIs

as energy savings & related cost savings serve as revenue-basis However, shift from grant culture to repayable investments is

not self-evident (change of paradigm, financing capacity of final recipients, etc.)

Success factors: Combination of FEIs and grants essential

Financial incentives, such interest rate subsidies or grants to cover the self-financing share of final recipients

Performance incentives, such as incremental capital rebates or interest rates related to EE gains / categories reached

Technical assistance & project preparation, such as energy audits, planning documents, etc.

Campaigning: Awareness-raising and promotion Stakeholder co-operation & integration of existing programmes or actors Need for relevant expertise in the market (easy access; sufficient capacities) Dove-tailing / One-stop shop: technical project preparation & access to finance in

one package Involvement and development of ESCO sector (large potential)

EE intervention as part of holistic / multi-thematic upgrading approach

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Outlook: Financial instruments 2014-2020 (1)

Background: Increased importance of financial instruments in implementing EU budget resources in future (MFF 2014-2020)

CP Financial Instruments 2014-2020 to provide a clear set of rules, building on existing guidance and

interpretations capture synergies with other forms of support such as grants, and to ensure compatibility with financial instruments at EU level

Key provisions of legislative COM proposal 2014-2020:1. Scope: Expansion to all thematic areas covered by OPs

2. Ex-ante assessment prior to establishing FIs

3. More implementation options:

I. Support to FIs set-up at EU level (direct management)

II. Support to FIs set-up at national/regional level, managed by MAs (shared management)

a. Already existing or newly created instruments (tailored)

b. Standardised instruments for which terms & conditions are laid down in Commission Acts; ready-to-use

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Outlook: Financial instruments 2014-2020 (2)

Key provisions of legislative COM proposal 2014-2020 (continued):4. Easier mobilisation of national co-financing:

Payment applications to include total of support paid and expected to be paid to FIs over a period of max. two years (phased contributions);

Additional incentive: EU co-financing share to increase by 10% if whole priority axis is implemented through FIs

5. Clearer rules concerning the financial management of EU contributions

Interest on EU contributions prior to investments Capital resources paid back from investments Gains/earnings/yields generated by investments

6. Use of legacy resources in line with OP for at least ten years after closure

7. Better monitoring & reporting concerning financial instruments

8. Strengthening the combination of FIs and other forms of support

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Thank you for your attention!

For further information:For further information:

Website:Website:

http://jessica.europa.eu

E-mail:E-mail:REGIO-JESSICA@ec.europa.eubjorn.gabriel@ec.europa.eu

DG Regional Policy – Unit D3 – Financial engineering, major projectsDG Regional Policy – Unit D3 – Financial engineering, major projects