eeef – european energy efficiency fund

eeef –

European Energy Efficiency Fund

Agenda

2

introduction to eeef - key elements

eeef investments: eligibility, process and project structures

1

2

3 Case studies

4 Final Remarks

eeef at a glance

3

eeef’s capital

Beneficiaries

Objective� eeef is an innovative public-private partnership dedicated to

mitigating climate change through market based financing in the EU28

� Initial capitalization: €265m provided by the European Commission, the European Investment Bank, Cassa Depositi e Prestiti and Deutsche Bank

� Technical Assistance (TA) facility of €20m provided by the European Commission, now expired

� Municipal, local and regional authorities or public and private entities acting on behalf of those authorities (e.g. utilities, public transportation providers, social housing associations, ESCOs..)

Investments

� Project categories of Fund’s investments:

− Energy Efficiency (EE)

− Renewable Energy (RE)

− Clean Urban Transport

1a

4

European Commission

(Initiator)

European Investment

Bank

(Founding investor)

Cassa Depositi e Prestiti

(Founding investor)

Deutsche Bank

(Investor and investment

advisor)

Background and objective Sponsors

Objective, sponsors and governance

� Commitment of the EU member states to achieve the 20/20/20 goals: 20% increase in EE, 20% reduction of CO2 emissions, and 20% RE in EU's energy mix by 2020

� Substantial potential for EE and small scale RE in the European public sector

� Set up a funding source to enhance EE and foster RE dedicated financing within the European Union, primarily through the provision of dedicated financing to:

− municipal, local and regional authorities

− public and private entities acting on behalf of those authorities such as utilities, public transportation providers, social housing associations, ESCOs etc.

� Focus areas: EE, RE and clean urban transport

1b

5

Fast and flexible

financing

� Professional investment advisor, decision making process from initial screening (assuming all information is provided) until financial close no longer than 6 months

� One-stop shop from project development support via grants from the TA facility to tailor-made financing of projects

Various financing

instruments

� The fund offers various financing instruments including senior debt, mezzanine, equity, leasing structures and forfeiting loans

� Fund can also operate as the sole investor in projects (single investor transactions) to simplify implementation and lower execution costs

Long maturities

� Flexible with respect to maturities

− Debt can be provided for maturities up to 20 years

− Equity or mezzanine capital can be provided to act as co-sponsor or long-term subordinated risk taker

Advantages of eeef1d

6

Investors

Super-Senior

Tranche

(Notes)

Mezzanine

Tranche

(B Shares)

Issuer

Vehicle

Luxembourg

Junior Tranche

(C Shares)

Prospect Institutional

Investors

EUR fundingEUR, Local FX investments

Investment CommitteeTechnical

Assistance

Facility

Investment Advisor

Senior Tranche

(A Shares)

Private Investors, International Financial

Institutions or Development Finance Institutions

Municipal, local, regional and national

authorities and public or private entities

acting on behalf of those public authorities

Direct Debt & Equity

FIs Senior & Sub

Debt LoansLoans

Management Board

Private Investors, International Financial

Institutions or Development Finance Institutions

eeef structure1e

Agenda

7



1

2

3 Case studies

4 Final Remarks

An investment has to meet several eligibility criteria:

� General eligibility criteria such as:

− municipal link

− commitment of municipality to mitigate climate change (e.g. Covenant of Mayors Initiative)

− CO2 emission savings min. 20%

− use of proven technologies

� Each technology may have its own specific eligibility criteria

� Preferably project size: €5m to €25m – smaller project sizes will be reviewed on a case-by-case basis

� Alignment with relevant EU legislation

Eligibility criteria of the eeef

Project eligibility

8

2a

Investment Process

Project deal flow

9

Initial

Screening

Approval

for due

diligence

phase

Investment

Manager due

diligence

Preparation

for the

Investment

Committee

Investment

Committee/

Mgmt Board

approval

Preparation

of financial

Closing

� Initial screening

of project in line

with eeef’s

eligibility criteria

for investments

� Portfolio fit

assessment

� In case initial

screening is

positive, detailed

DD to be initiated

� Further project

details required

(financial model,

comprehensive

project

description

/investment

memo, technical

details, etc.)

� The investment

manager conducts

financial, technical

and legal review:

• financial evaluation

• technical and legal

evaluation

• environmental

evaluation

(validation of

required CO2

savings for

potential projects)

� The Investment

manager prepares

an investment

proposal based on

the due diligence

to be presented to

eeef’s Investment

Committee and

Management

Board

� Approval of

the Fund’s

governing

Body

� Negotiation of

legal docs

� Disbursement

of funds

2b

10

eeef’s typical projects are so far...

Project

examplesInvestment features

� Senior debt

� Mezzanine / equity

� Funding via co-investments in SPV

or NewCo

� Forfaiting (mostly for Building

upgrades in a ESCO structure)

� Leasing (mostly for clean urban

transport projects)

Project structures

� Energy audits completed, vast energy savings potential

� Sufficient know-how of ESCO in case of big projects

� Savings guarantee required

� Depending on counterparty risk additional parental/municipal

guarantee required

Building

upgrades

� Only light bulbs, switch boards plus EE related measures

can be financed, not the light pole itself

� Ownership of lighting points need to be in municipal hand

� Technology with good track-record onlyStreet lighting

� Contracts for input (feed-stock) / output (e.g. Electricity/heat)

in place

� Substitution of input possible

� Technology with good-track record (e.g. boilers , turbines etc.)

� O&M concept

Biomass plants

� Land ownership in municipal hand

� Grid connection secured

� Feed-in tariff secured

� O&M concept

� Bankable module supplier

Photovoltaic

2c

(i) Forfaiting structure- guaranteed savings

from the ESCO

11

2

Municipality(Beneficiary)

ESCO(Seller)

eeef(Purchaser)

Collection of the

receivables from

Beneficiary

Implementation of EE

measures acc. to Energy

Performance Contract (EPC)

Payment based on

savings share

Forfaiting agreement:

purchase of

70% of receivables

(limited recourse)

Savings guarantee

3

1

4

� ESCO commits to increase the energy efficiency and guarantees certain savings for the Municipality (by way of an independent guarantee)

� ESCO sells a certain part of its remuneration receivables at a limited-recourse1 base to the eeef, the purchase price is the net present value of the

remuneration receivables discounted at a certain factor

� EEEF collects the remuneration receivables from the Municipality

� The forfaiting agreement will be signed by the ESCO and EEEF, however the Municipality has to agree to certain representations/undertakings

1 Limited recourse means that EEEF has counterparty risk of Beneficiary to a certain extent in case of default and limited recourse rights against the Seller

2d

(ii) Funding via Special Purpose Vehicle

12

eeefSPV

(established for EE/RE project)

VehicleMunicipality,

private investor,

ESCO, Utility etc.

Debt funding

Equity funding

ESCO

• Design and Build /EPC contract

• Savings guarantee

• O&M contract

Subcontractors

Municipality(Beneficiary)

Tender

Illustrative

2e

eeef investment activity

13

2f

Type of financial instrumentsGeographical and sectorial distribution

Key figures (as per 31/12/2013)

� More than 700 project proposals have been submitted to eeef via Fund’s website

� 11 projects performed and (partially or totally) disbursed

� Total invested portfolio > € 100ml

� Further € 46ml projects approved and funds committed

� In addition, eeef has supported various municipalities with Technical Assistance funds : 9 municipalities with a total

volume of approx. € 8,7ml, ensuring further pipeline to be developed for the Fund mid-term/long-term

Invested portfolio @ EoY 2013

Agenda

14



1

2

3 Case studies

4 Final Remarks

Project description

Partners: − Progetto ISOM S.p.A (project SPV)

− University Hospital S. Orsola Malpighi (grantor

of concession)

Measures:

energy

efficiency

CCHP

− Upgrade of entire fluids’ production and distribution

system of the hospital

− Including a tri-generation plant for the combined

production of cooling, heat and power (CCHP)

Results: − Reduction of CO2 emissions of 14,136 t p.a.,

approx. 31% compared to baseline

15

Energy efficiency upgrade of the University

Hospital S. Orsola Malpighi - Bologna, Italy

Location

Project structure Investment characteristics

Key data:

− Total project volume: €41 m (equity provided by Manutencoop

Facility Management, Siram, Sinloc and Iter Cooperativa

Ravennate)

− EEEF funded volume: €32m 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 a major energy

efficiency investment in a complex hospital; replication potenial

Bologna, Italy

SPV

Progetto ISOM S.p.A

Project bond + VAT bond

Equity funding

UHSOM (Grantor of

concession)

Concessionagreement

EPC and O&M

Consortium:EPC and O&M

−

− Manutencoop Facility Management − Siram− Sinloc

Region

Emilia Romania

Regional funding

of healthcare

3a

Project description

Partners: − City of Orléans, Dalkia France, eeef

Measures:

Biomass

plant/

energy

efficiency

− Dalkia won a public tender realized under a French

Regulation Commission Tender („CRE3“) for

electricity /heat generation fired by biomass

− Biomass-fired combined heat and power plant with

a capacity of 7.5 MW in electricity and 17 MW

thermal energy

Results: − Reduction of CO2 emissions of 20,500t p.a., approx.

89.1% compared to baseline

− Energy production 50.826 kWh p.a.

16

Combined Heat and Power Plant (biomass) –

City of Orléans, France

Location


Key data:

− EEEF is a 84,4% shareholder of Orléans Biomasse Energie s.a.s

alongside Dalkia with 15.6%.

− Total project volume: €36 m

− Total debt financing volume: €30m (provided by Crédit Agricole)


Highlights:

− Decentralized energy supply for City of Orleans using existing

district network

− Supply of biomass within 100 km

− Long term PPA agreement with EDF

Orléans, France

Orléans Biomasse

Energie s.a.s

Dalkia

Biomasse

Orléans

s.a.s

Operation and

maintenance ,

Incl. biomass supply

Contract for

electricity sale

City of

Orléans

Land rights

agreementConstruction

contract

Public

concession for

Heat supply to

district heating

network

EDF

3b

Project description

Partners: − University of Applied Sciences Munich (UoM),

Johnson Controls, eeef

Measures:

Building

upgrade/

energy

efficiency

− Installations of combined heat and power plant

− Installation of energy efficient lighting

− Optimization of heating

− Optimization of building management

Results: − Reduction of CO2 emissions 88t p.a. approx. 11.6%

compared to baseline

− Guaranteed energy savings € 118,860 p.a. (41.7%)

17

Location

Financing structure Investment characteristics

Key data:

− Financing volume: approx. €0.6 m


Highlights:

− Second project with the innovative forfeiting structure

− EE measure including a CHP plant (decentralized energy

production)

− Role model for further energy efficiency investments in schools,

universities etc.

2

UoM

(Employer)ESCO (Seller)

(Purchaser)

Forwards sold part of

receivables/energy

savings to eeef

Implementation of EE

measures acc. to

energy performance

contract (EPC)

Pays receivables/energy

savings

Forfaiting agreement:

purchase of

70% of receivables /

energy savings

(limited recourse)

Savings guarantee

4

1

3

Building retrofit of the University of Applied

Sciences - Munich, Germany

Munich, Germany

3c

Project description

Partners: − Banca Transilvania S.A. (‘BT’)

Measures: − EEEF and BT, one of the leading banks in Romania

signed a letter of intent regarding green lending to

support energy efficiency and renewable energy

investments

− Provision of financing to public and private building

owners, homeowner associations and municipalities,

public sector entities and private sector companies

acting on behalf of the public sector

Results: − Average CO2 emission reduction of at least 20% for

projects financed via BT

18

Location

Financing structure Investment characteristics

Key data:

− Financing volume: approx. €25 m


Highlights:

− First cooperation of the EEEF with a financial institution and also

EEEF’s first project in Eastern Europe

− Strong local partner with credentials in financing several energy

efficiency projects

− Role model for further Financial Institutions investments

(Sub-

borrowers)(Borrower)

(Lender)

Sub-loans for EE and RE

projects

Loan Agreement

Green lending cooperation with Banca

Transilvania - Cluj-Napoca, Romania

Cluj-Napoca,

Romania

3d

Project description

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

Results:− Achievement of primary energy savings of around

62% p.a. compared to baseline

19

Street lighting upgrade of the City of Venlo–

Venlo, Netherlands

Location


Key data:

− Total project volume: €8.5m

− eeef funded volume: €8.5m via a senior debt loan covered by the

City of Venlo


Highlights:

− 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

Venlo,

Netherlands

(Lender) (Borrower)

Loan Agreement

Obligation to invest

into energy

efficiency projects

3e

Agenda

20



1

2

3 Case studies

4 Final Remarks

21

� Demand for project funding via eeef remains high: five significant transactions were signed

in 2013. Among these transactions, important European landmark projects such as e.g.

EE financing for the University Hospital S. Orsola, first equity investment in City of

Orleans’ CHP plant, first green facility for the financial institution Banca Transilvania

� In addition eeef has supported various municipalities with Technical Assistance funds (as

per end of December 2013, 9 municipalities with a total volume of approx. EUR8.7m), thus

building a basis for future financings

� In the long term eeef is required to diversify its regional focus and accommodate

for financing of the smaller projects especially in Eastern and Northern Europe

� There is no sign of slowing demand in the European cities for energy efficiency

upgrades, however the procurement processes will remain long, thus delaying

the access for financing

� The overall increase of liquidity in the market, lower risk premiums /sovereign crisis

‘resolved’ will require additional marketing efforts with focus on smaller transactions,

highlighting availability of the long term funding from eeef

Final remarks4a

eeef – european energy efficiency fund

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