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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
introduction to eeef - key elements
eeef investments: eligibility, process and project structures
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
introduction to eeef - key elements
eeef investments: eligibility, process and project structures
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
Project structure Investment characteristics
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)
− Duration of financing: 18 years
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
− Duration of financing: 10 years
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
− Duration of financing: 10 years
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
Project structure Investment characteristics
Key data:
− Total project volume: €8.5m
− eeef funded volume: €8.5m via a senior debt loan covered by the
City of Venlo
− Duration of financing: 15 years
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
introduction to eeef - key elements
eeef investments: eligibility, process and project structures
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