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KBC Bank financial solutions & models for Smart Cities
Lode Verstraeten, Senior Banker & Head of Public Sector, KBC Corporate Banking Center Region Agoria Smart Cities Award event , 26 January 2017
Agenda
I
II
KBC & Sustainability
KBC & Smart Cities : approach, services & financing
solutions
I) Sustainability@
KBC Group
Sustainability is an integral part of our strategy
Increase our positive
impact on society
Responsible behaviour of all
staff
Limit our adverse
impact on society
• Focus on responsible behaviour and suitable advice, based on our corporate culture and Pearl- values
• Enhancing responsible behaviour via e.g. dilemma training
The core of our sustainability strategy
• Four focus domains close to our core business
Financial literacy Environmental responsibililty
Stimulating entrepreneurship Longevity or Health
• Strict policies for our activities regarding:
₋ Human Rights ₋ Environment ₋ Business ethics ₋ Socially sensitive issues
• Reducing our own footprint
₋ ISO 14001 certificate in all core countries
₋ Reduction targets greenhouse gases (GHG)
• A complete offer of SRI Funds
Agenda
I
II
KBC & Sustainability
KBC & Smart Cities : approach, services & financing
solutions
Smart
City
Subsidies / grants
Public finance
Corporate finance
ESCO finance
DBF(M)(O) – PPS
Crowdfunding
Leasing
Forfeiting
RE & Infrastructure funds
Green bonds
Real estate finance
Mobile payments
Start it @KBC
Smart partnership in
sustainable business
In addition to existing traditional (project) financing solutions, KBC has
developed new and innovative financing and service approaches relevant to
the Smart City theme, such as:
1. Energy efficiency financing solutions &
Environmental efficiency working group within Corporate Banking
focusing on Renewable Energy
2. KBC Mobility programme – examples: Velodroom & Traject Mobility
Management
3. Coaching start-ups via Start it @KBC
4. Focus on digitisation and mobile banking solutions
II) KBC & Smart Cities – approach, services & financing solutions
1 Energy efficiency financing
Economic rationale of Esco’s a.
Energy Saving/Service
Companies offer services for Energy Reduction
The business plan of Esco’s is as simple as it is appealing: Energy measures are being paid out of reduction in energy expenditure
Repayment tenor depends on the mix of measures implenented
Esco covers a variety of business models b.
Scope of services offered varies: in case of full scope “Esco” services include:
- Screening of potential energy efficiency measures (€ and kWh)
- Implementation of energy efficiency measures
- Monitoring and finetuning + Maintenance (preventive and corrective)
- Financing of investments
KBC is partner in finding tailor made solutions
Different Esco’s require different financing solutions
c.
Depending on the Esco scope offered, financing will be different
Assets can be financed by
1. Esco contractor
2. Esco Fund or SPV (Special Purpose Vehicle)
3. End Customer
On versus off balance
1.
2.
3.
Financing of Esco’s d.
1.
2.
3.
Economic potential
Easin
ess o
f F
ina
ncin
g
+ straightforward financing - limited to simple technologies - risk of crowding out investment credit?
+ Off balance for Customer - Contractor taking credit risk customer?
+ Tailor made, mix of technologies + Off balance for both customer and Esco contractor - Bankability?
Finding off balance financing solutions
e.
Non-recourse/project financing requires long term certainty over cash flows
Finding solutions to mitigate:
- Risks related to technology and predictability of Esco performance fees
- Long term payment risk of Esco Customers
- High transaction costs (documentation, review of documents)
- Weak Esco ownership rights
- ESR !!
Innovative financing :
Green Bonds
15
KBC Securities │16
KBC strong believer green bonds
• KBC has always been a strong believer of the green bond principles, demonstrating our commitment towards environmentally friendly and substainable financing solutions.
• KBC was one of the first members to adhere to the International Capital Markets Association’s Green Bond Principles.
• In recent years, KBC has further built its expertise in issuing green bonds for corporates and (semi-) governmental entities through a number of transactions.
• KBC can therefore assist you in the entire project and process management of a new green bond, highlighting the client’s commitment to green projects.
• KBC’s investors are keen to participate in these transactions reflecting positively on their portfolio, or even adressing specific green portfolios’ requirement.
• Financing or re-financing green projects,
Strong believer
Your partner
1
2
Aquafin Private Placement
€40 million 0,82% - 15Yrs
Sole Bookrunner
Shanks Retail Bond €100 million 3.65% - 7Yrs
Joint Bookrunner
Engie Multi-tranche Benchmark
Joint Bookrunner
2nd PP Green Bond 1st Retail Green Bond Green Benchmarks
KBC Sole Lead KBC Joint Bookrunner KBC Joint Bookrunner
Private placement with limited investors for semi-gov.
Transaction.
First ever retail bond under a green format
Large institutional green bond
Use of proceeds
3
KBC Milestone Transactions
KBC Securities │17
Green Bonds • Green Bonds raise funds for new and existing projects with environmentally sustainable benefits. The Green Bond Principles
(GBP) are voluntary process guidelines that recommend transparency and disclosure, and promote integrity in the development of the Green Bond market. They are intended for broad use by the variety of actors participating in the market and are designed to provide the information needed to increase capital allocation to environmentally sustainable purposes without any single arbiter
• The Green Bond Principles (GBP) are voluntary process guidelines that recommend transparency and disclosure and promote integrity in the development of the Green Bond market by clarifying the approach for issuance of a Green Bond.
• The GBP have four core components:
• 1. Use of Proceeds : The cornerstone of a Green Bond is the utilization of the proceeds of the bond for Green Projects which should be appropriately described in the legal documentation for the security. All designated Green Project categories should provide clear environmental benefits, which will be assessed and, where feasible, quantified by the issuer.
• 2. Process for Project Evaluation and Selection : The issuer of a Green Bond should outline:
• a process to determine how the projects fit within the eligible Green Projects categories identified above;
• the related eligibility criteria; and
• the environmental sustainability objectives.
• 3. Management of Proceeds : The net proceeds of Green Bonds should be credited to a sub-account, moved to a sub-portfolio or otherwise tracked by the issuer in an appropriate manner and attested to by a formal internal process linked to the issuer’s lending and investment operations for Green Projects. So long as the Green Bonds are outstanding, the balance of the tracked proceeds should be periodically adjusted to match allocations to eligible Green Projects made during that period.
• 4. Reporting : Issuers should make, and keep, readily available up to date information on the use of proceeds to be renewed annually until full allocation, and as necessary thereafter in the event of new developments. This should include a list of the projects to which Green Bond proceeds have been allocated, as well as a brief description of the projects and the amounts allocated, and their expected impact. Where confidentiality agreements, competitive considerations, or a large number of underlying projects limit the amount of detail that can be made available, the GBP recommend that information is presented in generic terms or on an aggregated portfolio basis (e.g. percentage allocated to certain project categories).
Definition (ICMA)
Green Bond Principles
1
2
KBC Securities │18
Green Bonds
• The GBP explicitly recognize several broad categories of eligibility for Green Projects aiming to address key areas of concern such as climate change, natural resources depletion, loss of biodiversity and/or pollution control. The list is intended to be indicative and capture the most commonly used types of projects supported or expected to be supported by the Green Bond market. These categories, listed in no specific order, include, but are not limited to:
• renewable energy (including production, transmission, appliances and products);
• energy efficiency (such as in new and refurbished buildings, energy storage, district heating, smart grids, appliances and products);
• pollution prevention and control (including waste water treatment, greenhouse gas control, soil remediation, recycling and waste
to energy, value added products from waste and remanufacturing, and associated environmental monitoring analysis);
• sustainable management of living natural resources (including sustainable agriculture, fishery, aquaculture, forestry and climate, smart farm inputs such as biological crop protection or drip-irrigation);
• terrestrial and aquatic biodiversity conservation, (including the protection of coastal, marine and watershed environments);
• clean transportation (such as electric, hybrid, public, rail, nonmotorized, multi-modal transportation, infrastructure for clean energy vehicles and reduction of harmful emissions);
• sustainable water management (including sustainable infrastructure for clean and/or drinking water, sustainable urban drainage systems and river training and other forms of flooding mitigation);
• climate change adaptation (including information support systems, such as climate observation and early warning systems);
• eco-efficient products, production technologies and processes (such as development and introduction of environmentally friendlier, eco labelled or certified products, resource efficient packaging and distribution).
Use of proceeds
3
Renovation Loan for Owners'
Associations
Renovation Loan for Owners' Associations (VME / ACP)
Required renovations can come with a hefty price tag. Owners'
associations often don't have enough funds available, plus
individual members may not be able to (or want to) contribute
financially. That's where a KBC Renovation Loan for Owners’
Associations comes in. It's our loan that enables owners'
associations to make quick financial decisions when it comes to
major renovation costs.
Benefits
• Easy solution for group financing renovations • Clear idea when renovations can start • Certainty about how much you repay • Not all individual owners have to take out the loan :
individual owners can opt in / out as desired • The Owners’ Association credit insurance policy
protects the financial reserves of the owners and the Owners’ Association.
2 KBC Mobility Programme
KBC Mobility focuses on sustainable and high-quality mobility solutions in Belgium
Mobility gets everyone moving – companies, governments, private individuals
KBC mobility wants to respond specifically to solutions for mobility issues:
- Chain mobility and mobility budget supported by ICT applications
- Sharing economy, pay per use, from ownership to usage
- Smart mobility – monitoring driving habits, smart to autonomous vehicles
- Sustainability – stricter fuel economy and emissions standards
- Health and safety – flexible working conditions, prevention, route monitoring
- Smart cities – chain mobility, ppp, etc.
https://ww33c.com/system/files/doc/n
ewsroom/pressreleases/2016/201604
20_KBC_Mobility_en.pdf
KBC Mobility “Velodroom”
From car to bike in 3 steps
‘VELODROOM’
Create a burning platform
The car model is under pressure from regulations introduced by cities and municipalities. These days, it's bikes not cars that determine how ‘cool’ a city really is.
Traffic congestion and time lost travelling to work are a daily source of frustration.
Employees can no longer ignore the urge to live a more active and healthier life.
Cyclists bridge in Antwerp
Pedestrian areas without cars in cities
Don't be boring, be innovative
We did not opt for a boring ‘big brother’ approach, but we have:
- separated bike use from car use
- given employees free choice to configure their own bike
- selected bicycle dealers to collaborate with.
More specifically:
“You can select a city bike, electric bike, folding bike, cargo bike, racing bike, touring bike, fitness bike and so on ... from 50 different professional bicycle shops. Just such as for cars. In operational leasing, with a 3-year contract. All-in.”
2.
Ensure ‘instant happiness’
We do this by enabling employees to:
1) Redeem salary, … for lease payments:
e.g. redeem € 50 gross salary = € 70 euro lease budget per month e.g. redeem € 70 gross salary = € 100 euro lease budget per month
2) This is for EVERYONE (not just for administrative staff or company car users)
3) So you get more bike for the salary redeemed
We did not opt for:
1) Less car use (doesn't work)
2) Fewer options (doesn't work)
3.
The figures:
2016:
4 test clients (small, medium and large) + KBC Metropool
580 bikes on the road within 6 months
Update ratio 25-30% of the population
Average retail value of the bikes: € 2500
(± € 75 monthly lease )
KBC Mobility:
Traject mobility
management
Traject mobility management presentation
January 2017
31
Our expertise
►Traffic & Mobility: consultancy – planning – management
►Respons to economical, social and sustainable criteria
►Change Management next to theoretical studies
►Corporate mobility plans, in house consulting, sustainable urban
mobility plans, parking studies, incidence studies…
►18 consultants, offices Brussels and Ghent
32
33
3 Coaching start-ups / Crowdfunding
Supporting
startups via Start
it @ KBC
Een paar cijfertjes… Start it is
momenteel de grootste incubator in
België, en waarschijnlijk één van de
grootste in Europa. Waar we ons de
komende tijd op willen focussen is net
dat Europees verhaal: met om te
beginnen sterke contacten in Berlijn,
Londen, Amsterdam, Parijs, Bulgarije,
Hongarije en in de Scandinavische
landen.
And many more smart city startups (energy, mobility, living and digital) on www.startit.be
zetapulse
Innovative financing :
Crowdfunding
bringing entrepreneurs and investors together via online ( example : Bolero Crowdfunding platform ) Crowdfunder defines a target amount to be collected within a predefined period (on average 60-90 days) Crowdfunder receives total amount when target amount reached within agreed period ; nothing when not achieving advantages : - direct investment in the real economy - access to new source of funding - access to young start up companies But : - high risk , illiquid investment - sharing information , competition is watching - communication with & engagement to investors !
Member of the KBC group
4 KBC & Digital solutions for Smart
Cities
46
KBC considers local involvement to be vitally important.
Solidarity between retailers, consumers, government bodies ... between
everyone who lives and contributes to the local community.
This community is increasingly confronted with growing digitisation, online
business and communication
Resident Retailer City
Incentive to create digital
retailers
Strengthens local network
retailer remains digitally
up-to-date
Incentive to make digital
purchases locally
One loyalty card for multiple
shops
Digital marketing tools,
digital coupon system
Extra online channel in
addition to local physical
shop
Support for expanding sales
channels
Town centre remains
attractive; modern digital
spirit
Encourage local shopping
Easy payment with smartphone
without exchanging bank
account numbers
Simple, mobile payments
without terminal, minimal
expenses
Simple solution for city services
e.g. Payconiq at recycling centre
Gets safe digital administration
which is easy to manage
Reaches residents via digital
highway; simple via connector
Young start-ups from KBC Start-It platform. Broader range with varying objectives, each with a specific solution.
.
Savings on paper and postage costs
Improved payment process: 50% fewer
late payments
Better and mobile customer satisfaction
48
Smart
City
Subsidies / Grants
Public finance
Corporate Finance
ESCO finance
DBF(M)(O) - PPS
Crowd Funding
Leasing
Forfeiting
RE&Infrastructure funds
Green bonds
Real Estate Finance
DBFO ICT projects
Mobile Payments
KBCStart it
Smart partnership in
sustainable business
We go for smart
partnership in sustainable
business
49
Company 50
Contact: Wim Leemen, General Manager Corporate Banking Centre Region [email protected] T: 02.429.49.80 Havenlaan 6, 1080 Brussels Lode Verstraeten, Senior Banker & Head of Public Sector & Institutionals, Corporate Banking Centre Region [email protected] T: 02.429.52.23 Havenlaan 6, 1080 Brussels
Company 52
