Financing Schemes

Please find Information about Financing Schemes in the PDF listed below.

How we work on new Financing Schemes

Example: Loans softened by German State budget through kfW

The building refurbishment programme of the German credit bank for reconstruction (KfW - Kreditanstalt für Wiederaufbau) was established in 2001 and is the most important state programme to support reconstruction in Germany A four storey panel building established in 1960 in Lübbenau/Spreewald was reconstructed to become barrier free during the InoFin project. Four flats for handicapped were introduced. The layout of flats was adapted. A grant scale entrance was introduced. Based on an investment of 1.2 M€ which was energy related at 18% energy consumption could be reduced from 135 to 77 kWh per square metre. Final rent to pay the investment was achieved at 4.65 € per m² due to kfW loan at lower interest rate. An additional grant of Land Brandenburg to add a lift could be gained. 56% own equity required a kfW loan of 0,22 M€ (building recovery) at 2.65% interest rate and 2.3% repayment (30 years) and an additional kfW standard loan of 0.35 M€ at 3.65% interest rate and 1.95% repayment (30 years). Former monthly rent of 3.14 € per m² was lifted up by 1.2 €. Monthly heating costs were reduced by 0.3 € per m².
Read more at: www.kfw.de

Example: Bank guarantee for loan granted by the State fund of housing development for renovation of housing stock

This scheme - State Support Programme for the Housing Stock Renewal through the Granting of Bank Guarantees for Loans - represents a very simple and relative successful attempt of the Government of the Slovak republic to support refurbishment of residential buildings directly by their owners.

Granting of bank guarantees for loans enabled wider utilization of bank resources in financing of housing stock reconstructions and thus started up a faster renewal than it could be in case of using only public resources or resources of buildings owners.
Read more at: www.szrb.sk

Example: Loans softened by Czech State budget - linked to the "PANEL Programme"

This programme is operated in the Czech Republic since 2001, and entails a mix of loans and bank guarantees.

Via the PANEL programme the clients can obtain loans that are around three percentage points lower than alternative loan options. The offer is limited to loans not exceeding CZK 4,800 per 1 m² of the floor area of a flat.

As viewed by the InoFin project team the current system works well. However, one problem is that available money for the system from the state budget is limited and will be even more limited in the future due to restrictions in the state budget expenditure. Consequently, it is recommended to reduce the amount of support and saved money could be used for supporting an additional number of projects.

Example: Energy Saving/Revolving Fund in the Czech Republic

An example of a revolving fund is the Phare ESF in Czech Republic in which the loans are composed of a mix of 33% Phare ESF resources and 67% bank’s own resources. The included 33% Phare money requires no guarantee and is to be paid back interest-free.
Read more at: www.szrb.sk

Example: The Polish Thermo-Renovation Programme

The Thermo-Renovation Programme was introduced in 1998 as a support mechanism for energy efficient retrofitting projects. The programme provides a grant subsidy of 25% calculated based on 10-years heat cost savings, which will cover repayment of the loan not exceeding 80% of total investment cost - to the applicants that are able to fulfil the related criteria (at least 25% heat demand savings). This entails that the given project must meet minimum technical and financial criteria, as verified by energy audit and financial analysis. The programme is managed by the state owned Bank Gospodarstwa Krajowego/BGK and a number of commercial banks are involved in the loan giving supplementing the grant part.

The Thermo-Renovation Programme has proved to be increasingly successful among target groups in the Polish housing sector. Especially housing associations connected to multi-family buildings have benefited of the programme and it has developed to be a key source for financing of energy efficient retrofitting. Also authorities in Poland have reckoned the benefits of the programme, including its multiplier effect of the subsidies.

Among the positive side effects can be mentioned that in the period 1999-2006 the construction sector was estimated to increase its employment level by about 60,000 as a result of the programme.

The InoFin project, facilitated via its Polish partner NAPE, has taken part in a new orientation of the Thermo-Renovation Programme, including putting in place innovative elements. This includes that the subsidized loan can be used for financing up to 100% of total cost, which makes it more attractive for home owner`s associations having problems with provision of own equity. Furthermore, there is introduced additional subsidised loan, which can be used for retrofitting measures with low energy efficient impact associated with thermal retrofitting loan.

Key facts
In the period 1999-June 2008, the programme supported 12,777 projects, of which 10,979 projects were connected with the social housing sector.



The cost-benefit analysis of the scheme shows high level of return of the subsidy to the state budget as:

• The value of energy efficient refurbishment measures reached around 1000 million euro (including VAT tax)
• While the value of subsidy was around 180 million euro only
• The implemented measures brought significant CO2 emission reduction, however they are not registered yet

The picture above is an example of a building renovation supported by the Thermo-Renovation Programme. It concerns a building on Bukietowa Street 8 in Warsaw and shows the building before and after refurbishment, April 2003. The building described was constructed 1963 in typical panel technology. It has 48 dwellings, 2,400 m² usable area and occupied by 98 persons, most pensioners and low-income families. Though the project entails a rather high payback period of 10 years, reflecting a certain complexity in the design of energy efficient measures in multifamily buildings, it has turned to be transparent and affordable for all the involved social groups, including vulnerable households being under municipal care.

Example: Jessica instrument in Polish regions

Since Poland is divided into 16 regions and there is no sectoral programme aimed to restructuring of urban areas, the regional authorities are only decision-maker for utilisation scheme of funds allocated in Regional Operational Programmes (RPO). During negotiations of the RPO`s with EC, there were putted efforts by Polish Government for making regional authorities aware of the existence of the JESSICA scheme. In parallel, the European Investment Bank and Bank of European Council provided information about rules and advantages of utilisation of JESSICA scheme.

Currently four large Polish regions (Masovia, Western Pomerania, Lower Silesia and Wielkopolska) consider using the JESSICA scheme with respect to the activities related to urban development. However, the legal study, which was performed in September 2008, indicated obstacles in Polish Law related to spending of Structural Funds under JESSICA scheme and the Polish Government made aware of these obstacles.

The JESSICA instrument would be very useful for Polish municipalities, which have identified the so called crisis urban areas already, since the projects to be financed under JESSICA scheme should be located in such areas. There are around 100 local urban development plans developed in Poland, mostly by large cities. Elimination of legal barriers by Polish government in conjunction with political willingness of regional authorities may establish foundation for further development of JESSICA schemes in Poland.

Example: EBRD Residential Energy Efficiency Credit Line in Bulgaria

The Residential Energy Efficiency Credit Line/REECL is a scheme designed for building house owners in Bulgaria. The scheme offers the house owners an opportunity to apply for financing of energy saving measures based on given criteria, where the financing offered is a mix of grant and loan.

According to the InoFin team REECL implies a straightforward set-up and easy to use approach. However, one problem observed relates to the individual household approach, leading to partial implementation of saving measures (in the single flat) and inadequate energy performance of the entire building.
Read more at: www.reecl.org

Example: EBRD credit line in Slovakia - SLOVSEFF

The European Bank for Reconstruction and Development (EBRD) in cooperation with the Ministry of Economy has launched the Slovak Energy Efficiency and Renewable Energy Finance Facility (SLOVSEFF).

Loans between EUR 20,000 and EUR 2,000,000, as well as grants - 20% of loan amount for housing associations and free technical assistance was available through local banks. Upon successful implementation and verification of completion of every sub-project, the Sub-borrowers were eligible to receive an incentive payment calculated as a percentage of the loan amount. The minimum level of energy savings to be achieved after the investment should be 15%.

This credit line was very successful and this approach seems to be good driver for refurbishment process of apartment buildings in Slovakia.
Read more at: www.slovseff.eu

Example: Financing scheme developed by Slovak bank - Obnova Plus

Obnova Plus (RENOVATION Plus) is a programme for renovation and modernisation of flat houses, prepared by Slovak bank ISTROBANKA in cooperation with BAUMIT (local leader in a field of buildings thermal isolation). The programme has been developed since 2005 and is designed specifically for thermal insulation of dwelling houses in Slovakia. A main asset of the scheme is that it provides a favourable interest rate, fixed or variable; long loan maturity up to 20 years, no real property needed as security and provision of free advisory to the clients. Financial scheme tailored for thermal-insulation refurbishment of dwelling houses as a representative of typical housing in Slovak towns has a big potential in Slovakia.
Read more at: english.istrobanka.sk

Example: Housing Association in Latvia

In summer 2001 the Cooperative in question decided to take a loan for energy efficiency measures and reconstruction of the building. The main reasons for taking the loan were:

• increase the thermal comfort in the building;
• decrease the costs for heat;
• improve the appearance of the building.

The loan in amount of 63 000 LVL (approx. 100 000 EUR) was taken in Latvian Mortgage bank for 12 years with the annual interest rate of 10% (in 2002 the interest rate was decreased to 7.5%). The loan is paid back from the payments for maintenance, which was increased to 0.30 LVL/m²month (0.50 EUR/m²month).
Read more at: Kuldiga_LV.doc

Example of Third Party Energy Services in the Latvian Context

In this example the “General meeting” of the apartment owners authorizes a building management company to take all necessary actions related to energy efficiency measures in the building including tendering and contracting for energy audits, development of technical project documentation, construction works, or accepting financial offers such as commercial loans or state and / or municipal co-financing. This means that the building manager prepares and signs all necessary documents on the basis of the apartment owners issued delegation of authority, but does not have any financial obligations for loan redemption, since he/she only acts as an intermediary, not as a borrower. That implies that ongoing financing redemption period is not an obstacle in case if the general meeting of the apartment owners decides to change the building manager since the apartment owners are the borrowers themselves. Loan payment for energy efficiency works is included in the monthly costs for management.




The main advantages of the financial scheme are:

• Building managers have the knowledge and experience in management of common ownership, in performing various building works and their supervision, and performing and evaluation of tenders for various services and works, as well as have the resources that are necessary for these activities;
• Residents and the manager are familiar to each other and collaboration is formed based on the mutual trust that has been developed for many years;
• The building manager knows most of the apartment owners, so it is more possible to convince them about the necessity and effectiveness of the energy-efficient project implementation.

Lack of these schemes appears in those cases when the apartment owners and the building manager have developed strong distrust during many years. Then it is very hard or even impossible to implement the developed scheme on practice.

Only a few energy-efficiency projects have been implemented in Latvia according to this scheme. One of these projects has been implemented in Daugavpils, where the building manager “Daugavpils housing and public utilities holding company” as an intermediary implemented all activities related to energy efficiency measures.

Example: Heating Company as an investor in Latvia

In order to develop a successful and sustainable heat supply system a complex approach is needed including considering heat energy end-users. Innovative financing scheme offers a company an opportunity to invest in end-user energy efficiency improvement being involved as a financial investor, and at the same time to adjust the whole heating system. This financing scheme might be attractive for an energy supply company due to several reasons:

• in case of heat tariff increase, customers are able to pay the bills for heating;
• customers are satisfied with the services provided;
• the company develops implementing innovative projects;
• it is possible to provide the required indoor temperature for the customers;
• it is possible to develop the entire system.

The Financing scheme is shown in the figure below:




The Heating Company that provides heat to the building signs a contract with the Building Owners “General Meeting” on implementation of energy efficiency measures (1). Unlike in the situation described in the previous chapter, where building manager is just an intermediary, the heat supply company itself receives a loan and/or state or local government co-financing (2.5), or finances the project from its own funds (f). Available financial resources cover an energy audit (3, b) development of a technical project (4, c), and energy efficiency measure implementation (6, e, d). The Heat supply company receives monthly payments from the apartment owners (a), and uses them for making the payments for the loan (g). Heat supply company contracts an energy audition company for after-implementation energy consumption monitoring. This funding scheme is similar to energy services scheme described in Chapter 4.

This financing scheme was e.g applied for a building in Roja located at 13 Kosmonautu street (Riga), where the heat supply company is planning to introduce such a financing scheme with the support of local municipality. In 2006, Roja heat supply company made a detailed analysis of energy consumption for multi-apartment buildings that are connected to the centralized heating system and identified the specific heat consumption for each building. Buildings with the highest specific consumption were selected for energy audits in year 2007, which were fully financed by Roja municipality. The information obtained during energy audits was used to carry out a detailed financial analysis using discounted cash flow method. This allowed comparing situations when energy efficiency measures were implemented in different periods of time.

Different possible options for energy efficiency measures were analysed in the financial calculations. The options were chosen on the basis of the energy audit reports.