The London Energy Efficiency Fund. The LBEG 12 December 2013

Transcription

1 The London Energy Efficiency Fund The LBEG 12 December 2013

2 The Case for Energy Efficiency Retrofit in London Strategic Case 50% of our non-domestic buildings and 75% of our housing stock will still be in use in 2050 Need to address backlog maintenance/ capital refurbishment/ under-investment in public infrastructure Retrofitting London s public sector buildings will cost over 6 billion Financial Case London public sector spends 750m/ year on energy Energy costs are increasing + Carbon Reduction Commitment costs EE retrofit can save 20%+ energy and payback in 5-7 years Limited sources of dedicated low cost finance for EE Environmental & Social Case London s public sector buildings contribute 10% of the capital s carbon Mayoral target to reduce London s emissions by 60% by 2025 Reduce fuel poverty Create jobs in construction/ energy industries 3

3 Amber A Specialist Asset Manager of over 120 Assets UK Assets Value 6.7 bn Project Abingdon Police Station Bootle Government Offices Calderdale Schools Derbyshire Courts Derbyshire Schools Phase 1 Derbyshire Schools Phase 2 Hereford & Worcester Courts Maesteg Schools Norfolk Police HQ Northamptonshire Schools North Wales Police HQ Strathclyde Police Training Centre St. Thomas More Schools Tower Hamlets Schools Moray Schools Liverpool Library 33 NHS LIFT projects JESSICA Fund Assets BSFi schools Barrow OFTO Robin Rigg OFTO Gunfleet Sands OFTO Ormonde OFTO European Assets Value 0.8bn North America Value m Project Durham Consolidated Courthouse Alberta Schools Location Ontario Alberta Project Dublin Courts Diabolo Rail Link Project Amiens Hospital BeNEX Pforzheim Schools Brescia Hospital Federal Ministry of Education and Research Location Ireland Belgium France Germany Germany Italy Germany Australian Assets Value 4.3bn Project Orange Hospital Long Bay Forensic & Prisons Hospital Project Royal Melbourne Showgrounds Reliance Rail Location Orange Sydney Melbourne Sydney Project NSW Schools Royal Children's Hospital Gold Coast Rapid Transport Location New South Wales Melbourne Gold Coast 10

4 Amber Green Sustainable Fund Management FSA regulated infrastructure investor and manager PFI/ PPP including LIFT, and Regeneration Manage listed Infra fund International Public Partnerships (INPP) Project appraisal and financial structuring Independent Investment decision making 200m of JESSICA capital to invest Solar fund recently launched; Communal Heating fund planned 14

5 Background to LEEF

6 London Energy Efficiency Fund LEEF A new source of finance for Non Domestic Retrofit across London, established by the Greater London Authority with the European Investment Bank under the European Commission JESSICA initiative, seed funded with public funds. Repayments of interest & principal up to [10] years 1-20m Loan or Equity 100m London Energy Efficiency Fund (LEEF) 50m London Green Fund (EIB) 50m RBS [Other Investors] 1) Corporate loan to Project host 2) Corporate loan to ESCO for an EPC 3)Project/ Asset finance for EPC Energy savings LEEF monies fund works Energy Efficiency Retrofit/ District Heating Projects in Public, Private or Voluntary Sector owned/ occupied buildings hospitals, leisure centres, civic centre, social housing, car parks, offices 16

7 LEEF Investment Criteria Stage 1: Project screening Stage 2: Application Stage 3: Decision to invest Stage 4 Post investment LEEF output targets: 20% energy saving kwh per annum from ECMs funded by LEEF Cash Carbon bonus scheme if targets delivered Procurement & Delivery No requirement to procure LEEF as a provider of finance Borrowers may wish to procure works from an ESCO using an Energy Performance Contract which includes a guaranteed level of energy savings through the RE:FIT programme Any location within 33 London Boroughs (Amber may also be able to support outside London) Borrowers can be public, private or JV entities, including ESCOs/ Developers, PFI Co Buildings should be owned or occupied by public sector (including HE, FE facilities and student accommodation, trading subsidiaries, schools etc) 18

8 Advantages of LEEF Finance One Stop Shop Bespoke Profile Cost Effective Financing Streamlined Process Dedicated team with financial and technical expertise Key GLA and EIB policy Competitive financing costs Reduce your CRC liability Fixed rate loan facility flexible and up to 10 years From 1m to 20m per project Streamlined application / approval process Template documentation package Drawdown profile to match the capital expenditure 100% funding Repayment profile up to 10 years tailored to projected energy savings and hence cost neutral or cash positive 19

9 Options for Debt Financing Energy Efficiency Projects Higher Affordability Salix/HEFCe PWLB / NLF JESSICA Lower Availability Own Funds? Commercial Banks GIB Green Deal Higher Availability Lower Affordability 21

10 LEEF Pipeline - Sector Breakdown LEEF pipeline now includes 461 potential targets and is being constantly amended Education sector includes HE, FE and large private schools with charitable status LA includes Boroughs, Police, Fire, livery halls and markets RSLs listed are large and medium sized bodies who have shown interest in LEEF Private sector includes mostly property firms/ private sector landlords operating or investing in publicly tenanted buildings 24

11 Technologies and the Application Process

12 Examples of Energy Efficiency Measures Category ECM Technology Typical Payback (pre-financing) Automatic metering system 2 Metering and controls Building management system / controls upgrade 8 Lighting control 5 Lighting Low energy lighting 2 Cost per tonne of CO2 saved increases with payback. Small power HVAC Small Power management controls 5 Low energy appliances and equipment 5 Boiler upgrade 10 Variable speed drives for fans and pumps 4 Air handling unit heat recovery 10 Chiller upgrade 30 Blended portfolio of ECMs with 10 year payback /tCO2 Miscellaneous Fabric Domestic hot water services point of use generation 10 Vertical transportation control and management 15 High efficiency measures on hydraulic lifts 25 Infiltration measures (air tightness improvements) 2 to 10 Replacement glazing 20+ Roof insulation upgrade 15 to 20 Wall insulation - over cladding 20+ Income generation from susbsidy regimes can reduce payback CHP Combined heat and power & District Heating 8 to 15 29

13 The UK EE and ESCo Marketplace

14 UK Energy Efficiency Market development Government Policy Incentives & CRC Rising Energy bills Obsolescence Financial savings inc: FM and lifecycle ESCO market Frameworks Public funding Drivers Challenges Complexity Fragmentation Scepticism Payback Priorities Financing Transaction costs Deal flow 33

15 Deliverability - the right EE solution Availability of own funds, ability/ appetite of host to secure debt, affordability/ delivery of externally financed EPCs Finance Risk share on delivery of Savings Guaranteed/ shared savings, integration with supply Balance sheet treatment Desired / required Accounting treatment for Host, ESCO & Funder The parties, terms and conditions of the Energy savings services to be delivered, including M&V and any Guarantees Energy Services Agreement EE Project Structure Savings & ECMs Delivery of target Energy or Carbon Savings, sharing of upside, installation of specified types of kit Funding mechanism; own funds/ loan/ equity/ asset finance Funding Agreement 36

16 Findings from the EEVS Energy Efficiency Trends Survey Chart 1.8 Expected payback period for energy efficiency 50 Previous Quarter Next Quarter Less than 1 year 1-3 years 3-5 years 5+ years Don't know Customers have tough payback period requirements. 38

17 Findings from the EEVS Energy Efficiency Trends Survey 5% of projects made use of third party finance. Transformational, multi-technology projects are not being undertaken. 39

18 How a LEEF Loan might finance a [x] EPC contract LEEF Loan to [x] to finance ECMs to be installed in client building may provide reduced cost of capital versus other funding sources London Energy Efficiency Fund (LEEF) ESCO LEEF Loan repaid from receipts or other sources [x] installs ECMs purchased in Building to deliver guaranteed Energy Savings [x] receives payment from organisation for Energy Savings services (revenue) Energy Efficiency Retrofit Project Cost of service potentially reduced by savings in [x] cost of finance through using LEEF 43

19 Appropriate Measurement &Verification (M&V) Savings = (Baseline Period Use or Demand Reporting Period Use or Demand) ± Adjustments (IPMVP page 13 EVO :2012) Cost effective, accurate, concise M&V crucial to Builld market confidence Support EPC project finance style finance International standards set by IPMVP Technical Assurance grant/ support often needed for clients to collect data and understand M&V plan Costs of due diligence and M&V can be prohibitive 46

20 Investments and Pipeline

21 LEEF: Example Transaction 20m loan to the Tate Foundation (charity) to support Energy Efficiency retrofit works at Tate Modern and Tate Britain. Bridging finance whilst private donations being secured and fundraising ongoing. Forecast 26% energy saving per annum across the Tate London estate Carbon neutral new build extension to Tate Modern 60% increase in gallery space with no change to overall carbon footprint Includes innovative technologies such as waste heat works, river bore water cooling. 48

22 The London Energy Efficiency Fund (LEEF) Case Study: London Borough of Croydon September 2013 Rising energy costs, changing legislation and challenging carbon reduction targets are forcing organisations to think creatively about sustainable investment in their buildings. LEEF a fund backed by the Mayor s London Green Fund, the European Investment Bank, Amber Infrastructure and RBS can help by providing flexible, low cost finance to support energy efficiency projects. The fund s second investment is a 20m loan to the London Borough of Croydon (LBC) for the installation of energy saving measures and low carbon infrastructure across their estate. Central Croydon looking North-East from Taberner House LBC s Approach To Energy Conservation In order to meet the challenging target of a 25% reduction in CO 2 emissions from its estate over a 2010 baseline by 2015; and additionally to control rising energy costs, Croydon has adopted four approaches: Reviewing its approach to energy procurement Using data to monitor, target and manage energy consumption Encouraging adoption of energy saving behaviour Investing in its buildings to improve energy performance As a group, Croydon s buildings are currently underperforming in terms of energy consumption, with a large proportion achieving the lowest Display Energy Certificate (DEC) rating of G. 20m LBC LEEF Project Highlights Refurbished properties will include up to 200 sites: including corporate offices, schools, crematoria, libraries, civic buildings and arts centres Part of the LEEF loan will be used to finance the GLA s largest RE:FIT Energy Performance Contract to date The project is central to the Council's aim of delivering key services in a more efficient and streamlined manner Total LBC Project Cost: 20m Forecast energy savings of between 10 and 30% per building Forecast RE:FIT programme energy savings of 14,148 MWh Forecast RE:FIT programme carbon savings of 4,953 tonnes CO 2 Energy Conservation Measures to include: Fabric improvements Renewable energy integration Biomass boilers Boiler and chiller upgrades LED lighting RE:FIT PROJECT ESTIMATIONS TOTAL Annual cost saving ( ) 788,115 Annual energy saving (MWh) 14,148 Energy saving (selected buildings) (%) 13.2% Annual carbon saving (tco 2 ) 4,953

23 The London Energy Efficiency Fund (LEEF) Case Study: London Borough of Croydon September 2013 An Innovative Financial Solution One Loan Agreement: Multiple Sites numerous individual projects at different geographic locations within a single loan document Concurrent Projects LEEF is providing funds for both existing major capital projects and RE:FIT s Invest to Save programme. The RE:FIT initiative will cover schools, social housing and corporate buildings Relevant Expertise LBC has been able, and will continue, to draw upon the technical and financial experience of the Amber, Arup and RE:FIT teams throughout the process Fairfield Halls is a concert hall, civic centre and art gallery. Post-refurbishment, it is expected over 20% energy will be saved Low Cost and Reduced Risk the single fixed interest rate is at a competitive level compared to prudential borrowing from the PWLB. By locking in the facility ahead of need, LBC s exposure to interest rate risk is significantly reduced Flexibility tailored drawdown and repayment profile over a nine-month period to match project requirements; and an option to repay the facility early without incurring any repayment costs Croydon s Clocktower contains its Central Library. The energy efficiency retrofit will include boiler and chiller upgrades

24 LEEF Selection of Pipeline and Completed Investments Local Authority - 20m Facility for use in a RE:FIT project (council buildings and schools) and across major refurbishment works (civic buildings, entertainment venue and schools) Local Authority Social Housing - 4.3m LEEF finance direct to a LA for communal heating in tower blocks, providing a 40% energy saving Hospital m Off balance sheet solution, via 3 rd party ESCo, for CHP and a range of ECMs District Heating Network - 12m LEEF finance to tri-borough SPV to develop and operate district heating network Livery Building - 4.8m Loan funding as part of a 12m refurbishment: installing a number of ECMs and targeting a BREEAM Excellent rating 52

25 Decentralised Energy Projects A) Loan to ESCO LB Brent s South Kilburn CHP and District Heating Scheme year contract with ESCO for DBO scheme as concession LEEF included in tender document as option for bidders Borrowing will be Off Balance Sheet for the Authority. B) Direct Loan to Project Sponsor 4m unsecured loan has been offered to the City of Westminster Potential 1.6km link between the Pimlico District Heating Undertaking and Whitehall District Heating Scheme. Building is due to commence in Q C) Loan to Joint Venture or Special Purpose Vehicle (SPV) LB Enfield, Haringey & Waltham Forest - Upper Lea Valley DH Network Heat from the Edmonton energy from waste plant to Council buildings/ commercial LA controlled SPV likely to be established Q LEEF potential 15m off b/s loan to SPV with LA guarantees 53

26 Local Authorities

27 LOCAL AUTHORITY FINANCE FROM LEEF A Source Of Low Cost Funding For London s Local Authorities As part of its second funding round and in order to best leverage ERDF funds the London Energy Efficiency Fund (LEEF) is working in partnership with the EIB to provide competitive, long-tenor financing for major capital works with energy and cost saving benefits; including building retrofit programmes, energy efficiency, CHP and local energy generation. Any funding would be against the Council s General Fund and up to 100 basis points below the equivalent PWLB Maturity Certainty Rate for tenors of up to 10 years. The Offer Competitive fixed interest rates No Arrangement Fee Offer exclusive to LEEF Up to 50m (subject to availability) Availability Period to 31 December % energy/carbon saving targeted Highlights 2.0m saved on 20m borrowing over 10 years Standard short form loan documentation Limited early repayment fees Flexible drawdown and repayment profile LEEF KNOW HOW LEEF manages 100m from the Mayor s London Green Fund and the private sector; to be lent to public or private sector borrowers on projects that promote energy efficiency and carbon reduction within the capital. With experience of investing 95 million of EU Structural funds to date, the LEEF team has an exceptional track record in delivering efficient financing of projects. The team has already climbed the learning curve, has the necessary development capabilities and can deliver capital to support your social and economic objectives. For further information, please contact: [email protected]

28 Amber Green (The JESSICA Team) Key Contacts For further background / general information: For project / funding specific information: Contact Name Role Phone Leo Bedford Operations [email protected] Alex Gilbert Relationship / Technical [email protected] Peter Radford Finance [email protected] Joanne Patrick Legal [email protected] Thomas Briault Technical [email protected] David Rees RE:FIT [email protected]