eeef - European Energy Efficiency Fund
Agenda 1 2 3 Introduction to eeef Eligibility check for projects Technical Assistance 4 Potential project structures 5 Case Studies 2
eeef at a glance Objective Beneficiaries eeef s capital eeef is an innovative public-private partnership dedicated to mitigating climate change through market based financing in the member states of the European Union Municipal, local and regional authorities or public and private entities acting on behalf of those authorities such as utilities, public transportation providers, social housing associations, ESCOs etc. Initial capitalization of the fund amounting to 265m provided by the European Commission, the European Investment Bank, Cassa Depositi e Prestiti and Deutsche Bank In addition Technical Assistance (TA) facility of 20m provided by the European Commission Fund s investments are split into three project categories: Investments Energy Efficiency (EE) Renewable Energy (RE) Clean Urban Transport 3
Objective and sponsors of the eeef Background and objective 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: European Commission (Initiator) Sponsors European Investment Bank (Founding investor) Cassa Depositi e Prestiti (Founding investor) 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. Deutsche Bank (Investor and investment advisor) Focus areas: EE, RE and clean urban transport 4
eeef structure EUR, Local FX investments Technical Assistance Facility Investment Committee Management Board Direct Debt & Equity Issuer Vehicle Luxembourg Super-Senior Tranche (Notes) Senior Tranche (A Shares) Mezzanine Tranche (B Shares) Junior Tranche (C Shares) EUR funding Investors Institutional Investors Private Investors, International Financial Institutions or Development Finance Institutions Development Finance Institutions 5 Municipal, local, regional and national authorities and public or private entities acting on behalf of those public authorities FIs Investment Advisor Loans Senior & Sub Debt Loans
Advantages of the eeef TA facility Fast and flexible financing Various financing instruments Long maturities eeef s Technical assistance (TA) facility of 20m supports the development of projects by providing grants to cover up to 90% of initial project development costs Such projects need to be financed by eeef 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 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 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 longterm subordinated risk taker 6
Eligibility criteria of the eeef According to eeef s investment guidelines 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 of at least 20% use of proven technologies Project eligibility Furthermore, each technology may have its own specific eligibility criteria Projects shall be preferably in range of 5m to 25m smaller project sizes will be reviewed on a case-by-case basis Alignment with relevant EU legislation 7
Role of DB in the eeef Deutsche Bank assumes the role of the investment advisor being the first contact point and conducting the project due diligence (for contact details please refer to eeef s website www.eeef.eu) No formal application process, potential beneficiaries are asked to complete a checklist provided on eeef s website Investment advisor identifies whether the project meets eeef s investment criteria and initiates a due diligence process (for selection process please refer to chart below) Initial screening Decision to start detailed due diligence Deutsche Bank due diligence Preparation of Investment Committee Investment Committee/ Management 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.) DB conducts financial, technical and legal review: Financial evaluation Technical and legal evaluation Environmental evaluation (validation of required CO2 savings for potential projects) 6 months 8
Agenda 1 2 3 Introduction to eeef Eligibility check for projects Technical Assistance 4 Potential project structures 5 Case Studies 9
Eligibility check for projects Potential beneficiaries are asked to complete a checklist provided on the eeef s website: http://eeef.eu/eligibility-check.html It allows them to find out, whether their project could be eligible for eeef financing, and to submit one or several projects to the Investment Advisor DB. Additional documents/ information may be uploaded Account can be created within just one minute 10
Agenda 1 2 3 Introduction to eeef Eligibility check for projects Technical Assistance 4 Potential project structures 5 Case Studies 11
Technical Assistance (TA) Facility attached to the eeef Background and objective Advantages Lack of technical capacity to develop projects on their own in many regions and cities across Europe eeef s TA facility of 20m supports its beneficiaries in developing their projects by providing European Commission grants for up to 90% of the total costs and subject to later financing by eeef Facilitating implementation of projects by supporting with preparation of feasibility studies, business plans, tendering processes etc Example: Support with complex tendering processes by covering costs of external consultants or further experts assigned to develop the tender of investment projects Technical advisory / project development Legal / financial advisory Scope of TA Feasibility and market studies Business plan Preparation of tendering procedures Financial structuring Energy audits Project structuring Preparation of contractual arrangements Funding preparation and documentation 12
Technical Assistance (TA) Facility attached to the eeef (ctd.) Selection process eeef s potential beneficiary has to present certain information about the envisaged TA works The investment advisor prepares a formal TA request for selected projects which will require approval by the EC Information provided by potential beneficiary Description of beneficiary, TA works and project Total costs for TA and related project Implementation timeframe Expected contribution to the 20-20-20 objectives Performed by potential beneficiary Preparation of request for TA approval Investment advisor receives the TA request and assesses the need for TA according to eligibility criteria listed in the next box Performed by Deutsche Bank Assessment and eligibility check Project qualifies for funding under the eeef (see eligibility criteria page 5) Recipient needs to self-fund min. 10% of eligible TA costs Investment size of at least 20 times higher than the estimated costs for TA (minimum leverage factor of 20) Other EU support programmes (e.g. ELENA) can not be funding the same project Performed by Deutsche Bank EC decision Approval If no additional information is requested decision within 6 business days Approval may be subject to conditions Performed by the EC 13
Agenda 1 2 3 Introduction to eeef Eligibility check for projects Technical Assistance 4 Potential project structures 5 Case Studies 14
eeef s typical projects are so far... Project examples Building upgrades Street lighting Biomass plants Photovoltaic Characteristics 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 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 only 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 Land ownership in municipal hand Grid connection secured Feed-in tariff secured O&M concept Bankable module supplier Project structures 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) 15
(i) Forfaiting structure- guaranteed savings from the ESCO eeef (Purchaser) 3b OR 3a Collection of the receivables from Beneficiary 2 Forfaiting agreement: purchase of 70% of receivables (limited recourse) ESCO (Seller) 4 1 Payment based on savings share Implementation of EE measures acc. to Energy Performance Contract (EPC) Municipality (Beneficiary) Savings guarantee 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-recourse 1 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 16
(ii) Funding via Special Purpose Vehicle (SPV) Illustrative Vehicle Municipality, private investor, ESCO, Utility etc. Equity funding eeef Debt funding SPV (established for EE/RE project) Design and Build /EPC contract Savings guarantee O&M contract ESCO Tender Municipality (Beneficiary) Subcontractors 17
Agenda 1 2 3 Introduction to eeef Eligibility check for projects Technical Assistance 4 Potential project structures 5 Case Studies 18
Case Study Jewish Museum Berlin (JMB) Project description Partners: Jewish Museum Berlin, Johnson Controls, eeef Measures: Building upgrade/ energy efficiency Installations of innovative LED-technology Installation of new ventilation system Optimization of air management Heat recovery and installation of electrical expansion valves and others Results: Reduction of CO2 emissions 1,812t p. a. approx. 55% compared to baseline Guaranteed energy savings 294,327 p.a. (43.2%) Location Germany Financing structure 2 Forfaiting agreement: purchase of 70% of receivables / energy savings (limited recourse) ESCO (Seller) eeef (Purchaser) 4 Forwards sold part of receivables/energy savings to eeef 3 1 Pays receivables/energy savings Implementation of EE measures acc. to energy performance contract (EPC) Savings guarantee JMB (Employer) Investment characteristics Key data: Financing volume: approx. 1.7 m Duration of financing: 10 years Monthly interest and principal payments Highlights: Pilot project with the forfeiting structure Attractive investment instrument to support advanced projects Winner of European Energy Service Initiative s Award 19
Case Study University of Applied Sciences Munich Project description Location 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 Germany Results: Reduction of CO2 emissions 88t p.a. approx. 11.6% compared to baseline Guaranteed energy savings 118,860 p.a. (41.7%) Financing structure 2 Forfaiting agreement: purchase of 70% of receivables / energy savings (limited recourse) ESCO (Seller) eeef (Purchaser) 4 Forwards sold part of receivables/energy savings to eeef 3 1 Pays receivables/energy savings Implementation of EE measures acc. to energy performance contract (EPC) Savings guarantee UoM (Employer) Investment characteristics Key data: Financing volume: approx. 0.6 m Duration of financing: 10 years Monthly interest and principal payments Highlights: Second project with the innovative forfeiting structure EE measure including a CHP plant Role model for further energy efficiency investments in schools, universities etc. 20
Contacts European Energy Efficiency Fund (eeef) Lada Strelnikova +49(69)910-46444 lada.strelnikova@db.com Zarpana Massud-Baqa +49(69)910-49858 zarpana.massud-baqa@db.com www.eeef.eu 21
Copyright 2012. European Energy Efficiency Fund, SICAV-SIF, 31 Z.A. Bourmicht, L-8070 Bertrange, Luxembourg. All rights reserved. This presentation (the Document ) has been prepared by European Energy Efficiency Fund, SICAV-SIF ( European Energy Efficiency Fund ) exclusively for the benefit and internal use of the potential client ( Client ) in order to indicate, on a preliminary basis, the feasibility of a possible transaction or transactions. The Document may only be used for these purposes. The Client is not permitted to duplicate the information provided in this Document and to communicate the received information of this Document to any third party without the prior written consent of European Energy Efficiency Fund. The Document is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by European Energy Efficiency Fund. The Document is neither intended to serve as legal or tax advice nor should it replace it. The information in the Document reflects prevailing conditions and European Energy Efficiency Fund's views as of this date, all of which are subject to change. Neither the European Energy Efficiency Fund nor their directors, officers, agents or employees, customers or professional advisers make any representation, warranty or undertaking, express or implied, as to the accuracy, reliability, completeness or reasonableness of the Document. The aforementioned persons will be under no duty to provide access to any additional information or to update or correct (if required) any Information. Accordingly, neither the European Energy Efficiency Fund nor the aforementioned persons will be liable for the accuracy, reliability, completeness or reasonableness of the Document.