Financing EE in housing in Estonia Mirja Adler KredEx 29 November 2011

KredEx Foundation, financing Enterprises and Housing A self-sustaining and non-profit guarantee fund that offers: Business loan guarantees Mezzanine financing Long term funding for commercial banks Export guarantees Housing financing and loan guarantees

Solid foundation Founded in 2001 Under the jurisdiction of the Ministry of Economic Affairs and Communications State guarantee limit for: SME guarantees EUR 96 million Export guarantees EUR 64 million Housing loan guarantees EUR 96 million Fully accredited for using ERDF and SF Member of AECM, NEFI, IUHF, IFHP Number of staff: 35

Housing stock ~17 000 multi-apartment buildings ~95% housing stock is in private ownership: ~60% of the housing stock has been built in 1960-1990 ~30% before 1960 ~ 75% population living in multi-apartment buildings Low quality and low energy efficiency Average energy consumption per year in buildings which have not been renovated 200-220 kWh/m2 Energy used in buildings ~40%

Financial measures Grants Low interest rate loan From state From municipalities Low interest rate loan Beneficiary can combine the measures

Previous measure – grant scheme 2003-2007 state grants all over Estonia: For energy audits, building designs and technical expertise 50% of the costs (since 2003) – still continuing Supported 3 800 buildings Totally 1,4 million € For renovation, 10% of the costs Supported 3 200 buildings 17 million m2, totally 11 million € Problems: Insufficient funding Singel works Grant available after payments

From renovation grants to revolving fund – why? Opportunity for re-usage of the funds Funds stay in state Support scheme (10% support) versus loan scheme (state support is even bigger) Loan is needed for reconstruction anyway Opportunity also to smaller buildings Easier to administer, lower administrative costs End-beneficiary is used to take loan Innovative scheme

Low interest rate loan - revolving fund scheme

Credit from Fund to the Bank Credit to 2 banks Maturity: 20 years Annuity loan Maximum limit of risk margin for Banks Terms for credit to multi-apartment buildings Fixed interest rate for end-beneficiaries Bank is responsible for credit risk of multi-apartment buildings

Credit to apartment buildings Main purpose - energy efficiency measures: to save at least 20% of energy in buildings up to 2000 m² to save at least 30% of energy in buildings more than 2000 m² Self-financing 15% (now grant) Energy audit is obligatory Renovation according to energy audit (by priorities) Loan period: up to 20 years Interest rate: up to 4,2% (first tranche) fixed 10 years

Selection of works Thermal insulation: New windows/outdoors of the roof of the walls/facade of the cellar/roof ceiling New windows/outdoors New heating system/renovation of the heating system Renovation of the ventilation system / new ventilation system Installation renewable energy devices

Obligations of banks Monthly reporting about loans given Information about building Description of investments Number of dwellings concerned Date of energy audit, savings Total investment cost Loan amount Supplementary Bank loan Loan maturity Loan interest rate / margin KredEx can carry out audits in banks Loan is given in maximum 8 tranches, next tranche available after previous is used

SF loan vs usual loan SF loan Usual loan Interest: Contract fee: Fixed for 10 years Between 4,3 – 4,8% Interest on 64 000 € loan 4,5% 10 years 15 573 € Contract fee: 0,5% - 0,75% from loan amount Maturity: Up to 20years Interest Fixed for 5 years or floating Interest ~ 7-10% Interest 64 000 € loan 7% 10 years 25 137 € Contract fee : Up to 1% from loan amount Maturity: Average 2008: 11,8 years

Combination of national and municipal funding schemes Credit guarantee from KredEx – if needed State grant from KredEx for: energy audit – 50%, max 700 € technical inspection – 50%, max 700 € building design documents - 50%, max 4 000 € Reconstruction grant from GIS up to 35% Tallinn city grant 10% for apartment buildings using renovation loan

Grant 15, 25 or 35% Do more – get more 15% fulfill the terms for renovation loan, energy saving 20 or 30%, according to the size of the building Energy label E, energy consumption < 250 kWh/m² 25% roof, facade, windows (U 1,1) heating system, energy saving at least 40% Energy label D, energy consumption < 200 kWh/m² 35% roof, facade, windows (U 1,1) heating system, heat-recovery ventilation system, energy saving at least 50% Energy label C, energy consumption < 150 kWh/m² In all the cases it is obligatory to fulfill the criteria for indoor climate!

Burden of payments – building 2000 m², interest 3,8%, loan 20 years

Steps for end-beneficiary

Results so far Start 24.06.2009 By 20.11.2011: 355 buildings Loan Refurbishment grant Start 24.06.2009 By 20.11.2011: 355 buildings Apartments 11 004 Ca 885 497 m² Total 31 mln € Average 102 915 € Saving 36,18% Start 30.09.2010 By 20.11.2011: 282 applications/252 buildings 7 mln € 243 pos decisions 6,4 mln €/Investment 29,3 15% 2,1 mln € 25% 2,6 mln € 35% 1,6 mln € Ca 648 804 m² Average 26 192 €

Lessons learned Preparation takes long time – for Estonia 2 years Many different partners to negotiate – parallel negotiations Economical situation in the country can change dramatically Legal framework to support the measure Combine different measures Information to market participants and end-beneficiaries

Problems during implementation End-beneficiaries are still careful with taking the loan No actual opportunity to persuade end-beneficiaries, only raise awareness and motivate Many documents to prepare before loan application can be finalized Loan conditions are rather difficult Reporting is burdensome

Information to market participants Press-conference in public media Infodays/seminars/workshops - to end beneficiaries, builders, energy auditors, project designers, local municipalities Advertisements in newspapers/magazines Internet (website, banners, news, articles) Direct mails Leaflets/booklets Cooperation with banks

10 campaigns since 2006

Technical studies by Tallinn University of Technology Studies for 4 different building types, including social studies about residents attitude and expectations Brick Concrete large panel Wooden apartment buildings Newly constructed buildings

BEEN-PPP: energy savings Paldiski 171 heating consumption * 2005 2010 Heating consumption MWh 392 165 Price EEK MWh 431 989 Heating costs, EEK 169 082 163 357 Costs EEK/m²/month 4,48 4,33 Average per apartment monthly, EEK 234,84 226,88 Comparison 2005-2010: Heating consumption has decreased ca 58% Heating price has risen ca 129% The costs for heating per month have decreased ca 3% * Heating consumption is corrected with degree days

Conclusions Building reconstruction is unavoidable 2 years for preparations – long period Economical conditions have changed drastically during preparation, are getting better again Scheme has great future (low interest, high energy efficiency) – combined with grants in Estonia now best financial terms over history All-round approach - awareness raising, promotion, state and local support, legal and financial framework – is the key for success

Contact: KredEx Mirja Adler Hobujaama 4 10151 Tallinn, Estonia Tel: +372 6674 100 Fax: +372 6674 101 E-mail: mirja.adler@kredex.ee www.kredex.ee