Pilot Details |
|
|---|---|
| Pilot Name | Bridging the Gap betweeen EES Providers and Investment Funds |
| Client Type | Financial Institution |
| Country | Austria |
| Solution Type | Facilitation Services |
The pilot provider is an investment fund that finances projects in the energy efficiency market at the European level. As such, it has already experience with forfaiting of EES projects.
Breakdown
In this pilot application, e7 focused on the delivery of facilitation services to bridge the gap between (Austrian) EES providers and an investment fund that is offering refinancing for EES projects at the European level. For this purpose and facilitated by DECA, a number of bilateral online-meetings and calls with EES providers have been implemented, in order to evaluate the level of their interest in refinancing.
- The demand for additional capital in the current Austrian EES market is limited, so that currently EES providers have (still) little incentive to search for additional financing, such as refinancing schemes:
- Generally, the EES market is rather stagnating
- The focus is on projects with comparably low demand for capital
- Alternative financing approaches are well established – e.g., leasing financing for ESC-projects
- In the discussions with EES providers it turned out that demand for refinancing in the future is mainly expected in new and more capital-intensive market segments, such as decarbonisation of urban housing stock.
- Austrian EES providers, however, are not yet well prepared for the market segments related to capital-intensive EES. This refers also to to providers in the field of ESC – which is gaining increasing importance in the context of decarbonizing heat supply. Therefore, it is necessary to develop training events and experience exchange in these fields of activities. The REFINE team took up this file together with DECA when developing targeted training courses.
- Obviously refinancing funds are more expensive than conventional overdraft loans or leasing financing (if applicable), from an EES provider’s perspective refinancing only makes sense if projects blocked in the pipeline due to insufficient financings have a higher margin than the interest rate of the refinancing arrangement. Also, the integration of public guarantee schemes into the financing approach is very relevant in this context, since they may considerably improve financing conditions to be offered by refinancing institutions.
- Alternative investment funds have repeatedly expressed their general interest, but there is a kind of “hen-egg-dilemma”: Funds want to be sure that a sufficient project pipeline (5 to 10 mil. €) is available before they are willing or able to set up fund structures accordingly, whereas EES providers want to know the financing conditions at first before they commit to refinancing arrangements.
- Given the small scale of most EES projects the development of a pipeline is difficult from the fund’s point of view. Therefore, facilitation support is needed to put together a project pipeline which motivates investment funds to get moving. This facilitation service, however, does not seem to be marketable, but needs to be supported by public programmes (e.g., by the ELENA-programme or similar national programmes)
- Investment funds did not express knowledge barriers on how to implement refinancing arrangements in general, but mainly uncertainty about the volume of the EES market and its future development.
- Besides refinancing through purchase of receivables, funds also expressed a certain interest in other refinancing arrangements that potentially promise higher profit margins, e.g., purchase of corporate bonds (provision of additional equity to EES providers)
For more information, please contact: