Pilot Details |
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|---|---|
| Pilot Name | Refinancing concept in high-level implementation document |
| Client Type | Public |
| Country | Croatia |
| Solution Type | Refinancing instrument |
Given the nature of this pilot activity, the pilot provider cannot be specified. The Ministry of Physical Planning, Construction and State Property in Croatia is responsible for preparing and proposing the national Energy Renovation Programme for Public Sector Buildings to the government. One of the purposes of the Programme is to outline financial measures and concepts that can be utilised to fund the energy efficiency improvements of the public buildings (Construction Act, Article 47.b). The Programme is considered one of the essential documents for preparing future public calls and models for energy renovation of public buildings.
Since 2014, the energy renovation of public sector buildings in Croatia has been encouraged through grants using two models – direct allocation of funds and the energy service model. The Energy Renovation Programme of Public Sector Buildings for 2014-2015 was based on the energy service model. The Programme aimed to support the implementation of energy efficiency measures in public sector buildings without additional burden on the public budget. The co-financing rate for implementing energy renovation projects using the EPC was 40%, and national funds financed it. The deadline for financing projects under this program has been extended until the end of 2018, and in that period, 69 buildings at 12 locations were renovated. This Programme has contributed to creating momentum for the energy services market and investing in energy efficiency projects using the Energy Performance Contract through the ESCO model. However, due to several implementation difficulties, the ESCO model coupled with ESIF co-financing for the renovation of public sector buildings has not continued after this Programme. Although the ESCO market has evidenced growth in Croatia since 2014, the expansion was primarily due to the dedicated public funding for energy renovation of public buildings made available in 2014 and 2015 by the Environmental Protection and Energy Efficiency Fund and Agency for Transactions and Mediation in Immovable Properties. However, after the public funds were exhausted, the ESCO market came to a halt, and the only Energy Performance Contracting (EPC) projects were in the public lighting sector.
Breakdown
The Energy Renovation Programme for Public Sector Buildings in the period up to 2030 includes the ESCO model as one of the models to be used in the energy renovation of public buildings. The ESCO model will be co-financed by the Recovery and Resilience Facility. However, the Programme’s previous versions did not include or mention the possibility of refinancing or forfeiting (refinancing is not recognised as the legally appropriate term) for such investments. The intention of this pilot activity within the project REFINE is to expand the financing options for the renovation of public buildings and pave the way for such a financing concept and the possible inclusion of the refinancing clauses in future contracts with public institutions (prevailing users of the ESCO model). REGEA initiated this process in consultations with the ministry responsible for preparing the Programme.
The Programme represents a high-level implementation document and includes an analysis of current and previous obstacles to energy renovation of public sector buildings and the suggestions for tackling those issues, together with outlining the financing possibilities and methods, as well as models and scenarios of reconstruction. The Programme’s content will feed into the public calls published by the ministry and shape the direction and financial solutions for the energy renovation of public buildings in Croatia in the upcoming decade.
The long period of low-interest rates made the refinancing of the existing ESCO projects unprofitable in the current financial climate. Based on the conversations with leading EES providers in Croatia, there is no interest in selling the receivables of the ongoing projects. However, the ESCO market is expected to be reignited in the upcoming period, as public funds are allocated in the National Recovery and Resilience Plan for the energy renovation of public buildings using EPC and the ESCO model.
The inclusion of the refinancing concept in such a high-level document opens the possibility for a wider uptake of the concept on a national level and forms preconditions for the growth of the energy efficiency services market even after grants from the Recovery and Resilience Facility are exhausted.
Refinancing EES projects The Energy Renovation Programme for Public Sector Buildings in the period up to 2030 has been officially adopted on 31. of March 2022 and it recommends use of refinancing concepts based on forfaiting schemes with reference to REFINE project. In general, financing EES projects based on ESCO model in Croatia hasn’t been an attractive model for clients except in public lighting projects. Most of projects realised through ESCO model (in building sector) were projects realised through national ESCO model supported by subsidies in form of grants. Without this support all of these projects wouldn’t be feasible under ESCO model. Due to this fact, development ESCO model in Croatia highly leans on support and grants from national and EU funds. The need for refinancing of EES projects is closely corelated with size and maturity of ESCO market. Without new EES projects there is no need for existing ones to be refinanced so development of refinancing concepts depends firstly on strong development of EES (ESCO market).
Concept of refinancing developed under REFINE was introduced in the Energy Renovation Programme for Public Sector Buildings in the period up to 2030 with reference to the project itself. This should help to disseminate the results of REFINE project and to promote and inform clients on possible refinancing concepts and tools as well as help to prepare national ESCO programme with refinancing concept.
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