Projects financing and implementation experience

Dr.sc.ing. Ilze PurinaChairperson of the Board

Latvian Environmental Investment Fund

____________________________Clearinghouse Support

Riga, 30th May 2007

Latvian Environmental Investment Fund

• Mission – to reduce environmental pollution by promoting implementation of the environmental protection projects and increasing capacity of municipalities and enterprises in preparation and implementation of qualitative and effective environmental projects from idea to it’s realization

• Our activities are directed on achieving maximum environmental improvement, investing financial resources in implementation of environmental infrastructure development projects

• Fund was established in 1997 and has more than 10 years of experience in implementation of environmentally friendly projects

• Fund’s share capital – 6.3 mill. euro and the assets exceed 10 mill. euro

• Loans approved – ~ 22 mill. euro (185 projects with total investments of ~75 mill. euro)

• Loans portfolio – ~10 mill. euro as of 31 December 2006• Fully repaid loans – 6.4 mill. euro (44 projects)• Fund does not have bad debts – according to the independent auditors’

reports

Directions of the Fund’s activities

• Financial services – pooling of local and foreign financial resources and providing loan financing for implementation of environmentally friendly projects in municipal and private sector

• Project management services – identification of projects and supervision of implementation according to the financier’s requirements

• Consultations – promotion of environmentally friendly projects and

preparation of projects for financing, as well as increasing of the awareness level on opportunities and benefits of environment protection projects

From project idea to its realization - together with Environmental Investment Fund!

Drinking water

Waste water treatment

Environmentally friendly heat supply Insulation of buildings

Cleaner production

Waste recycling

Types of projects

Housing renovation initiative for energy saving

Framework – inter – ministerial cooperation agreement between Federal Ministry for Environment, Nature Conservation and Nuclear Safety of Germany and Ministry of Environment of Latvia:

– total loan financing provided by KfW – 5 mill. euro– grant provided by the German ministry of Environment – 2.1 mill. euro for interest rate

subsidies and for the first finished projects– loans were issued by Latvian Land and Mortgage bank Aim – to reduce GHG emissions, increasing energy efficiency in the housingsector of Latvia

Cooperation partners – Ministries of Environment of Latvia and Germany, KfW, LHZB, municipalities and private apartment owner associations

Projects implementation period – 2003 – 2005 LEIF provided– dissemination of information – consultations on preparation of applications, tendering process etc. – monitoring of achieved environmental benefits (including GHG emission

reductions) and reporting to financiers over loan repayment period

Project preparation process

• March 17, 2003 – inter – ministerial cooperation agreement between federal Ministry for Environment, Nature Conservation and NuclearSafety of Germany and Ministry of Environment of Latvia was signed

• July 14, 2003 – global framework agreement and credit line agreement between KfW and Latvian land and Mortgage bank was signed

• July 15, 2003 – open call for applications announced including 5 regional seminars and wide information dissemination campaign

• In total 127 project applications with total loan financing required of approximately 30 mill. eiro submitted

Applications’ evaluation process

• Latvian Land and Mortgage bank evaluated project applications according to eligibility criteria (debt level, components planned etc.)

• One of the main barriers for qualification for the 2nd stage was a high debt level

• In total 26 applicants with 47 project applications qualified for the 2nd stage with total required loan financing of approximately 10 mill. euro

Implemented projects

• Until heating season 2004/2005 the following projects were finished:– Broceni, Skolas str. 21

– Broceni, Skolas str. 23

– Broceni, Lielcieres str. 34

– Broceni, Lielcieres str. 36

– Riga, Celmu str. 5

• Until heating season 2005/2006 the following projects were finished:– Liepaja, Ganibu str. 135/141

– Salacgriva, Tirgus str. 3

Regional distribution of projects

Talsi

TukumsKuldīga

Saldus

Dobele

Bauska

Liepāja

Ventspils

Jelgava

Ogre

Valmiera

Madona

Daugavpils

Rēzekne

Rīga

Limbaži

Cēsis

Alūksne

Balvi

Valka

Aizkraukle

Jēkabpils

Ludza

Preiļi

Krāslava

Gulbene

4

Regions covered

1

1

1

Riga, Celmu str. 5

Riga, Celmu str. 5

• Main parameters of the building :– Number of floors – 5– Number of apartments – 60– Number of tenants – 151– Heating area – 2972 m2

– Hot water – provided all year around • Measures implemented :

– Windows changed, m2 – 541– Walls insulated, m2 – 2023– Top floor ceiling insulated, m2 – 780– Thermoregulation installed on each radiator, pieces – 190– Thermal energy meters installed on each radiator, pieces– 190

• Total investments – 148 560 €– including grant – 60 000 € as to the first finished private project

Broceni, Lielcieres str. 34

Broceni, Lielcieres str. 34 (similar Lielcieres str. 36)

• Main parameters of the building:– Number of floors – 5– Number of apartments – 42– Number of tenants – 110– Heating area – 2200 m2

– Hot water – provided all year around• Measures implemented:

– Windows changed , m2 – 470– Walls insulated, m2 – 1730– Thermoregulation installed on each radiator– Thermal energy meters installed on each radiator– Basement ceiling insulated, m2 – 522

• Total investments – 180 150 € for each project

Relative heat consumption

98.86108.27 108.82

117.83

129.60

108.01

182.06

55.97

84.9469.45

60.1262.2858.0963.4072.52

54.2956.0052.22

57.36

0

20

40

60

80

100

120

140

160

180

200

Lielcieceresiela 36

Skolas iela 23 Lielcieceresiela 34

Skolas iela 21 Celmu iela 5 Ganibu iela.135/141

Tirgus iela 3

kW

h/m

2

Pirms 04/05 05/06

Reduction of CO2 emissions

0

10

20

30

40

50

60

Lielcieceresiela 36

Lielcieceresiela 34

Celmu iela 5 Skolas iela 23 Skolas iela 21 Ganibu iela135/141

Tirgus iela 3

%

04/05 05/06

Costs for heat

1.98

2.23 2.23 2.252.43

2.34

3.71

1.201.40

1.731.311.371.281.40

1.311.19 1.24

1.28

1.39

0

0.5

1

1.5

2

2.5

3

3.5

4

Lielcieceresiela 36

Skolas iela 23 Celmu iela 5 Lielcieceresiela 34

Skolas iela. 21 Ganibu iela135/141

Tirgus iela 3

Ls/

m2

Pirms 04/05 05/06

Main problems and challenges

• Project applicants faced a problem to reach at least 75% apartment owners agreement to take loan and to start whole renovation of dwelling (it is required by the bank in case there is no any additional security provided)

• It is very difficult for inhabitants to agree to take loan for investments in common property. There are very different people that are living in the same house – for some of the planned payments are acceptable but for some are too high

• Inhabitants are not ready to invest in common property and still do not realize that it is their common obligation

• Program required complex renovation of dwellings. That is correct from technical point of view but it requires also very high investments. Not all inhabitants are ready for so big credit payments that are necessary to finance complex renovation

• Inhabitants don’t have collective borrowing experience therefore are very sceptic to participate and to take loan

• It is a time consuming process – from project idea to real implementation

Future perspectives of EE projects financing

• End-user energy efficiency will become a crucial issue – for planning and investing in energy generation and transmission sector, and also for securing not switching back to fossil fuels

• Housing sector has a great potential for reduction of heat energy consumption and GHG emissions in the future, but it is very complex and challenging

• EU Structural funds will play an important role in facilitation of investment into increasing of EE in the housing sector

• Involvement of private sector (like PPP etc.) and Green investment schemes could be very good financing mechanisms for EE project financing in the future

From project idea to its realization together with Environmental Investment Fund!

Ģetrudes str. 10/12 Phone: + 371 67845111Fax: + 371 67845222

E-mail: pasts@lvif.gov.lvhttp:\\www.lvif.gov.lv

(more detailed information on project results is available)