The European Bank for Reconstruction and Development (EBRD) is supporting an innovative solution to help Latvian energy service companies (ESCOs) obtain long-term financing for energy efficiency upgrades.
A €4 million loan will be provided to the Latvian Baltic Energy Efficiency Facility (LABEEF), a company founded by energy efficiency specialists. In parallel, the Dutch company Funding For Future (F3) will invest €1 million to become a shareholder in LABEEF.
LABEEF works with ESCOs and provides them with long-term financing for energy efficiency improvements in residential and public buildings. At the moment, local ESCOs only have access to short-term financing for this purpose.
LABEEF works by purchasing receivables (a stream of future revenues) from completed and certified projects, based on its guidelines and contracts. Under this model, resident associations and managers of public buildings can engage an ESCO to carry out upgrades, while an ESCO can get financing for those upgrades from a company like LABEEF. This allows ESCOs to finance more energy-saving projects.
Such a structure means that residents will not have to pay extra for refurbishment and insulation works. Instead, the costs will be covered from the reduction in their energy bills.
Energy efficiency improvements, or retrofits, are often combined with structural repairs to extend the life of Soviet-era buildings or the addition of modern features such as wheelchair access, thus improving the value of a building as well.
Energy efficiency projects in Latvia are also supported by the European Union (EU), which has provided grants, including structural fund grants, for a number of years. They are managed by Altum, the state agency for EU grants, which will also provide approvals for those LABEEF investments where EU grants have been previously utilised.
About 70 per cent of Latvians live in apartment blocks built in the Soviet era, most of which suffer heat losses of over 50 per cent and require substantial renovation.
Terry McCallion, EBRD Director for Energy Efficiency and Climate Change, said: “This project with LABEEF addresses several EBRD priorities: supporting sustainable energy and developing non-banking financial services, which makes our countries of operations greener and more resilient. I am pleased that we are supporting this innovative model with LABEEF in Latvia, preparing the country to carry on energy efficiency upgrades after the EU grant programme finishes in 2020.”
Nicholas Stancioff, co-founder of LABEEF, added: “Our approach offers a sustainable flow of finance for energy efficiency projects which does not rely on grant funding and does not put a financial burden on homeowners and occupants of public buildings. Once the programme is established in Latvia, we hope to offer it in other eastern EU countries as well.”