News
17-03-2016
Survey on Eurostat guidance note on EPC show that the rules have a negative impact
Results of EU survey on Eurostat guidance note “The impact of Energy Performance Contracts on government accounts” show that Eurostat rules on public debt and deficit have a negative impact on investments in energy efficiency in public sector in several EU Member States.
25-11-2015
Survey on Eurostat guidance note
Fill in European survey on Eurostat guidance note "The impact of EPC´s on government accounts" here. On 7 August 2015, Eurostat published a guidance note titled "The impact of EPC´s on government...
24-11-2015
European Utility Week
Transparense project was presented at the European Utility Week in Vienna on 4 November 2015. The presentation "European EPC Markets and the Code of Conduct as a first step towards harmonisation and...

Financing models and best practice examples

 

This section summarises the main characteristics of the three types of financing models available for EPC projects: third-party financing (A), ESCO financing (B) and customer financing (C). It also provides best practice examples for each of these models that can be viewed here.

Further best practice examples are available in the Transparense brochure or in the EESI2020 database (http://eesi2020.eu/bestpractice/).

Finally, section D provides an indicative list of financing bodies at the European level.

A. Third party financing

Third party financing is a situation in which investors lend a certain amount of money on credit in exchange for repayment plus interest. The most common energy efficiency financial product is a loan directly to the client (owner of the premises) or to the EPC provider. Three variations on the third-party financing model are detailed below.

A.1 Credit of ESCO (pure credit or credit with sale of claims)

  • The ESCO

-      takes the credit, i.e. ensures financing of the EPC project in its own name

-      bears the whole risk of the project failure, even if the cause was out of its control

  • The customer

-      does not meet with the source of financing (usually a bank) as can be seen from the following figure

A.2 Credit of customer

  • The customer

-      concludes a contract directly with the source of financing (usually bank)

  • The ESCO

-      "only" guarantees the achievement of technical parameters of the project

-      if the assumed parameters are not achieved owing to the ESCO, the ESCO is obliged to even up the difference between the actual level of savings and the instalment

A.1&A.2 Combined credit of ESCO and customer

  • a very suitable way of financing EPC projects
  • both parties (the ESCO and the customer) participate in ensuring the financing
  • helps eliminate disadvantages of single approach and supports their advantages
  • is a basis for much tighter business relations

 

Best Practice Example:

Barts Health NHS Trust, CCHP Project - The UK

 

B. ESCO financing

This financing model refers to the ESCO or EPC provider financing the project with its own funds.

  • financing with internal funds of the ESCO and may involve use of its own capital or funding through other debt or lease instruments

Best Practice Example:

Hanzehal Zutphen - The Netherlands

 

C. Customer financing

  • involves financing with internal funds of the customer backed by an energy savings guarantee provided by the ESCO
  • may also be associated with borrowing, but it comes from the customer's internal Capital Expenditure (CAPEX) budget and existing lines of credit

Best Practice Example:

Eiker municipalities - Norway

 

D. Financing Sources for EPCs

Below is an indicative list of European sources of financing for EPC, beyond national banks and private lenders: