TrustEE Facilitates ESCO Project Financing in Industry
The implementation of energy efficiency measures and the use of renewables can help manufacturing businesses cut costs and prepare them for when they will have to compete in a decarbonised market. However, even outstanding technical designs often fail to secure financing. The EU’s TrustEE programme is looking for technology suppliers and project developers who are interested in an evaluation – and a possible funding – of their projects. TrustEE’s offer garnered much attention during Austria’s largest business conference on financing, the Finance Symposium in Alpbach on 5 October (see photo). Photo: AEE INTEC
“It’s difficult to implement energy efficiency and renewable projects in Europe’s industrial sector. Investors have a hard time assessing the risks that these innovative ventures entail. Likewise, the complicated contractual relationships which they need to set up to get a foot in the door make it a costly endeavour – often a too costly one when compared to other SME projects and the relatively small overall investment,” said Christoph Brunner, Head of the Industrial Processes and Energy Systems department at AEE INTEC based in Gleisdorf. To provide a solution to this dilemma, the EU’s TrustEE programme combines typical offers of energy service companies, or ESCOs for short, with insurance coverage and external financing.
An ESCO model offers many advantages to customers from industry, which makes it an excellent selling point for technology suppliers or engineering companies. It does not unduly constrain a business’s annual budget and it mitigates risk by linking payments to savings performance. “But a contractual model usually exceeds the financial capabilities of the technology supplier, as it would tie up too much capital for a long time,” said Winfried Braumann, managing partner from the Austrian renewable energy developer Reenag Holding. “Our business model is based on purchasing receivables from the supplier once the costumer`s project has been successfully commissioned.”
For TrustEE, this means the establishment of a so called securitisation vehicle under the name Sustainable Future Trustee. The benefit to the technology supplier is obvious. It can improve its credit rating by quickly recovering the money spent on a now finished task.
The Sustainable Future Trustee securitises receivables, i.e., the right to request the money owed based on the savings is transferred to the vehicle via a written agreement. The purchase of these receivables is refinanced by means of tradable securities, which are offered to investors on the capital markets. To meet the most stringent requirements for creditor protection, the vehicle is set up in Luxembourg, which has established clear rules on securitisation and provides the highest level of investor protection in Europe.
The first project which could benefit from TrustEE financing involves raising the energy efficiency at a utility by 5 to 10 %, according to Georg Schoder from Austrian-based VOIGT + WIPP Engineers. His company is planning to implement the ESCO project on site within 6 months, but without disrupting day-to-day operations. The measures are said to amortise over 1.5 years. Savings would be compared to the baseline, i.e., the utility’s energy consumption prior to project start, to determine the customer’s quarterly repayment.
The TrustEE target is between 10 and 15 Mio EUR energy efficiency and renewable project volume for which it intends to offer securities via the Sustainable Future Trustee to banks, insurance companies and investors. The emphasis is on risk assessment and plan evaluation. “We’re in the process of setting up a web-based platform to make it possible for planners and technology providers to input relevant data and trigger fully automated economic and technical assessments,” said Jürgen Fluch from AEE INTEC. If a design meets all relevant criteria, the TrustEE partners will make sure that also the project risk and financial risk standards of the financing vehicle are complied with by using standard contract and insurance terms. The long-term objective is to enable plant and technology suppliers to become part of a TrustEE database which will list certified and registered businesses for concluding framework agreements on project development and financing.
More information:
Email to TrustEE project coordinators: Contact@trust-ee.eu
