The SUNShINE (Save your bUildiNg by SavINg Energy) project is a Horizon2020 funded project running from 1 March 2015 to 1 March 2018. The project builds upon an existing programme that is aimed at the deep retrofit of Multifamily Buildings (MFB) in Latvia.
Under the existing scheme, a private ESCO, called RenEsco, has renovated, over the last 5 years, 15 typical soviet era apartment buildings using Energy Performance Contracting. These buildings are very old, overcrowded and of poor quality. They are typically heated through district heating. The focus of the investment is building envelope, heat distribution pipes, heat control and energy management. Projects are eligible for ERDF (European Regional Development Fund) support of 40% which gives a simple payback time of 9 – 10 years.
RenEsco’s business model uses EPC as a tool for renovating the buildings, in combination with on-bill financing (i.e. the homeowner continues to pay the same amount, while the ESCO recovers the amount saved through the House Maintenance Company). EPC contracts are typically signed for 20 years. The homeowners get a modernized apartment, with an increased value by about 20% – 30% right after renovation and an extended life time of the building by 30 years.
Financing to RenEsco was provided by local commercial banks (60%) in combination with a third party guaranteed loan (40%) from the Dutch Housing Institute (guaranteed by the Dutch Housing Corporation) based on project cash flows. No other collateral was foreseen.
Homeowners have an extraordinary payment discipline, with 97% of payments on time and 0% non-payment during the 6 years of existence of the program.
One of the problems of the scheme is the fact that the balance sheet of the ESCO gets charged too much as the amount of projects increases.
This has lead to the creation of the SUNShINE project in which, a forfaiting fund, called LABEEF (Latvian Building Energy Efficiency Fund), has been created. After having shown the energy savings, typically after 1 to 2 years, this forfaiting fund purchases the future receivables from the ESCO, allowing the ESCO to take on new loans. This forfeiting scheme is key in growing the amount of investment in the buildings.
In addition, one aim of the project is to create an online platform with information on how to renovate a MFB, with several technical, economic and financial tools and with various templates and applications (e.g. contracts, protocols, reporting).