Periodic Reporting for period 2 - TrustEE (TrustEE – innovative market based Trust for Energy Efficiency investments in industry)
Reporting period: 2017-08-01 to 2020-01-31
The aim of TrustEE was to create an innovative financing approach based on a standardised technical and financial project evaluation platform for energy efficiency (EE) and renewable energy (RE) projects in European industry. Many promising EE and RE industrial projects, in particular those developed by or for small and medium enterprises (SMEs), fail to attract viable financing options. In the framework of the projects these issues and barriers were addressed and methods developed to overcome these barriers.
TrustEE developed an innovative sales financing facility for technology suppliers, which is based upon an automatic evaluation platform for EE and RE projects. On the platform, the products, services and terms of sale of registered technology suppliers are integrated into an assessment algorithm that performs the technical and economic evaluation of submitted projects using a simulation model (performed in the background). The result of the platform is a highly comprehensive project report, which serves as the basis for financial commitment by banks or financial investors to refinance the project after it has been successfully commissioned. Refinancing takes place by acquiring (“forfaiting”) the medium to long-term repayment terms the supplier has granted to his customer. Using a securitisation vehicle those assets can be securitized for issuing Green Bonds. The TrustEE approach slashes transaction costs, assigns technical risk to suppliers (enabling Green Bonds) and establishes new financing and investment opportunities in decarbonization projects in industry.
TrustEE developed an innovative sales financing facility for technology suppliers, which is based upon an automatic evaluation platform for EE and RE projects. On the platform, the products, services and terms of sale of registered technology suppliers are integrated into an assessment algorithm that performs the technical and economic evaluation of submitted projects using a simulation model (performed in the background). The result of the platform is a highly comprehensive project report, which serves as the basis for financial commitment by banks or financial investors to refinance the project after it has been successfully commissioned. Refinancing takes place by acquiring (“forfaiting”) the medium to long-term repayment terms the supplier has granted to his customer. Using a securitisation vehicle those assets can be securitized for issuing Green Bonds. The TrustEE approach slashes transaction costs, assigns technical risk to suppliers (enabling Green Bonds) and establishes new financing and investment opportunities in decarbonization projects in industry.
The work and achieved results can be structured in 6 core topics.
1. Development and implementation of a securitisation vehicle as an innovative market based third-party financing scheme
The principle achievement of TrustEE is a third-party financing approach where banks or financial investors are backing suppliers of energy efficiency or renewable heat generation projects with long-term financing offers for their customers. They acquire accruing long-term receivables from suppliers after project commissioning and bundle and securitize these assets to issue Green Bonds by a securitisation vehicle. The performed work included from the beginning on direct contact and discussions with banks, financial investors, insurance companies, project developers and other stakeholders in order to get access to energy efficiency and renewable energy investment projects, to learn from the experience of project sponsors, end-users, and to discuss the financing of projects in all aspects with financing partners.
2. Definition and implementation of technical support tools
For reducing assessment and transaction cost, TrustEE pursued an automatization strategy by standardizing EE and RE technology types, and using the defined parameters in an algorithm to analyse the expected technical and financial outputs of EE and RE projects. Technical support tools were worked out including a standardised investment proposal procedure, investment analysis tools providing objective support to the decision process, defining decision criteria (technical and economic) and defining standardized remote monitoring and energy metering procedures and hardware.
The platform was launched on 30th of November 2018, a commercial version was deployed but developed outside the funded TrustEE project
3. Lowering IRR requirements
The TrustEE third – party financing solution lowers investment return requirements of financial investors by a radical reduction of transaction cost (automated assessment by the standardised routines of the TrustEE Platform) and relieving financial investors from technical risks, leaving with them only the credit risk of the customer.
4. Gathering a portfolio of investments
The creation of an investment portfolio already started in the first period of the project through outreach and dissemination of the project objectives. The project partners providing technical support in the project (AEE, F-ISE, UEVORA and AINIA) were focused especially on the engagement of technology suppliers and end-users, while REENAG and Borg&Co focused on the engagement of investors. Over 200 technology suppliers were engaged through direct contacts and through conferences, workshops, etc. in which the consortium participated. Technology suppliers and project developers in acquisition countries (Austria, Germany, Spain, Portugal) and across Europe were contacted.
Regarding progress with banks and investors, Reenag led efforts to engage with about ten different banks, insurance companies (credit insurance) and industrial companies. The total project volume identified for future financing is >10 Mio€, which includes projects in Austria, Germany, Spain and Scandinavia.
5. Providing evidence of the impact of different public incentive schemes
The necessary subsidies for reaching financial viability of renewable process heat technologies have been calculated and compared to existing subsidies using PHESIMA, the investment calculation tool developed for TrustEE. Impacts and costs of alternative policy levers for decarbonisation of industrial production through solar thermal, biogas and biomass heat production have been analysed and compared, namely: investment subsidies to reduce CAPEX, different carbon pricing/CO2 tax levels, and public guarantees.
6. Market penetration of EE and RE technologies in industry
Communications and dissemination of the TrustEE message and approach amongst the relevant target group was crucial to aid market penetration of EE and RE technologies. The TrustEE consortium organised, sponsored or headlined eight major seminars or events and participated in a total of 69 conferences, workshops, etc. targeting different stakeholders including technology suppliers, banks and investors, research and academia, policy-makers and others.
Besides coordination of selected events, hundreds of specific discussions with individual suppliers in Austria, Germany, Spain, Portugal and Scandinavia took place regarding the financial challenges faced by suppliers and industrial customers, which informed the proposed TrustEE financing and services.
1. Development and implementation of a securitisation vehicle as an innovative market based third-party financing scheme
The principle achievement of TrustEE is a third-party financing approach where banks or financial investors are backing suppliers of energy efficiency or renewable heat generation projects with long-term financing offers for their customers. They acquire accruing long-term receivables from suppliers after project commissioning and bundle and securitize these assets to issue Green Bonds by a securitisation vehicle. The performed work included from the beginning on direct contact and discussions with banks, financial investors, insurance companies, project developers and other stakeholders in order to get access to energy efficiency and renewable energy investment projects, to learn from the experience of project sponsors, end-users, and to discuss the financing of projects in all aspects with financing partners.
2. Definition and implementation of technical support tools
For reducing assessment and transaction cost, TrustEE pursued an automatization strategy by standardizing EE and RE technology types, and using the defined parameters in an algorithm to analyse the expected technical and financial outputs of EE and RE projects. Technical support tools were worked out including a standardised investment proposal procedure, investment analysis tools providing objective support to the decision process, defining decision criteria (technical and economic) and defining standardized remote monitoring and energy metering procedures and hardware.
The platform was launched on 30th of November 2018, a commercial version was deployed but developed outside the funded TrustEE project
3. Lowering IRR requirements
The TrustEE third – party financing solution lowers investment return requirements of financial investors by a radical reduction of transaction cost (automated assessment by the standardised routines of the TrustEE Platform) and relieving financial investors from technical risks, leaving with them only the credit risk of the customer.
4. Gathering a portfolio of investments
The creation of an investment portfolio already started in the first period of the project through outreach and dissemination of the project objectives. The project partners providing technical support in the project (AEE, F-ISE, UEVORA and AINIA) were focused especially on the engagement of technology suppliers and end-users, while REENAG and Borg&Co focused on the engagement of investors. Over 200 technology suppliers were engaged through direct contacts and through conferences, workshops, etc. in which the consortium participated. Technology suppliers and project developers in acquisition countries (Austria, Germany, Spain, Portugal) and across Europe were contacted.
Regarding progress with banks and investors, Reenag led efforts to engage with about ten different banks, insurance companies (credit insurance) and industrial companies. The total project volume identified for future financing is >10 Mio€, which includes projects in Austria, Germany, Spain and Scandinavia.
5. Providing evidence of the impact of different public incentive schemes
The necessary subsidies for reaching financial viability of renewable process heat technologies have been calculated and compared to existing subsidies using PHESIMA, the investment calculation tool developed for TrustEE. Impacts and costs of alternative policy levers for decarbonisation of industrial production through solar thermal, biogas and biomass heat production have been analysed and compared, namely: investment subsidies to reduce CAPEX, different carbon pricing/CO2 tax levels, and public guarantees.
6. Market penetration of EE and RE technologies in industry
Communications and dissemination of the TrustEE message and approach amongst the relevant target group was crucial to aid market penetration of EE and RE technologies. The TrustEE consortium organised, sponsored or headlined eight major seminars or events and participated in a total of 69 conferences, workshops, etc. targeting different stakeholders including technology suppliers, banks and investors, research and academia, policy-makers and others.
Besides coordination of selected events, hundreds of specific discussions with individual suppliers in Austria, Germany, Spain, Portugal and Scandinavia took place regarding the financial challenges faced by suppliers and industrial customers, which informed the proposed TrustEE financing and services.
Using standardising technical and financial parameters for technologies and products TrustEE has developed a new method for the technical and economic evaluation of EE and RE projects. Standardizing equipment, products, services and selling solutions/products of selected suppliers instead of projects is an alternative approach to radically reduce assessment and transaction costs while matching the investment assessment requirement of financial investors. This evaluation method has been implemented on the TrustEE platform where investment proposals can be submitted online by registered suppliers (fulfilling maximal data security and protection requirements).
Another innovation, which is key for the bankability of the project and for moderate IRR requirements of investors, is the risk structuring method developed in TrustEE. This allows for a third-party financing scheme that assigns financial risks to financial investors, while technical risks remain with the supplier and the customer. Forfaiting receivables fits perfectly with bundling and securitizing financial assets through securitization vehicles, which do not require an AIFM registration or license and thereby enable a “Green Asset Backed Securities” scheme.
Another innovation, which is key for the bankability of the project and for moderate IRR requirements of investors, is the risk structuring method developed in TrustEE. This allows for a third-party financing scheme that assigns financial risks to financial investors, while technical risks remain with the supplier and the customer. Forfaiting receivables fits perfectly with bundling and securitizing financial assets through securitization vehicles, which do not require an AIFM registration or license and thereby enable a “Green Asset Backed Securities” scheme.