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LAUNCH: sustainable energy assets as tradable securities

Periodic Reporting for period 1 - LAUNCH (LAUNCH: sustainable energy assets as tradable securities)

Reporting period: 2019-05-01 to 2020-10-31

LAUNCH aims to accelerate deal closure and pipeline growth for Sustainable Energy Assets (SEA) through standardised material. This includes investor-grade Energy Performance Contracts, standardised risk assessment protocols for investors, a roadmap for project developers to access growth capital, and market-tested value propositions for project developers’ end-clients. The ultimate goal of LAUNCH is to enable SEA as tradable securities.

The project will result in a SEAD-End contract, aiming to eliminate the lack of contract standardization thought the inclusion of key required protections for financial parties, a due diligence cost reduction and the promotion of project aggregation.
The lack of risk assessment standardisation is the result of the absence of a shared risk assessment methodology applied by funds which leads to an incensement of costs for parties involved in the project.
Moreover, the barrier of accessing the growth capital is critical for companies that only requires a certain amount of investment and there is a general lack of knowledge about the
information requirements of a private equity investor. Therefore, standardised templates are needed in growth capital investments and must be developed in cooperation with potential investors so that they can specify what information they require in order to evaluate potential investments.
Last but not least, there is a lack of SEAD robust project pipeline with significant potential to increase sales volumes.

In general, society has interest on the part of financial institutions to finance SEA projects in Europe, but in order to provide funding at scale, a standardisation of projects is now necessary. There an interest on applying a portfolio approach to smaller SEA projects, through standardised contracts and risk assessment protocol able to help with the market growth, in order to accelerate the scaling of project finance and the development of SEA as tradable securities.

In order to reach Europe’s 2030 energy efficiency and carbon reduction targets, large-scale finance of SEA projects is necessary. Investments to improve the energy performance of buildings must be increased and financial capital mobilised at a much larger scale. This is possible if due diligence processing, risk analysis and client contracts become standardised.

The specific objectives of LAUNCH are:
a) refining the SEAD-End client contract and tests the market acceptance in cooperation with financial funds, lending bankers and SEADs, in order to standardise the contracts, and thus encourage project aggregation across pools of investments, in an off-balance sheet manner to encourage uptake in the market place, mainly focusing on Energy Performance Contracts;
b) compiling and refining generic risk assessment protocols and existing risk assessment methodologies in cooperation with financial funds and SEADs. This will allow to create a user-friendly, standardised protocol to encourage project aggregation across pools of investments. This protocol will be tested in the field during the project to maximize their deployment;
c) working with private equity investors and SEADs to create a set of standardised presentation templates (financial spreadsheets and investment pitch presentation). It will allow quick and accurate assessment of SEAD companies as potential investment opportunitiess by private equity funds. A standard investment memorandum (IM) outline template will also be created to enable the creation of investment funds with the ultimate objective to provide finance also for smaller SEADs;
d) supporting SEAD sales growth, and accelerating SEA volume. SEADs different End-Client segments will be identified and taught how to develop suitable value propositions and corresponding marketing messages.
For each Work Package, the following work and results have been produced.

WP1: the project was adequately co-ordinated and organized at strategic level, assuring an interface between the Consortium and EC. Policies related to project management and data access were set-up, as well as the day to day project management, project reporting, IRP management and participation in common dissemination activities.
Main outputs:
- Creation of Project Manual and Project Website
- Progress Report submitted in M9

WP2: this WP aims to refine refine and standardise an off-balance sheet SEAD-End Client contract. The objective was reached by contracts comparison and development of 2 drafts of a standardise contract.
Main outputs:
- First and second draft of the standardised SEAD-End Client contract

WP3: the objective of this WP is to create and finalized a standardised Risk Assessment Protocol covering 17 different risk types. A first version of the document has been drafted and it is currently being translated into different European languages: Italian, French, German and Dutch.
Main outputs:
- First and second draft of the Risk Assessment Protocol

WP4: this WP supports the SEAD in making their outreach and presentation to Private Equity investors as well as with an array of sales tools, value propositions and marketing messages for their end-client relationships.
Main outputs:
- Standardized financial representation spreadsheets
- Company representation templates for private equity investors
- Investment Memorandum Template
- Report on SEAD business models and end-customer segmentation

WP5: this WP focuses on piloting and testing materials developed in WPs 2, 3 and 4. During the Pilot design phase, the LAUNCH Consortium decided to create the Launch Education Program, in order to help project developers to actively apply the LAUNCH standardised materials and share best practices among each other.
Main outputs:
- Report on main findings for the introduction of materials
- Report on main findings from the first phase of piloting

WP6: this WP aims to develop dissemination, communication and education materials related to the project, and engage project stakeholders in various activities.
Main outputs:
- The material developed include a brand guide, maintenance of project website, Twitter account and mailing list, investor forum video and printed material.
- Establishment of the Investor Board representing funds, banks and investment firms
- Establishment of the SEAD Stakeholder Group
- The creation of the LAUNCH Learning Hub
- Implementation of the LAUNCH Education Programme
Both the standardised end-client contract and the risk assessment protocol represent first-of-their-kind tools for energy efficiency project finance in Europe. After 18 months of development and several cycles of feedback and testing, the LAUNCH consortium will now translate and transpose these materials into several additional languages and jurisdictions, covering a geographical area inhabited by more than 320 million Europeans. The remaining 12 months will focus on the application of these and other LAUNCH materials in real-life projects, an ambitious piloting effort for which the groundwork had been laid in the first reporting period. In fact, more than 360 project stakeholders were reached by LAUNCH communication and dissemination activities, and an Investor Board created with 12+bn € of assets under management. The LAUNCH education programme has proven a great success and will continue to educate SEADs across Europe in accessing growth capital and accelerating deal closure with their clients and investors alike.