COMMISSION STAFF WORKING DOCUMENT Mid-term evaluation of the European Energy Efficiency Fund Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL On the implementation of The European Energy Programme for Recovery
Date: 2013-11-18
Institutions: European Commission
Subjects: carbon capture and storage, cost-effectiveness analysis, economic recovery, economic support, electricity supply, gas pipeline, industrial financing, project of common interest, trans-European network, wind energy













EUR-Lex - 52013SC0457 - EN











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52013SC0457

COMMISSION STAFF WORKING DOCUMENT Mid-term evaluation of the European Energy Efficiency Fund Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL On the implementation of The European Energy Programme for Recovery /* SWD/2013/0457 final */









COMMISSION STAFF WORKING DOCUMENT
Mid-term evaluation of the European Energy
Efficiency Fund
Accompanying the document
REPORT FROM THE COMMISSION TO THE
EUROPEAN PARLIAMENT AND THE COUNCIL
On the implementation of The
European Energy Programme for Recovery
Introduction
At the end of 2010, the European Energy
Programme for Recovery (EEPR) was amended[1]
to reallocate uncommitted appropriations of EUR 146.3 million to the
establishment of a financial facility supporting energy efficiency and
renewable energy initiatives. 
The European Energy Efficiency Fund (EEE F)
was subsequently established on 1 July 2011 through a delegation agreement with
the European Investment Bank (EIB). It includes a EUR 125 million contribution
to a newly established Investment Fund vehicle with variable capital (EEE F
SICAV-SIF[2])
that has so far reached a total volume of EUR 265 million[3], supported by a Technical
Assistance grant facility with a budget of EUR 20 million to provide project
development support to potential beneficiaries[4]
of the EEE F. In addition EUR 1.3 million has been allocated to the European
Public Private Partnership Expertise Centre (EPEC)[5] for awareness-raising
activities.
As required by the EEPR Amending
Regulation, this mid-term evaluation provides information on the status of the "Financial
facility" (the EEE F, the Technical Assistance and the awareness-raising
activities) focusing on cost-effectiveness, leverage, additionality, financial
management and the achievement of objectives under the Regulation.
1.           Objectives of the European Energy
Efficiency Fund
The cost-effective energy savings potential in the EU has been
estimated to be of the order of EUR 600 billion for the period 2011-2020, with
the biggest share in the building sector[6].
Despite these investment opportunities, the energy
efficiency market still faces a number of financial and non-financial barriers
such as high transaction costs, fragmented and small investments, limited
access to credit, complex deal structuring, low confidence of investors and
lack of capacity of project promoters. In consequence, financial intermediaries
are reluctant to engage in long term financing in a domain where they still
perceive high risks due to a lack of track record and appropriate asset
valuation techniques.
To address these barriers, the EEE F was
launched with a two-fold ambition. 
First, the Fund aims at supporting the development
of a credible energy efficiency market through the provision of non-standard
project finance[7]
and dedicated financial products (both debt & equity)[8]. In particular, the Fund supports
the development of an Energy Performance Contracting (EPC)[9] market through a
"forfeiting scheme"[10],
long-term loans and equity investments in Energy Service Companies (ESCOs). 
To tackle the lack of financing and the
risk aversion of investors, the EEE F was established as a layered investment
fund, with three classes of shares. The EU invested in junior C shares,
absorbing the first losses and taking most of the risk to attract additional
investors, including private ones.
Second, the EEE F intended to serve as a
role model for innovative financial instruments investing in cost-effective and
mature sustainable energy projects (with payback periods of up to 20 years) and
attracting private capital while demonstrating the business case behind these
investments and creating a credible track record. 
EEE F specifically addresses the lack of
debt financing, in particular long term, by retail banks for financially viable
sustainable energy projects. 
Through the progressive establishment of a
solid track record of commercially viable projects, the EEE F intends to
increase market confidence, reduce risk perception and attract additional
investors into the market without distorting it.
2.           Main Findings of the evaluation
The following
sub-sections assess the extent to which the progress and the functioning of the
facility reflect the EEE F's objectives and meet market needs. In order to do
so, an external study[11]
was commissioned. This shows some good first results and reasonably promising
outlook, while pointing to lessons to be learned. The formal evaluation
indicators (additionality, leverage effect, cost-effectiveness, and sound
financial management) are complemented by a more integrated approach looking at
the first results, current and future challenges, with dedicated sub-sections
for Technical Assistance and awareness raising. 
3.1 Additionality
Looking at existing EU, national and
regional financing schemes, and despite the lack of available or comparable
data, it has been found that most public sustainable energy financing schemes
at the national level offer grants or preferential loans[12]. There
is a general lack of monitoring of their impact, but it appears that their
success depends on more factors than just financial terms and conditions,
including governance, simplicity of access, information, administrative
capacity and flexibility in funding conditions. 
In that sense, the EEE F brings a new
market-oriented approach with a simple one stop shop for both project financing
and technical assistance with light administrative procedures. Although the EEE
F offers a great deal of flexibility, there is a limit to the extent to which
it can adapt to markets in all EU Member States. In some cases a targeted
local/regional instrument might be more suitable to address the peculiarities
of the national market or sector. The EEE F nevertheless serves as a role model
for the deployment of innovative project finance, increasing market confidence
for both investors and project promoters by establishing a solid project track
record. 
This confirms
that EEE F is providing resources to the economy which are not otherwise provided,
demonstrating additionality. 
3.2 Leverage effect
Leverage has been evaluated at two levels. At
programme level, the EU contribution (EUR 125 million) has been more than
doubled by additional investor commitments (EUR 140 million)[13]. For every EUR 100 committed by the EU in project financing, more
than EUR 110 is being provided by other investors, giving a leverage of more
than 2. In the future, it is of course desirable that more investors decide to
invest, however this will not happen until the EEE F has achieved a convincing
track record. 
At project level, the sample of investments
funded so far is too limited to draw general conclusions. According to the case
studies carried out on two projects, leverage effects are minimal. In the first
case (Jewish Museum), the EEE F is taking 70% of the project risk, by acquiring
a repayment right on future receivables (energy cost savings resulting from the
project). In the second (San Orsola Malpighi Hospital Heating and Cooling
system), 76% of the EUR 41.5 million of investment has been provided by the EEE
F. 
Such limited
leverage can be explained in the first case by the small size of the investment
(EUR 3.1 million), making it less attractive for investors but also reducing
the need for additional investors due to small risk exposure for the EEE F. In
the second case, possible explanations are the general scarcity of financing and
the reluctance of credit institutions and private operators to take risks,
especially in times of crisis. This high risk perception is also linked to the
lack of a credible track record of technical and financial viability for such
complex energy efficiency projects. 
3.3 Cost-effectiveness
Although it is difficult at this stage to
provide a thorough analysis of the EEE F's impact (effectiveness) and to relate
it to Fund management expenditures, due to the limited number of finalised projects,
Annex 1 (figure 1.2) provides elements on the EEE F's management expenditure
and Annex 2 on the outcomes of the two case studies. 
The EEE F 2013 indicative budget foresees
EUR 1.48 million of administrative expenditure and EUR 160 million of investment
allocation. In concrete terms, if achieved, this will represent EUR 1 spent on
administrative expenditures leading to approximately EUR 108 of investment.
This does not take into account income generated in the form of interest rate
and principal reimbursement (EUR 21,804 for 2012), which is first allocated to
cover EEE F's administrative expenditures. 
As shown by the
project pipeline and case studies, the EEE F is aiming at the diffusion of
technologies which have achieved a satisfactory level of cost-effectiveness and
maturity. The EEE F also promotes investments with higher upfront costs and
longer payback periods which are more risky but still financially viable. 
3.4 Sound financial management
The financial management of the EEE F is
based on investment guidelines and principles laid down by the European Commission
and the EIB and follows high banking standards monitored and assessed in the
various investment steps (see annex 1 figure 1.6). At the selection stage, the Investment
Manager (Deutsche Bank) is responsible for screening all the applications and
performing due diligence analysis. Once a project is mature and financially sound
it is assessed by the Fund's Investment Committee (whose members are nominated
by investors) and, upon that Committee's recommendation, transmitted to the
Management Board in which all the investors are represented (including the
Commission) to give final approval. The Investment Manager produces monthly
investment portfolio reports, quarterly reports and annual business plans in
which yearly targets are set and impacts on the EEE F’s balance sheet are
forecast. These targets are set on the basis of an assessment of projects'
maturity, drawing data from the project pipeline which is updated through day-to-day
contact with promoters.
As foreseen, the EEE F is operating with its
own resources and it is run with business management criteria which should
ensure the full coverage of costs by revenues once sufficient investments have
been made and disbursed.
The Commission
ensures continuous monitoring of the EEE F at working level and through its
representation in the Supervisory and Management Boards of the EEE F. It is
also responsible for approving Technical Assistance requests prepared by the Investment
Manager.
3.5 First results and findings
The project pipeline of the Fund (Annex 1)
holds out the prospect of promising results in terms of market response and
project replication. 
An investment structure has been created,
with balanced governance to ensure the Commission's ability to verify
compliance with the investment guidelines (see Annex 1 figure 1.6). A
professional Investment Manager has been recruited and applies to the EEE F the
same logic it uses in its own activities (planning, monitoring and controlling,
risk management with due separation of functions, etc). 
In order to run the EEE F efficiently, the
Investment Manager deployed an initial workforce which is now being increased
in response to the need for a faster uptake. 
The first operational objective was to make
bankable deals and this has been achieved, as shown by the case studies. The EEE
F seems to be receiving good acceptance by the market. 
A number of the projects in the pipeline demonstrate
that municipalities and other eligible actors are moving away from a grant
approach when deciding to invest in sustainable energy solutions. 
However, mature projects in the pipeline
are tending to materialise at a slower pace than initially expected. This is
partly due to market fragmentation, which represents a major hurdle. Each
Member state may have different rules and a different level of advancement
regarding their approach to energy efficiency in the various market segments.
In particular, the existence of a "grant culture" in certain
countries may impede the development of market based tools and the involvement
of market actors (investors, ESCOs). 
This slow uptake represents a challenge especially
in view of the short allocation period for the EU investment (by 31 March 2014).
An acceleration accompanied with a focus on larger investments is thus
desirable. 
Additional points on achievements can be
made on the basis of the analysis of the pipeline, as presented in Annex 1.
·       
Project pipeline:
6 projects have been approved so far leading to a total
of around EUR 79 million allocated. The project
pipeline contains, in the most mature category, a further EUR 114 million of potential investments.
For commitment projections for 2013-2015 see Annex 1 figure 1.3. The first EEE F project (Jewish Museum Berlin) is a good example of how EPC can be financed (cf. annex 2). This financing
structure was then replicated for the Pasing University project. The San Orsola
project is viewed as the first project bond financing under Italy’s newly enacted project bond rules.
·       
Geographical coverage: the project pipeline (all maturity stages) includes 21 countries
(cf. annex 1.4), suggesting a good penetration of the EEE F also in countries
where financing instruments supporting energy efficiency investments have a
significant maturity. The presence – albeit limited – of project in Member
states where International Financial Institutions, such as EBRD, are active, suggests
additional value of the EEE F presence in those countries.
·       
Market operator mobilisation has started with municipalities providing a good response (30 projects) as well
as ESCOs (20 projects), and project developers, utilities and private investors
(10 projects in total).
·       
Most projects are of significant size - 80% of candidates fall between EUR 4 and EUR 20 million. Despite
the image of a market composed of small sized projects, this shows a welcome
trend towards more aggregated initiatives.
·       
Synergies with Structural and Cohesion Funds: The Structural Funds General Regulation
prohibits expenditure co-financed by the Structural and Cohesion Funds (SCF)
from receiving assistance from another Community financial instrument[14] (such as the EEE F). However, different
funds can finance different, separate actions and, as a result, a project can be split into different parts, each being treated and declared
as expenditure separately to each fund (SCF and EEE F).
In addition, EEE F may finance non-eligible expenditure under SCF such as
expenditure related to revenue-generating projects within the meaning of Article
55 of the Structural Funds
General Regulation which are not covered by the funding gap. The Commission has given guidance to the Investment Manager on
options for using the two sources of financing as complements. Nevertheless,
the prohibition of direct co-financing and the relative complexity of
alternative synergy options have proved somewhat challenging in countries where
Structural and Cohesion Funds represent the major source of funding for
sustainable energy projects. This has had an impact on the EEE F objective of
geographical balance.
3.6 Technical Assistance
To limit transaction costs a dedicated
technical assistance (TA) facility has been created, helping beneficiaries to
bundle their projects together and improve their replicability.
Up to EUR 20 million of TA can be provided
to accelerate the development of projects to be subsequently financed by the EEE
F. The objective is to develop investment projects, facilitate their financing
and overcome barriers that hinder this type of investment. 
TA can be requested for feasibility and
market studies, project structuring, business plans, energy audits, preparation
of tendering procedures and contractual arrangements, financial structuring and
funding preparation/documentation and any other assistance necessary to develop
investment projects to be submitted for financing to the EEE F.
The development of sustainable energy
investments is often administratively difficult. Complex public procurement systems
may slow down the process. Many municipalities, while familiar with grant
applications, are not accustomed to structuring bankable projects. TA
programmes are a good way to overcome these barriers and to fill gaps at
municipal level in knowledge and technical expertise.
Eighty TA requests have been received by
the Investment Manager for first screening since the inception of the Fund. Of
these, only a dozen have reached the level of official submission and only
eight have so far been approved by the Commission (Spain (5), France (1) and UK
(1) and Denmark (1)) for a total allocated amount of EUR 6.3 million, with an
average leverage factor of 46 (the minimum is 20) (see Annex 1 figure 1.1).
Initial observations suggest that the TA requested will improve the quality of
project preparation, accelerate certain procedures (complex tendering), while
enlarging the project scope in certain cases and potentially increasing
replication potential. 
Until March 2014 the Investment Manager
forecasts the commitment of an additional EUR 2.3 million of TA. It follows
that there might be a risk that about EUR 11 million will stay unspent.
The slow uptake of TA can be explained in
many cases by the low level of preparation of requests and the lack of
aggregation: in the majority of cases, the Investment Manager has had to
discuss with applicant authorities in order to clarify the eligibility of
costs, the organisational set up of the project, the implementation time, the
impact of measures etc. The efforts needed have been higher than estimated at
the inception of the EEE F. 
Organisational
solutions will be sought to fully exploit the Fund's TA potential, as TA
processes, when properly managed, increase the number of quality projects and
enhance the chances of Fund's success.
3.7 Awareness raising 
EPEC is
responsible for awareness-raising activities supporting the EEE F in
three ways:
·       
Supporting the development of Energy Performance
Contracting in the Member States (as the national component of the Energy
Performance Contracting Campaign[15]);

·       
Encouraging optimal use of Structural and
Cohesion Funds for energy efficiency and renewable energy (addressing project
selection, use of financial instruments and PPP…);
·       
Spreading information on recent policy changes
(Energy Efficiency Directive, cohesion policy regulatory amendments) and
priorities for the next Multiannual Financial Framework (MFF).
EPEC pursues a country-specific approach,
establishing country strategies, identifying a target audience and relevant
stakeholders to organise capacity building workshops at national level to
achieve its objectives.
EPEC has established a website[16] providing information and
guidance on the EU policy framework and financial support for energy
efficiency, EPC and PPP related issues.
EPEC has conducted or participated in 32
meetings/conferences across 11 Member States. It is now focusing on national
capacity building workshops (as part of the EPC Campaign) with participants
from Ministries of finance, energy, employment, territorial development,
national agencies and other public bodies.
The Commission and EPEC have identified the
following issues that need to be addressed in order to expand the use of
financial means other than grants for renewable energy and energy efficiency:
–                        
Energy performance contracting legal framework
and accounting rules lack precision in many countries, leading to a perception
of necessarily increasing public debt and deficit of general government, even
when most of the project related risk/reward is borne by the private partner
(ESCO);
–                        
Public sector capacity/awareness is low and
often needs political involvement as application of EPC in the government
sector requires inter-ministerial coordination. 
3.           Conclusions & actions
The following conclusions can be
drawn from this mid-term report: 
Slow budget absorption has represented a
challenge in view of the limited EU allocation period. This is mainly due to
problems that typically affect such instruments in the take-off phase (long
lead times, learning curve etc). Additionally, the EEE F addresses a fragmented
market with long tendering procedures. Legal issues at the Fund level have also
caused delays in finalising deals, including banking license requirements in
certain member states. 
Contrary to a traditional EU support
programme, the establishment of an innovative financial instrument requires relatively
long and complex steps, including negotiation with potential investors, the
selection of an Investment Manager and the building up of a sound, bankable and
diversified project pipeline. These steps have been achieved.
The additionality of the EEE F has been
demonstrated, by its ability to provide long term financing, promoting
market-based and quality investments with replication impacts (cf. forfeiting
structure used in the first two projects). 
To deal with market fragmentation, the Fund
has been reaching out to small size projects (below EUR 5 million) which
constitutes a challenge in terms of transaction costs and considering the
limited commitment period of the EEE F. 
The Fund's TA is capable of addressing the
lack of capacity and administrative barriers within project promoter that
hinders the bundling of larger projects to reach critical mass. EPEC's
awareness and capacity building activities bring additional support. However,
both have developed more slowly than first planned.
The EEE F has been successful in attracting
external funding which, so far, is more than twice the EU contribution. The
project leverage ratio is however more limited for reasons including fund
scarcity and risk aversion by credit institutions and operators. 
Geographical balance is being ensured in
the project pipeline. 21 countries are represented among the proposals (all
maturity stages) confirming a good penetration of the EEE F also in countries
where financing instruments supporting energy efficiency investments have a
significant maturity. Presence of project in countries where long term banks
like EBRD are active shows an interest in the EEE F suggesting its added value
for the market. 
It is too soon to fully assess
cost-effectiveness. 
Sound financial management is ensured by
the Fund’s solid governance structure, and through the reporting and fiduciary
duties of the Investment Manager. In addition to due diligence, the Investment
Manager ensures that projects comply with the investment guidelines. This
includes a regular (quarterly and annual) review of the financial, social and
environmental performance of the Fund. 
The experience with the EEE F has helped to
understand the dynamics of the energy efficiency market and its relation with
the financial instruments including innovative ones, suggesting that:
·       
Financing instruments collectively need to
reflect the diversity of EU territories; differences in economic background
between countries and market segments, their cultural, historical and
behavioural characteristics and variability in financial sector development.
·       
Proximity of the financing instrument to the
market actors is a key factor of success.
·       
Costs of any new EU instruments need to be
carefully analysed and compared with expected benefits, and possibilities to
use the existing instruments more effectively should be duly considered before
new instruments are set-up. 
·       
Innovative financing instruments and products for
sustainable energy need to be flexible and variable, reflecting the local
market needs. Mobilisation of investments at national and regional level seems
to be a key driver for market transformation.
·       
The gap in capacity (and motivation) to develop,
structure, launch and finance energy efficiency investments can be effectively
tackled by provision of project development assistance, independent on the
financing source of the investment itself, but conditional to investment
triggered. This support needs to be accompanied by robust independent
monitoring which would enable the creation of a verified track record on energy
efficiency investments' impacts, thus contributing to standardisation and
confidence building vis-à-vis financiers and investors. Such project
development assistance can be modelled on the current Elena Facility[17], while extending its scope
(toward appropriate private sector operators).
·       
This might help the energy efficiency market to
develop further and reach investment grade, as standardisation and reliable
valuation of underlying assets and contracts is a necessary pre-condition for
attracting the private capital.
·       
Therefore, the EU intervention should address
the common barriers (such as lacking project structuring skills, poor
enforcement of EU legislation leading to market fragmentation, low level of
market confidence and knowledge), market failures (unwillingness to
invest/finance economically viable projects, high risk perception and high
transaction costs) and impacts of the financial crisis (downgraded
creditworthiness of retail banks and businesses, low access to affordable credits).

·       
EU-level instruments should usefully complement
national or regional schemes in place, avoiding duplication and crowding out
private investments.
The following actions are made: 
(1)                   
In order to allocate the full EU contribution to
investment projects by 31 March 2014, the EEE F needs to refocus, when
possible, on larger size projects (EUR 10-15 million), and even above the EUR
25 million threshold laid down in the investment guidelines, when justified and
appropriate. TA should also support project development for initiatives to
materialise beyond March 2014.
(2)                   
To overcome market fragmentation and reduce
transaction costs, demand aggregation through bundling single projects into
larger ones should be actively sought. 
(3)                   
Another way of overcoming market fragmentation
is to work through financial intermediaries to achieve greater market
proximity. This approach should be pursued more intensively.
(4)                   
Guarantee instruments could also be developed to
reinforce the attractiveness of the Fund for certain projects.
(5)                   
Aggregation should also be pursued under the TA
to increase its leverage effect. A more proactive role of the Investment
Manager in prospecting for national/regional aggregators (such as energy
agencies) should be supported. Such aggregators could facilitate in bundling
projects together, establish joined procurement procedures and identify
replication potential. 
(6)                   
Disconnecting the TA from the EEE F financing
could possibly also be considered as a way to enlarge the TA scope of
activities and support project funded by other sources. 
(7)                   
At present, an increase of the EU financial
contribution does not seem justified. However, once the Fund will have reached
its maturity level and proved its attractiveness to the market, while still addressing
EU policy challenges, an additional contribution could be considered if
leverage effects of different orders of magnitude could be expected. 
Annex 1 
Project pipeline (approved and most mature projects)
Figure 1.1 first results as of September 2013
 EEE F 
 Projects || Country || Category || Status || EEE F share [€ million] || Type of investment 
 Jewish Museum Berlin || DE || EE-Building retrofit || approved || 1.70 || forfeiting loan 
 University Pasing || DE || EE-Building retrofit || approved || 0.59 || forfeiting loan 
 City of Orléans || FR || EE-CHP || approved || 5.14 || equity/loan 
 San Orsola Malpighi Hospital || IT || EE-Combined heating and cooling system || approved || 31.78 || project bond 
     || FR || EE-CHP || approved || 15 || equity 
     || RO || EE-RES || approved || 25 || intermediation 
   || Total || 79.21 ||   
     || FR || EE-urban transport || to be approved || 30 || Bond structure 
     || FR || EE building upgrade || to be approved || 5 || loan 
   || NL || EE || Due diligence || 25 || loan 
   || PT || RE || Due diligence || 12 || Loan to SPV 
   || HU || EE public lighting || Due diligence || 21 || Loan to ESCO 
   || DE || Urban transport || Due diligence || 5 || Loan 
   || LT || EE lighting upgrade || Due diligence || 16 || Loan to SPV 
   ||   ||   || Total || 114 ||   
 ||   ||   ||   
 TECHNICAL ASSISTANCE ||   
 Project || Amount (€) || Status || Leverage factor 
 Public lighting/building retrofit (ES) || 407,326 || signed || 22 
 Building retrofit/public lighting (ES) || 623,332 || signed || 29 
 Street/building lighting (ES) || 820,885 || signed || 56 
 Building retrofit (FR) || 1,125,000 || approved by EC || 22 
 Combined heat and power (UK) || 458,448 || approved by EC || 87 
 Energy efficiency-Biomass (DK) || 1,918,000 || approved by EC || 90 
 Public lighting/building retrofit (ES) || 423,000 || approved by EC || 29 
 Public lighting/building retrofit (ES) || 527,000 || approved by EC || 35 
 Total || 6,302,991 || Average || 46 
Figure 1.2
 Direct Operating Expenses ||   
 EUR ||  2012 ||  2011 
   ||   ||   
 Custodian and Administrative Agent fees || 82,765 || 15,975 
 Investment Management fees || 3,468 || 750,000 
 Carbon Reporting fees || 200,000 || 101,362 
 Technical Assistance Management Fee || 75,000 || 0 
 Luxembourg state, local, foreign or other taxes || 3,124 || 2,736 
 Auditors, counsel, accountants and other advisors fees || 41,078 || 34,500 
 Legal fees || 149,740 || 82,511 
 Director and officer liability or other insurances || 27,048 || 13,635 
 Marketing, placement, structuring and promotion fees || 23,584 || 42,335 
 Due diligence expenses || 35,266 || 0 
 Preparation of reports || 10,000 || 0 
 Other expenses || 523 || 35,793 
 Total Direct Operating Expenses || 651,596 || 1,078,847 
Figure
1.3 Potential 2013/2015 commitments by the EEE F
Figure 1.4 Project pipeline (all maturity stages): number of
projects and status by country 
The maturity or the
progress status of the projects is expressed in 4 tiers:
1.       ready to
finance
2.       under due
diligence
3.       under first
screening
4.       preparatory stage
Figure 1.5 Number of projects per inhabitant and status by country
Figure 1.6 EEE F Approval process
The Investment Manager (Deutsche Bank),
which was selected by the EIB, acts as the entry point for both technical
assistance and financing requests. 
The Investment Manager is responsible for a
first screening and further due diligence on mature projects which are then
submitted to an Investment Committee (composed of experts nominated by the core
investors) providing an advisory opinion to the Management Board (in which all
the core investors nominate a member) which gives final approval. 
Annex 2 
Case Studies
1.           Case Study 1: Jewish Museum Berlin project (DE)
Beneficiary of the EEE F
Jewish Museum Berlin Foundation (“JMB”) is
the final beneficiary of EEE F.
Project description 
Johnson Controls Systems & Service GmbH
(“JC”) - assuming the role of an ESCO and JMB entered into an Energy
Performance Contract (“EPC”) for the buildings of the museum with a total EPC
volume of EUR 3.1 million. Energy efficiency measures comprising the
optimization of heating, ventilation and air conditioning, energy efficient
lighting and the optimization of the energy management system will achieve
annual energy savings of 43% and a reduction in CO2 emissions of 55%
compared to the baseline. JC will guarantee to JMB energy savings of EUR 290
000 per annum and will carry out the maintenance and building operation
services for the 10 year contract period. Investment size of EUR 1.5 million
(net price purchase of receivables) and a tenor of 10 years.
Structure 
By entering into a forfeiting agreement
with JC the EEE F took a step towards establishing a new financial product in
line with the target of the Fund. This financial product has replication
potential in the public sector which as demonstrated in the second transaction
of the EEE F, a similar energy efficiency project with the University of Munich (Pasing). 
2.           Case Study 2: San Orsola Malpighi
Hospital Heating and Cooling project (IT)
Out of a project of EUR 41.5 million, EEE F
has invested EUR 26.2 million senior debt for a tenor of a maximum of 20 years
(24.5 year concession period). The grantor of the concession is one of the
biggest Italian hospitals. Furthermore, a VAT facility of EUR 6.07 million
related to this investment has been established for a tenor of 8 years, to be
recovered by the Italian tax authority starting as of the 3rd year (to be
confirmed by tax opinion). A special purpose vehicle has been established to
build and manage - under a Public Private Partnership - the new technological
centre for efficient energy production and distribution for the hospital. It is
intended to raise the energy efficiency of the fluid production and
distribution system and reduce energy consumption through:
–                        
adoption of energy efficient equipment such as
centrifugal chillers, absorbers, etc.
–                        
reconstruction of heat distribution networks
including the reduction of the delivery water heat from 170° C to 90° C
–                        
renovation of heat exchange substations and
inclusion of a tri-generation plant for the combined production of cooling,
heat and power (CCHP) sized on the energy consumption of the hospital facility,
fuelled by methane gas.
An energy monitoring system will be
implemented for each energy station and pavilion. The system will be able to
account for the consumption of both fluids and power. The system will also
enable the control of the main parameters; it will provide historical consumption
trends and will detect any abnormalities such as possible sources of waste.
Impact of the project
Reduction of CO2 emissions:
14.136t per annum, 31% compared to baseline;
Primary Energy Savings: 237062 MWh primary
annum, 33.7% compared to baseline.
Due to an increased electricity output from
the CHP methane gas supply, the overall MWh production is higher with the
proposed design but results in lower primary energy consumption due to the
switch from electricity to gas supply and the energy efficiency improvement of
the system. The project makes also a significant contribution to the reduction
of CO2 emissions of the overall project (31%) using much more
efficient technologies.
The cost-effectiveness of the investment
in both Case study 1 & 2
In both cases, the savings are substantial:
31% to 55% CO2 savings and 33.7% to 43% of primary energy savings.
[1]               European
Economic Plan for Recovery (EEPR) Amending Regulation (EU) no.1233/2010
[2]               Société
à capital variable –Specialised Investment Fund based in Luxemburg
[3]               Additional
investments have been made by: the European Investment Bank EUR 75 million,
Cassa Depositi e Prestiti SpA (CDP) EUR 60 million and the Investment Manager
Deutsche Bank (DB) EUR 5 million.
[4]               Final
beneficiaries of the EEE F are local, regional and (where justified) national
public authorities and public or private entities acting on their behalf.
[5]               The
European PPP Expertise Centre (EPEC) is a joint initiative of the EIB, the
European Commission and EU Member States and candidate countries. EPEC helps strengthen
the capacity of its public sector members to enter into Public Private
Partnership (PPP) transactions. http://www.eib.org/epec/

[6]               http://ec.europa.eu/energy/efficiency/consultations/doc/2012_05_18_eeb/2012_eeb_consultation_paper.pdf

[7]               Project
finance is based on the project's cash-flow rather than on the balance sheet of
its sponsors, creating value and risk assessment benchmarks for energy
efficiency projects themselves.
[8]               Such
as senior and junior debt, mezzanine instruments, guarantees, equity, leasing
structures and forfeiting loans. The EEE F does not provide grants or
subsidised interest rates ("soft" loans), as these financial
incentives are not considered appropriate for projects generating sufficient
revenue.
[9]               EPC
means a contractual arrangement between the beneficiary and the provider of an
energy efficiency improvement measure, verified and monitored during the whole
term of the contract, where investments (work, supply or service) in that
measure are paid for in relation to a contractually agreed level of energy
efficiency improvement or other agreed energy performance criterion, such as
financial savings.
[10]             A
forfeiting scheme consists of selling future receivables (energy savings) at a
discount rate. Forfeiting schemes under EEE F are additionally secured through an
energy performance guarantee provided in the energy performance contract as
collateral. See case study 1 in Annex 2.
[11]             Mid
Term evaluation of the European Energy Efficiency Fund, June 2013, PricewaterhouseCoopers

[12]             Etude
comparative sur l'efficacité des soutiens publics aux investissements de maîtrise
de l'énergie dans l'Union européenne, February 2013, Stefan Scheuer SPRL 
[13]             See footnote no.3 for a breakdown of investors’
commitments.
[14]          COUNCIL
REGULATION (EC) No 1083/2006 of 11 July 2006, art. 54 (5) 
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:210:0025:0078:EN:PDF

[15]             See http://ec.europa.eu/energy/efficiency/financing/campaign_en.htm
[16]             http://www.eib.org/epec/ee

[17]             ELENA (European Local Energy Assistance) Facility is a
project development assistance facility financed under the Intelligent Energy –
Europe II Programme, implemented via EIB, EBRD, KfW and CEB. The facility
provides the grant support for development, tendering and launch of sustainable
energy investments by local and regional authorities.