UK DEVELOPMENTS IN ENERGY EFFICIENCY FINANCING

STEVEN FAWKES

7TH MAY 2012

ACEEE 2012 ENERGY EFFICIENCY FINANCE FORUM

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POLICY CONTEXT

“I want us to be the greenest government ever”David Cameron, Prime Minister, 14th May 2010

UK government estate achieved 14% reduction in greenhouse gas emissions in 1st year of Coalition government against target of 10%

25% reduction target by end of Parliament (2015)

Climate Change Act 2008 sets legally binding targets on GHG emission reductions:-34% by 2020-80% by 2050

EU 20/20/20 targets by 2020-20% reduction in GHG emissions-20% from renewables-20% reduction in energy intensity

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THE GREEN DEAL

ResidentialPrivately financedRepayment attached to energy meterThe Golden Rule

- expected savings must be greater than costsAccredited advisersAccredited installers

Targets over 10 years:-£14bn of private finance-£13bn of utility finance (under Energy Company Obligation)-65,000 new jobs

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THE GREEN DEAL - 2

Enabled by Energy Act 2011Pilot schemes start late 2012Not-for-profit Green Deal Finance Company (GDFC) established by industry:• British Gas• Carillion• Clifford Chance• E.ON• EDF Energy• Gentoo• Goldman Sachs• HSBC

• Norfolk County Council• RWE npower• PwC• RBC Capital Markets• RE Thinking Energy• Scottish Power• SSE• Willmot Dixon

• Insta Group• Kingfisher• Knauf Insulation• Linklaters• Lloyds Bank Corporate

Markets• Mark Group• Newcastle City Council

Some local authorities innovating:•Birmingham borrowing £75m to establish a retrofit fund and warehouse loans

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THE GREEN INVESTMENT BANK

Established by Coalition government£3bn funding over 3 yearsHas to operate as a commercial bankDesigned to address market failure - (contradicts with above?)Can only co-finance under EU rulesFocused on:-Offshore wind-Waste -Non-Domestic Energy Efficiency (NDEE)

Fund managers appointed for Waste (£80m to two fund managers)Current competition for NDEE – result expected in JulyFund managers need to have:-Project pipeline-Matching funds or the ability to raise them

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THE MARKET

Growing interest in financing energy efficiency retrofits from public and private sectorsWork going on in central government to resolve Treasury accounting issuesEnergy efficiency practitioners all very busyMassive confusion in the market about ESCOs/EPC“ESCO” market dominated by FM based companies and large technology providersNumber of new entrants - large and small

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CONTACT

Steven FawkesPartner, Corporate FinanceMatrix Corporate Capital LLPOne Vine StreetLondonW1J 0AHUnited Kingdom

+44 (0)20 3206 7185+44 (0)77 0223 1995

steven.fawkes@matrixgroup.co.uk