6,000 houses (12M m2) should benefit from comprehensive energy renovation starting in the Latvian capital city. The municipality has created a revolving fund linked to a soft loan scheme which will provide loans at a low interest rate (up to 3% APR) to citizens and non-profit organisations via ESCOs and tenant cooperatives. The goal is to increase energy efficiency and the use of renewable energy and to reduce energy consumption in the housing sector.
The fund is planned to start with EUR 34.5 million, where EUR 4.5 million would be a contribution from Riga municipality and EUR 30 million would be a loan from the European Investment Bank. It is expected that additional capital would come from local municipal heating company or international financial institutions such as the EBRD. To ensure the revolving mechanism, savings from utility bills will be repaid to the fund until the cost of renovation is covered. Then the savings are further reinvested into energy renovation projects.
The city council plans to launch a public procurement call to select a commercial bank to manage the fund. The bank will manage the cash flows but is not expected to issue the loans.
The revolving fund model is structured in such a way that no upfront nor collateral investments are required from the house owners. The business and financial models were designed to ensure transparency and sustainability of the fund for a period of over 30 years, which is enough to observe operation of the fund at its highest potential considering existing sources and scale of available finance.
Several variables of the financial model rely on economic conditions, such as the price of heat energy on the market and growth of renovation costs. The more favourable economic conditions, the more houses will be renovated.
Expected conditions applying to future beneficiaries of the fund are:
- The supported measures are complex building insulation, heating and ventilation systems renovation and purchase of equipment for energy consumption monitoring and regulation
- Amount lent is up to €150 / m2 (average EUR300,000 / building)
- Interest rate is ≤ 3% / year
- Maturity is 12-20 years, depending on the type of the house
- Eligibility criteria is the household’s utility payment (bills) financial flow.
A market study conducted at local level showed that the main barriers to energy renovation are investment attractiveness and communication with owners in multi-apartment dwellings. Thus the “Rigas Namu Parvaldnieks” which is a municipal company managing services for residential buildings will play a crucial role in establishing trust and building a bridge towards the home owners.
The Riga project team developed and submitted a comprehensive revolving fund concept that shall be approved by the City Council in the 3rd quarter of 2016. This concept includes the local study, market study, business model as well as various development scenarios, including financial forecasts and the economic impact analysis.
First energy renovation projects batch are expected to be launched by April 2017.
More info: Fund website
|Riga at a glance
||Riga is the capital of the Republic of Latvia and the largest city in the Baltic States with 658,640 inhabitants. Riga’s SEAP foresees the renovation for 6,000 residential buildings for a total of 12 million m². The estimated costs of 71 €/m² provides indication for a €856 million-worth investment. Since the beginning of 2013, 30 residential buildings - incl.2 social housing units - have been renovated via national and EU Structural Funds. Additional 18 buildings were insulated using various other funds, including private ones. The average energy savings are 50% as regards heat consumption. |
Riga’s City Council decided to support the setting up and operation of energy service companies (ESCOs) in Latvia. They notably ensure that funds are available for ESCOs’ operations.
The overall objective is to provide loans to associations of owners and to other authorised persons for up to 20 years with low and fixed interest rates (up to 3 %, which is necessary to ensure operation of the fund) amongst other measures.
To succeed in delivering the expected results by 2020, Riga created a political working group involving both political majority and opposition in order to establish a revolving fund.
|Who is implementing the soft loan financing scheme in Riga?
|How is the financing scheme implemented?
||Local Study / Market Study / Business Model|
|Who backs the scheme at the political level?
||City Council Decision on the establishment of the financing scheme - financial committee / Riga Development Strategy 2030|
|Pilot Sustainable Energy Measures to be implemented via the scheme
||List of measures (expected in Feb. 2017) |
|Local communication / marketing tools for the scheme beneficiaries
More information about Riga