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Katarzyna Matijczak. Loans and thermo-modernisation bonuses as innovative financial tools-good practice from Poland


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KATARZYNA MATIJCZAK. 2nd Thematic Seminar: Local sustainable energy concepts and action plans. STEP PROJECT. INTERREG IVC. 17/10/2013

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Katarzyna Matijczak. Loans and thermo-modernisation bonuses as innovative financial tools-good practice from Poland

  1. 1. Regional Development Agency ARLEG S.A. Katarzyna Matijczak, Murcia, 17.10.2013
  2. 2. Location of the practice Country Poland NUTS 1 NUTS 2 Lower Silesia City Poland (good practice is widespread in Poland) Lower Silesia Voivodeship
  3. 3. WHAT IS A THERMOMODERNISATION FUND AND A THERMOMODERNISATION BONUS? They are funds allocated from the State Budget which are administered by Bank Gospodarstwa Krajowego [National Economy Bank]. They are intended to support all eligible subjects in performing actions aiming at lowering energy consumption and the amount of energy carriers in both communal and social & living resources.
  4. 4. WHAT IS A THERMOMODERNISATION FUND AND A THERMOMODERNISATION BONUS? Thermomodernisation of buildings is usually highly profitable, yet it requires bearing substantial costs right from the beginning. That is why, many building owners cannot carry out thermomodernisation without extra financial support. The Act on Supporting Thermomodernisation Investments creates a system for bulding owners which aims at facilitating the process of financing thermomodernisation so as to finally lower energy consumption and costs of both heating buildings and producing domestic hot water.
  5. 5. PRINCIPLES OF SUPPORTING THERMOMODERNISATION The system of financial help includes thermomodernisation undertakings in the following buildings: - multi and single-family buildings irrespective of their legal form of ownership which means: private, commonhold, housing associations, company, city and other buildings except for those belonging to budget entities, - social collective accommodation buildings such as nursing homes, halls of residence, dormitories, hostels, retirement homes and the like, - buildings used for public activities of local government units such as schools, commune offices and the like, - local heat sources (housing estate boiler houses and thermal power stations) or district heating substations and local heating networks with the power of 11.6 MW.
  6. 6. PRINCIPLES OF SUPPORTING THERMOMODERNISATION Provisions under the Act on Supporting Thermomodernisation Investments are also connected with the overall and partial replacement of an existing energy source with an unconventional one e.g. solar panels, heat pumps, boilers using biomass and the like. The Act provides for a commercial bank loan to be the main source of financing for thermomodernisation investments. The owner of the building may finance 100% of investment costs by means of such a loan. Both the share of the loan in overall costs and the credit period shall be negotiated between the investor and the bank granting the loan.
  7. 7. The thermomodernisation bonus is a form of help which an investor may get from the State Budget and it constitutes 20% of the used loan yet there are two conditions which must be met: - it cannot constitute more than 16% of the overall costs of the undertaking, - it cannot constitute more than the expected value of two-year savings determined by means of an energy audit. There is a rule that forbids combining statutory loans with EU funding. An energy audit is the ground for statutory funding. It is a document which includes a technical & economical analysis which determines what shall be improved in the building to be modernised. The audit points out technical actions that may be taken and which ones of the planned actions may bring best economic benefits (optimal solutions).
  8. 8. One can apply for a thermomodernisation bonus provided that such thermomodernisation will substantially lower the yearly demand for energy, especially: - in buildings with only the heating system being modernised – by at least 10%, - in buildings which underwent thermomodernisation of the heating system after year 1984 – by at least 15%, - in remaining buildings – by at least 25%, - in local heat sources and local heating networks – decreasing annual primary energy losses by at least 25% and by replacing local heat sources and heating networks with a connection to a centralised heat source (of a city network) – lowering costs of purchasing heat supplied to the building by at least 20% per annum.
  9. 9. Those who can apply for a thermomodernisation bonus include owners and administrators of: - residential buildings, - collective accommodation buildings, - public utility buildings owned by local government units and used by them for performing their public tasks, - local heating networks, - local heat sources.
  10. 10. ACQUIRING A LOAN AND A THERMOMODERNISATION BONUS After deciding upon thermomodernisation, a building owner submits all necessary documents to the bank which is going to grant the loan. The documents are as follows: - a loan application with all annexes required by the bank, - a thermomodernisation application, and - an energy audit. The bank which may grant a loan is the one which has an agreement with Bank Gospodarstwa Krajowego [National Economy Bank] on granting loans and procedures of transferring thermomodernisation bonuses provided for in the Act. Detailed requirements concerning loan applications and the form of loan collateral are determined individually by each loan- granting bank.
  11. 11. EFFECTS OF THE THERMOMODERNISATION SUPPORT SYSTEM EXAMPLE Residential building of 11 storeys, total floor space 4,880 m2. Thermomodernisation costs 612.,000 PLN, including: Own funds 122.,000 PLN (20%) Loan 490.,000 PLN (80%) 2 x monthly savings 132.2 thousand PLN Thermomodernisation bonus 98,000 PLN (20% of the loan) Monthly loan instalment with interest 3.9 thousand PLN (with interest at 12%)
  12. 12. Before thermomodernisation annual costs of heating and domestic hot water 192.7 thousand PLN After thermomodernisation (in the first year of repaying the loan) annual costs of heating and domestic hot water 126.6 thousand PLN Annual loan service payments (12 monthly instalments) 46.8 thousand PLN Overall costs (heating + loan service) 173.4 thousand PLN After repaying the loan annual costs of heating and domestic hot water 126.6 thousand PLN EFFECTS:
  13. 13. After modernisation, during the loan repayment period, all expenses connected with heating and domestic hot water are lowered by around 10%, and they ultimately lower by 34% after the loan has been repaid completely. The thermomodernisation investments support system is beneficial to all interested parties. It allows an investor to start and carry out investments which aim at improving conditions of using a residential building and at the same time lower all the connected costs. Starting thermomodernisation investments also directly influences the State by lowering the overall demand for heat. It indirectly leads to improving ecological conditions and lowering CO2 emissions into the atmosphere. Thermomodernisation is done using relatively low funds from the State Budget, yet at the same time, some of the expenses come back to the budget as taxes on purchased devices and materials as well as taxes on contractors' income.
  14. 14. THE RULES OF SUPPORTING RENOVATIONS The Act concerns supporting not only investments connected with thermomodernisation but also with renovation. Help in form of a renovation bonus is particularly directed at multi-family residential buildings which have been used since earlier than 14 August 1961 and its object is: - overall renovation of a given building (without renovating flats), - windows replacement and renovation of balconies even when the only user is the owner of a given flat, - alteration of a building leading to its improvement, - providing building with installations and devices required in buildings which are currently being open to use in accordance with technical & construction regulations. The Act does not concern renovations of single-family buildings.
  15. 15. The renovation bonus may be grated to an investor who is a natural person, a housing association or a social housing association. The bonus (as a form of help for the partial repayment of a loan) constitutes 20% of the used loan, yet no more than 15% of the cost of the undertaking. It is granted if the following conditions are met: - the renovation undertaking cost indicator is between 0.15 to 0.70 (the ratio of renovation costs per 1m2 of floor space to the price of 1m2 determined for the purposes of calculating the guarantee bonus). - the renovation will lower the annual demand for energy necessary for heating the building and heating water by at least 10% and when the cost indicator is over 0.3 – by at least 25%. Lowering the demand for energy is not required when the building meets the requirements connected with energy savings determined in valid provisions of technical&construction regulations. - it is impossible to get a renovation bonus if there is another bank loan with a thermomodernisation or renovation bonus or if there is any other EU funding.
  16. 16. According to the hereinabove mentioned date for the buildings eligible for a renovation bonus (year 1961), the Act concerns buildings built about 15 years after the II World War and some older ones, yet it does not concern any newer buildings e.g. large-panel buildings. For the buildings mentioned in the Act, there is a possibility of getting a bonus sometimes more easily than as a thermomodernisation bonus. It is worth highlighting, that almost any works carried out as thermomodernisation may also be done as renovation. The Act states that loans cannot be allotted for financing works for which there has been granted another loan with a thermomodernisation or renovation bonus. It means that the same scope of works cannot be financed from two sources. However, there are no obstacles for using both a renovation and a thermomodernisation loan for works in the same building, as long as they are to finance different types of works.
  17. 17. Thank you for your attention!