Financing instruments and innovative business models to boost...

ROME | VIA TIRSO 14LONDON | THE SHARD, 32 LONDON BRIDGE STREET

Financing instruments and innovative business models to boost urban regeneration

Funds and Finance Smart Cities

Alessandra Cassisi and Angelo GiordanoOfficinae Verdi Group, Financial Advisers

F I N A N C E S U S T A I N A B I L I T Y

E N E R G Y I N D U S T R Y

E N E R G Y E F F I C I E N C Y

R E N E W A B L E S

S U S T A I N A B L E F I N A N C I N G

C A R B O N O F F O P E R A T I O N S

S M A R T & R E S I L I E N T C I T I E S L A R G E S C A L E G R E E N I N V E S T M E N T S

S M A R T E N E R G Y M A R K E T S I N T E G R A T E D I N N O V A T I V E T E C H

OV Shareholding

OV Business Model

OV Background – EU Projects | Funds & Finance for Smart Cities

REMOURBAN Smart City Project

Duration: Jan 2015 – Dec 2019

Total budget: € 24.793.451,01

Lighthouse Cities: Valladolid, Nottingham,

Tepebaşı

Following Cities: Seraing and Miskolc

R2CITIES Smart City Project

Duration: Jul 2013- Jun 2018

Total budget: € 14.861.751

Lighthouse Cities: Valladolid, Kartal and

Genova

REZBUILD Project – NZEB

Retrofitting

Duration: Oct 2017 – Sep 2021

Demo Cities: Madrid, Oslo and Venice

STARDUST - Smart City

Project

Lighthouse Cities: Pamplona,

Tampere, Trento

Following Cities: Derry, Kozani,

Litomerice and Cluj-Napoca

TRUSTEPC - Scale up investments by

Energy Performance Contracting

Duration: Mar 2015 – Feb 2018

Countries: Croatia, France, Greece, Italy,

Portugal and Spain

+CityxChange - Smart City Project

Lighthouse Cities: Trondheim, Limerick

Following Cities: Sestao, Alba Iulia, Pisek, Voru and Smolyan

Executive summary

#1 The “Long Term Generating” concept

#2 The smart city “Ecosystem vision”

#3 The city enablers’ engagement

#4 Smart City integrated infrastructures

#5 The EIP-SCC fine-tuning of cities Domains

#6 Funding instruments

#7 Financing mechanisms

#8 Role of Private Equity

#9 Business Models and Financing Schemes customization process

#10 Emerging ESCOs Business Models

Funds & Finance for Smart Cities

How to finance Investment Plans ?

Umbrella concept

1. Our ecosystem is under the Main Public Authority umbrella. They should generate and guarantee the local value chain identification/creation.

2. Deploy actions according to EIB Capital requirement especially under the EIAH umbrella, namely the URBIS <new urban investment advisory>

#1 The “Long Term Generating” concept

The LTG could be considered as a key enabler concept triggering, around a wide smart city framework, investment projects.

According to our experience, 5-to-20 ys is the right lapse able to generate benefits for both financing investors and social welfare.

#2 The SC “Ecosystem vision”

Successful case studies underlines the establishment of a

well-functioning Ecosystem architecture as a key issue for

a real-life city investment plan activation.

Literature is currently focused on the Quintuple Helix

engagement, covering all local society involvement. Emerging

instruments are social innovations and gamification tools

#3 The city enablers’ engagement

An emerging case study in US is the creation of a local Venture Smart Group. A platform built for co-design the local smart city

vision, sharing data and information.

The objective is to establish a co-thinktank approach involving policy decision making, citizens, technology providers, financial institutions in order to adopt smart city local medium/long term vision. <2030..>

#4 Smart City integrated infrastrs.

Currently, EU cities infrastructures need massive reinvestment and modernization. Up-to-date SCs trends focus on city infra/structures

and info/structures at integrated level.

But, there is a need for financial engineering allowing smart cities capturing conventional funding and un-conventional financing, even

trespassing the stability pact rules and other constraints.

#5 The EIP-SCC city domains

EIP-SCC Marketplace, coordinated all the co-funded FP7 SCs and H2020 LCs, individuates validated/experienced smart cities’

domains.

Smart Lampposte-Mobility

Social HousingUrban Platform

#6 Funding instruments* *Triggering an innovative investment pool for smart city program, requires creative thinking overcoming the

traditional models of infrastructure fund.

- EU/EC co-funding initiatives and programs (ERDF, H2020/HEurope, etc. fulfilling the investment projects funding gap)

- tools by which project costs are repaid by the city through mechanisms such as: property taxes, business taxes, municipal income tax, user charges, pay-for-performance models, asset

disposals, etc.

#7 Financing mechanisms * *Triggering a comprehensive

investment pool for smart city program deployment requires creative thinking overcoming the traditional models of infrastructure financing.

Project promoter’s contribution Private contribution under a PPP

Bond financing bond options issued by states, local authorities, or corporates to finance different projects

Pension fund private placement bonds financing, capital to invest through non-public

Equity investment and infrastructure fund managers investments as part of diversified securities portfolio

Venture capital invest in companies in exchange for equity in the companies they invest in

Crowdfunding enables groups to support a solution by pooling their resources

Venture philanthropy private investors, foundations or private-equity firms using VC approaches to provide financial support to viable projects with high

levels of social interest.

EIF – VentureEU €2.1 billion to boost venture capital investment in Europe’s innovative start-ups

#7 Financing mechanismsBond, green bond

#7bis Financing mechanisms

Up to date there are convenient forms of debt, equity and guarantees, which could income from public financial

institutions: The EIB* Financial Instruments, possibly blended with EC grants, such as: Investment loan, Mezzanine and Senior loan Framework loan, Equity investment, Intermediated

loans, Investment platform.*the largest supranational borrower and lender in the world and the only international financial institution politically

accountable to the EU

#7ter F&F mechanisms

Funding and Financing instruments are the vehicle used to pay for and generate revenue to service costs related to traditional

infrastructure development and transitions.

Case study: - IoT and Blockchain cryptocurrency transactions for energy

- Car2go business model vs City net revenues- Monetizing BigData revenues

#8 Role of Private Equity

According to latest financial literature “Private Equity is the new black”.

The biggest firms might become the new banks. They are not linked with deposit and short-term funding, but they raise money from

long term investors such as insur. co. or pension funds.Over the last 10ys private credit is the most performing, vice versa

Real Estate and Venture Capital are the worst.

#9 BMs&FSs customiz. process

SC renovation process in business model will encompass the creation of new

types of jobs and a green local value chain, as a baseline milestone of a valuable

and bankable platform for innovation.

Disruptive business model will be not only on canvas but bankable, having

evaluated since the co-design phase the gap analysis, underpinning all the

constraints and all the bottlenecks (regulatory, financial, technological and

social). The feature is scalable and replicable ready-to-market business model,

crossing investor’s sentiment, duly highlighting the de-risk of the implemented

technologies.

We are still committed is setting a customized financing schemes settled for the integrated infrastructure use.

Basically, it is a Revenue Sharing Stabilization Mechanism, enabling new public private partnership models for front-end investment and revenue sharing,

including pay-for-performance related to service improvements or access to services.

Emerging ESCOs Business Model are deploying local value chains and new risk, financing and revenue allocation among players: enablers, Esco, TSO/DSO/SMO,

local authorities.

The scientific literature has identified the most common identified barriers:

- Market- Information

- Financial barriers- Institutional, administrative and structural

#10 Emerging ESCOs BMs

Innovation in ESCOs Business Model is currently underpinning four main domain as the key umbrella enabling system.

1. The Value proposition2. The Revenue model

3. The Customers and market segment4. The Risks

#10 Emerging Esco BMs

#10 Emerging ESCo BMs

Through One-stop-shop ContractingWith performance and credit risk

Through Energy Performance ContractingWith performance and credit risk

Through Energy Performance ContractingWith performance, energy price and credit risk

Through Energy Performance ContractingWith performance and credit risk

Underlining the innovation in distributed energy resources and smart meters operators

Muchas Gracias

Alessandra CassisiAngelo Giordano

Officinae Verdi GroupFinancial AdvisersROME | VIA TIRSO 14

LONDON | THE SHARD, 32 LONDON BRIDGE STREET

a.giordano@ovaerdi.coma.cassisi@ovaerdi.com

Financing instruments and innovative business models to boost...

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