KfW Promotional programs for energy efficiency in buildingsMain elements and success factors
Financing energy efficiency inGermany, France and Austria
Frankfurt, 5 December 2018
Bettina DorendorfSenior Product Manager / PrincipalMittelstandsbank und Private [email protected]
Agenda
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2 Promotional offer for the building sector
3 Key principles and results
4 Customer orientation and quality management
5 Monitoring of promotional effects and lessons learnt
1 KfW in a Nutshell
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1. KfW – Financing with a Public Mission
› Founded 5.11.1948 – celebrating 70th birthday 2018
› Promotional bank of the Federal Republic of Germany
› Shareholders: 80% Federal Republic, 20% Federal States
› Headquarters: Frankfurt am Main Branches: Berlin, Bonn and Cologne
› Representative offices: about 80 offices and representations worldwide
› Balance sheet total 2017: EUR 472 billion
› Financing volume 2017: EUR 76.5 billion› 6,100 employees› Best long-term rating: Aaa/AAA/AAA
1. KfW Banking Group - an overview
We promote development
Developing countries &
emerging economies
International financing
We promote Germany
Private clientsSMEs Municipalities
Domestic promotion
We support internationalisation
Export & projectfinance
Support for climate and environmental protection
Financing volume (FV): 51.8 billion (2017, EUR) FV: 13.8 billion FV: 8.2 billion and 1.6 billion
− Differences in the totals are due to rounding
1. On-lending Principle – a successful business modelPromotional mandate defined by KfW law
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Customer submits loan application with regular bank before start of investment
Financing partner
(customer‘s bank)
Customer
If approved, application will be forwarded
to KfW
Customer’s bank enters into the loan
agreement and disburses the loan to
customer
KfW refinances the loan for the financing partner at favorable interest rates
Advantages Promotion available in all regions No KfW branch network necessary Neutral w.r.t financing partners Diversification of risks
KfW Domestic Promotion
No direct customer contact
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Total Commitments ( billion EUR) 2017 76.5
KfW Domestic Promotion51.81
(37.1 per 10/2018)
Mittelstandsbank / SME clients 21.9
Public and private clients / financial institutions 29.9
Financial markets 1.5
Export and project finance 13.8
Promotion of developing countries and emerging economies (incl. DEG) 9.7
KfW Group 79.3
2/3 of volume for domestic promotion: key areas – promotion of SMEs and building sector
KfW commitments amount to around EUR 70-80 billion p.a. – 43% directed to support environmental and climate protection
1. KfW - one of the largest global financiers supportingenvironmental protection
expansion of renewable energies (EUR 6.8 bn in 2017) andincrease in energy efficiency (EUR 21.1 bn in 2017)In addition, technological innovations for climate protection are supported in the context of innovation financing
Public BuildingsResidential Buildings Commercial Buildings
KfW-Bildarchiv / Rüdiger Nehmzow KfW-Bildarchiv / Torsten GeorgeKfW-Bildarchiv / -
2. KfW promotion for the building sector –a success story
Support for 5m housing units since 2006
40% newly constructed housing units supported
KfW Efficiency House setting market standard
EUR 260 bn investments triggered over 12 years
Mandatory involvement of an energy expert (quality management)
Products contribute 17% to accomplishment of national efficiency goals
50 TEURper housing unit
* As per 1.12..2018; ** based on maximum corresponding loan amount
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2. Promotional programs for residential buildings – Set-upEnergy Efficient Refurbishment
Interest rate Partial debtrelief
KfW-Efficiency House 100
100 TEURPer housing unit
KfW-Efficiency House 85
KfW-Efficiency House 70 22,5 %
17,5 %
0,75 %p.a.
effective * +
KfW-Efficiency House Monument
KfW-Efficiency House 55 27,5 %
Loan-schemeMaximum
promotional loan amount
Promotional Level basedon the Energy Efficiency
Ordinance
KfW-Efficiency House 115
Heating or ventilation package
Single Measures
12,5 %
12,5 %
15 %
12,5 %
7,5 %
Grant-scheme% of eligible costs**
15 %
15 %
17,5 %
15 %
10 %
25 %
20 %
30 %
Private customershave the choice
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German Energy Saving Ordinance (EnEV) is the baselinePromotional programs are based on legal framework Promotional incentives require higher efficiency standard than legal framework
Promotional programs are focused on a holistic approachFocusing on energy efficiency and renewable energiesFree choice of technology (heating system and building envelope)Cost efficiency and reduction of energy demand are crucialOpen for all types of investors (including contactors)
KfW-Efficiency House: brand for energy efficiencyMarket standard for new and existing buildings Easy to understand: the smaller the number the higher the energy efficiencyCreates high transparency
The better the energy efficiency level reached, the higher the promotional incentives
3. Promotional programs for residential buildingsEnergy- efficient construction and refurbishment Key principles
3. 12 years Energy Efficient Construction andRefurbishmentSuccess story: promotional support for 5 million housing units
10 centralmessages
Largest product family ofdomestic promotion Sometimes negative effective interest rate due to
combination of low interest rate plus partial debt relief
40% of newly constructedhousing units
Tripling of promotionalvolume since start of programin 2006
KfW-Efficiency House - setting marketstandards for efficient construction andrefurbishment
Digital application andapproval processes
In 2017 energy efficient constructionof 118.000 new housing units
Products contribute 17% toaccomplishment of national efficiency goals (energy savingsand CO2e reduction in building.
EUR 300 bn investments triggeredover 12 years
In 2017 energy efficient refurbishmentof 275.000 housing units
4. Online access to promotional product informationOnline processing of promotional loan and grant application
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4. Mandatory involvement of Energy ExpertsSupport and advise for customers - Quality management
Grants of 50 % of eligible costs of energy consultant, max. 4.000 Euro per applicant and project
For planning of energy efficiency measures and assistance until implementation of the measures
Available in combination with KfW programme Energy Efficient Construction as well asEnergy Efficient Refurbishment
All energy efficiency experts involved in promotional process must be listed in a targeted register, set up in 2012 to support the promotional programs (approx. 13.000 experts as of today). www.energieeffizienz-experten.de Listing requires proof of professional experience and quality; re-listing every 3 years; Ongoing training required to keep up with technical, legal, market development “AAA-list” reputation among energy efficiency experts due to high professional expectations
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Yearly Monitoring by IWU/Fraunhofer – proof of promotional effectiveness5. Monitoring of promotional effects 2017
No. of housing units : 275.000 (129.000 promotional approvals)
CO2e emission reduction: 480.000 tons CO2e / year (CO2-equivalent)
Investments triggered: 10,9 bn. € (incl. VAT.)
Job effects: 118.000 man years
No. of housing units 117.000 housing units in approx. 54.000 new buildings
CO2e emission reduction 139.000 tons CO2e / year (CO2-equivalent)
Investments triggered: 30,1 Mrd. € (inkl. MwSt.) bewirkt
Job effects: 317.000 man years
Promotional program „Energy efficient refurbishment“
Promotional program „Energieefficient construction“
Since 2006: - CO2e emission reduction 9.4 million tons per year; ; - 470.000 new jobs created or saved for one years per year (as of 31 December 2017)
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5. Lessons learntEnergy-efficient construction and refurbishment
The more transparent and simple the promotional scheme the better it is to understand and the easier it is to distribute
Availablility via digital channels and access everywhere where the customer seeks for information
The mandatory involvement of an energy expert is very important to provide help and advise to the investor regarding assures a high degree of quality and reliability and assures target-
oriented use of public funds
Monitoring of promotional effects is important to show economic and climatic impact and contribution to meet the goals of the
Federal government
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Back-up
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The basis for success
1 Government/public mandate important role in implementing the energy transition
2 KfW’s top capital market refinancing conditions benefit for on-lending banks (cheap refinancing)
3On-lending model and distribution/marketing broad network with business/ financing partners ongoing training / information on
product development for financial institutions and other multipliers
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Awareness raising: maintaining a tailor-made, ongoing stakeholder information & dialogue across the entire spectrum of stakeholders
owner associations, housing associations all kinds of representatives of the building sector representatives of the energy-efficiency industry chambers of architects & engineers, chambers of commerce, chambers of craft energy efficiency experts political spectrum (ministries, members of parliament, political parties)
The basis for success
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Availability of public budget Long term availability of public funds to support promotional programmes creates the
basis for the development of promotional products Careful management of the limited public budget required to support the promotional
products in accordance with market conditions and product strategy
6Stability and attractiveness of promotional product offer – established brand (KfW Efficiency House) basis for customer investment planning
7 High degree of standardisation through KfW-Efficiency House Standard and component requirements
8Focus on customer orientation through ongoing improvement of product access
Use of modern digital communication channels and ways of interaction
Creating a win-win situation for all parties involved
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For promotional customers Attractive promotional conditions (flexibility – choice between loans and grants;
financially attractive conditions: very low interest rate; partial debt relief;) Easy access to promotional product spectrum (web-based; customer bank) Professional client support through mandatory involvement of an energy expert Fast online approval process for promotional loan and grant products (“cappuchino”)
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For on-lending institutions (commercial banks/savings banks and insurance companies) Enhanced product spectrum for their clients, improvement of cross-selling potential Access to liquidity without capital market refinancing costs Attractive handling fee to compensate for on-lending activities Free of charge ongoing training and information for bank employees
3 For the public budget Additional income from tax and social security contributions
Overview of Promotional InstrumentsBroad Spectrum Tailored to Financing Needs
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Student loans Structured financing Financing of municipalities
Broadening the risk-assumption capacity of financial partners
Low refinancing ratesAdditional interest rate subsidy
Long-term contracts
e.g., financing of business founders
GrantsRedemption grants Investment grants
e.g., for energy-efficient construction
for technology-oriented start-ups
Venture capital
Risk Sharing
Loans
Direct Loans
Equity
DomesticPromotion
500,000individual loans and grants per year
KfW Domestic Promotion
* As per 30.08..2018, 20 year maturity, fixed interest rate for 10 years, 3years amortisation free period
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2. Promotional programs for residential buildings– Set-upEnergy-efficient Construction
(as % of the requirements defined for the Reference Building)
Interest RatePartial debt
relief
100 %100 %
KfW-Efficiency House 55 70 %55 %
KfW-Efficiency House 40 55 %40 % 10 %
5 %
1,56% p.a.
effektiv * +
Reference Building EnEV 2014
KfW-Efficiency House 40 Plus 55 %40 % 15 %
Loan-schemeAnnual Primary Energy Demand (QP)
Promotional Level basedon the Energy-efficiency
regulation
Transmission Heat Loss (HT´)
EnEV 2014 (1.1.2016) 75 % 100 %
Cons
truct
ion
Refu
rbis
hmen
t
KfW-Efficiency House 70
KfW-Efficiency House 100
KfW-Efficiency House Monument
Single Measures
2. Non-residential buildings – public sector clientsEnergy-efficient Construction and refurbishment for non-residential buildings (introduced in 10/2015)
KfW-Efficiency House 70
KfW-Efficiency House 55
Promotional Level based on the Energy Efficiency Ordinance
Risk-adjusted interest ratefrom 1% p.a. effective
--
17,5 %max. 175 EUR/sqm
5%max. 50 EUR/sqm
7,5%max. 100 EUR/sqm
10 %max. 100 EUR/sqm
5%max. 50EUR/sqm
Interest Rate Partial DebtRelief
+
Promotional Loan
Risk-adjusted interest ratefrom 1% p.a. effective +
Up to EUR 25m
per investmentinterest
Up to EUR 25m
per investmentinterest
Promotion available for Comprehensive refurbishment
Single measures
Promotional elements Subsidized interest rate
Partial debt relief
Grant for project
development assistance
Digitizing Domestic Promotion‘On-Lending Online 2.0’: Advanced Customer Orientation – Efficient, Automated Processes
Kunden
Banking
Changed customer behaviour transforms business models
Very high market dynamics in banking – opportunites ofdigitization are allocated now
Through the use of new technologies, KfW associates with digitization theopportunity…
› to sustainably secure its promotionalactivities especially with regard to customers and partners and
› to identify and raise new efficiencypotentials
On-Lending Online 2.0
Implication for the promotion-relatedbusiness
KfW Domestic Promotion 23
Customer orientationKfW-Online-portal for grantsHow it works
Registration Application Identification Payment
› Establishment of account in online gant portal
› Easy: only few data required
› Secusity questions in cse of lost pass word and and Double-Opt-In-Procedure
› Direct integration of sulutions for personal
identification
› Post-Ident
› Online-Identification (chat)
› Complement personal data and information on targeted investment
› Direct Feedback on the screen and after sending the application
› Instant access to approval
› Confirmation of accomplishment of investment (upload invoice)
› Bank account details for payment of grant
› direct feedback available on screen
› Instant information regarding disbursement date
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