Riga, Latvia
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
Useful materials
| 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? |
Core team |
| 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 |
| Local communication / marketing tools for the scheme beneficiaries |
Fund website |
More information about Riga
