Structure of the financial instrument | The Renovation loan shall take the form of a loan fund to be set up by a financial intermediary with contributions from the programme and the financial intermediary itself to finance a portfolio of newly originated loans, to the exclusion of the refinancing of existing loans.
The Renovation loan shall be made available, in the framework of the operation which is part of the priority axis defined in the programme F2funded by the ESIF and defined in the context of the ex-ante assessment required in Article 37 of Regulation (EU) No 1303/2013.
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Aim of the instrument | The aim of the instrument is to offer preferential loans to natural and legal persons or independent professionals owning premises (apartment, social housing or individual household), as well as administrators or other legal bodies acting on behalf and for the benefit of the owners in order to undertake renovation works that are eligible for F3ESIF supportsupport for rural development and support under Regulation 508/2014.
The F4ESIF programme contribution from the managing authority to a financial intermediary shall not crowd out financing available from other private or public investors.
The ESIF programme shall provide funding to the financial intermediary in order to build up a portfolio of newly generated loans, and in parallel, participate in the losses/defaults and recoveries on the loans in this portfolio on a loan by loan basis and in the same proportion as the programme contribution in the instrument.
In the case of fund of funds structure, the fund of funds shall transfer the contribution from the ESIF programme to the financial intermediary.
In addition to the ESIF programme contribution, the fund of funds may provide its own resources which are combined with the financial intermediary resources. The fund of funds shall in this case take the pro-rata part of the risk sharing between the different contributions in the portfolio of loans. State aid rules have to be respected also in relation to such resources if they are public resources.
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State aid implication | The Renovation Loan shall be designed as a State aid free instrument, i.e. market-conform remuneration for the financial intermediary, full pass-on of financial advantage by the financial intermediary to the final recipients, and the financing provided to the final recipients are under the applicable de minimis Regulation.
(a)
Aid at the level of the financial intermediary and the fund of funds is excluded when:
(1)
the financial intermediary and the managing authority or fund of funds bear at any time the losses and benefits in proportion to their contribution (pro-rata) and there is an economically significant participation of the financial intermediary in the Renovation loan instrument, and
(2)
The remuneration (i.e. management costs and/or fees) of the financial intermediary and the fund of funds reflects the current market remuneration in comparable situations, which is the case when the they have been selected through an open, transparent, non-discriminatory and objective selection procedure or if their remuneration is aligned with the Articles 12 and 13 of Delegated Regulation (EU) No 480/2014 and no other advantages are granted by the State. Where the fund of fund only transfers the F5ESIFprogramme contribution to the financial intermediary, and has a public interest mission, and has no commercial activity when implementing the measure, and is not co-investing with its own resources — therefore it is not considered a beneficiary of aid, — it is enough that the fund of fund is not overcompensated, and
(3)
The financial advantage of the programme public contribution to the instrument shall be fully passed on to the final recipients in the form of an interest rate reduction. When selecting the financial intermediary, the managing authority shall, in line with the Article 7(2) of Delegated Regulation (EU) No 480/2014, asses the pricing policy and the methodology to pass on the financial advantage to the final recipients.
Where the financial intermediary does not pass on all the financial advantage to the final recipients, the undisbursed public contribution shall be transferred back to the managing authority.
(b)
Aid at the level of an entity acting on behalf of the owners (i.e. natural and legal persons, independent professionals owning premises, administrators, other legal bodies):
Aid at the level of an entity acting on behalf of the owners is excluded when:
- (1)
the entity does not benefit from any direct transfers of public support and
- (2)
The entity transfers all the financial advantages of the programme public contribution to the final recipients
(c)
At the level of the owners without or with an economic activity (legal person or independent professionals, landlords and owners who install renewable energies, supplying part of the energy produced to the grid):
Owners that are natural persons and which are not considered undertakings because they do not exercise an economic activity are not considered to be beneficiaries of State aid.
Owners with an economic activity qualify as an ‘undertaking’ and are subject to State aid rules. In particular, this is the case if they are landlords (renting is an economic activity) and in the case of installing renewable energies, if part of the renewable energies produced is supplied to the grid (supplying energy to the grid is considered an economic activity).
At the level of the owners with an economic activity, the aid shall comply with the de minimis rules.
For each loan inserted within the portfolio regarding owners with an economic activity, the financial intermediary shall calculate the GGE by using the following calculation methodology:
Calculation of the GGE = Nominal amount of the loan (EUR) × (Cost of funding (standard practice) + Cost of risk (standard practice) – Any fees charged by the managing authority on the programme contribution to the financial intermediary) × Weighted average life of the loan (Years) × Risk sharing rate.
When the GGE is calculated with the above mentioned formula, for the purpose of the Renovation loan instrument, the requirement as foreseen in Article 4 of the de minimis Regulationf1 is considered to be met. There is no minimum collateral requirement.
A verification mechanism shall ensure that the GGE calculated with the above mentioned formula is not below than the GGE calculated following the Article 4(3)(c) of the de minimis Regulation.
The total amount of aid calculated with the GGE cannot be above EUR 200 000 over a 3 years fiscal period taking into account the cumulation rule for final recipients in the de minimis Regulation.
Technical support grant or another grant provided to the final recipient shall be cumulated with the calculated GGE.
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Lending policy | (a)
Disbursement from the managing authority or fund of funds to the financial intermediary:
Following the signature of a funding agreement between the managing authority and the fund of funds or the financial intermediary, the relevant managing authority transfers public contributions from the programme to the fund of funds or the financial intermediary which places such contributions in a dedicated Renovation loan fund. The transfer shall be in tranches and respect the ceilings of Article 41 of Regulation (EU) No 1303/2013.
The target lending volume and range of interest rate shall be confirmed within the ex-ante assessment in accordance with Article 37 of Regulation (EU) No 1303/2013 and shall be taken into account to determine the nature of the instrument (revolving or non-revolving instrument).
The maximum risk-sharing of the financial instrument towards the final recipients shall be 85 % (i.e. at least 15 % shall be provided by the financial intermediary own funds).
(b)
Origination of a portfolio of new loans:
The financial intermediary shall be required to originate within a pre-determined limited period of time a portfolio of new loans funded according to a risk-sharing rate agreed in the funding agreement (i.e. funded by (i) the programme contribution) (ii) the financial intermediary own fund).
Eligible loans pre-defined according to eligibility criteria on a loan-by-loan basis and portfolio level shall be automatically included in the portfolio by way of submitting inclusion notices at least on a quarterly basis.
The financial intermediary shall implement a consistent lending policy, especially regarding portfolio composition enabling a sound credit portfolio management and risk diversification, while aiming at reducing the market failure identified in the ex-ante assessment (referring to Article 37 of Regulation (EU) No 1303/2013) and while remaining aligned with the managing authority's financial interests and policy objectives.
The identification, selection, due diligence, documentation and execution of the loans to final recipients shall be performed by the financial intermediary in accordance with its standard procedures and in accordance with the principles set out in the relevant funding agreement.
(c)
Re-use of resources paid back to financial instrument:
Resources paid back to the financial instrument shall be either reused within the same financial instrument (revolving within the same financial instrument) or after being paid back to the managing authority or the fund of funds they shall be used in accordance with Article 44 of Regulation (EU) No 1303/2013.
When revolving within the same financial instrument, as a matter of principles, the amounts that are attributable to F6the support of the ESIFsupport for rural development and support under Regulation 508/2014 and that are reimbursed and/or recovered by the financial intermediary from loans to final recipients within the time framework for investments shall be made available for new use within the same financial instrument. This revolving approach as referred at Articles 44 and 45 of Regulation (EU) No 1303/2013 shall be included in the funding agreement.
Alternatively, if managing authority or fund of funds is directly repaid, the repayments shall occur regularly mirroring (i) principal repayments (on a pro rata basis on the basis of the risk sharing rate) (ii) any recovered amounts and losses deductions (according to the risk sharing rate), of the Renovation loans and (iii) any interest rate payments. These resources have to be used in accordance with Articles 44 and 45 of Regulation (EU) No 1303/2013.
(d)
Loss recoveries:
The financial intermediary shall take recovery actions in relation to each defaulted loan co-financed by the Renovation loan in accordance with its internal guidelines and procedures.
Amounts recovered by the financial intermediary (net of recovery and foreclosure costs, if any) shall be allocated pro-rata to the risk-sharing between the financial intermediary and the managing authority or the fund of funds.
(e)
Others:
Interest and other gains generated by support F7from the ESI Fundsfor rural development and support under Regulation 508/2014 to financial instrument shall be used in accordance with Article 43 of Regulation (EU) No 1303/2013.
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Pricing policy | When proposing its pricing, the financial intermediary shall present a pricing policy and the methodology to ensure the full pass on of the financial advantage of the programme public contribution to the final recipients. The pricing policy and the methodology shall include the following elements:
- (1)
the interest rate on the financial intermediary participation is set at market basis (i.e. according to the financial intermediary own policy),
- (2)
the overall interest rate, to be charged on loans to the final recipients included in the portfolio, must be reduced proportionally to the allocation provided by the public contribution of the programme. This reduction shall take into account the fees that the managing authority might charge on the programme contribution.
- (3)
The GGE calculation as presented in the State aid section shall be applied on each loan included in the Portfolio.
- (4)
The pricing policy and the methodology shall remain constant during the eligibility period.
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Programme contribution to financial instrument: amount and rate (product details) | The Renovation loan allocation to financial intermediaries and the minimum risk sharing rate shall be based on the ex-ante assessment findings justifying the support to the financial instrument (Article 37 of Regulation (EU) No 1303/2013) and taking into account the revolving approach of the instrument (if applicable). |
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Programme contribution to financial instrument (activities) | The loan portfolio funded by the Renovation loan instrument shall include newly originated loans to the final recipients, to the exclusion of the refinancing of existing loans. The eligibility criteria for inclusion in the portfolio are determined pursuant to F8the Unionnational law (e.g. Regulation (EU) No 1303/2013 and Fund-specific rules), programme, national eligibility rules, and with the financial intermediary with the aim of reaching a large number of final recipients and achieving sufficient portfolio diversification and homogeneity in order to allow a reasonable estimation of the portfolio risk profile. These criteria shall reflect market conditions and practices in the relevant country or region.
The financial intermediary shall be required to cooperate with regional or national bodies responsible for providing additional services in relation to the implementation of the renovation projects, which includes inter alia: consultancy services; verification and evaluation of project preparation, construction, technical supervision and procurement documents; evaluation of the compliance of renovation projects with F9Union and national law; the provision of grant support, State aid verification and registration.
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Managing authority's liability | The managing authority's liability in relation to the financial instrument shall be as set out in Article 6 of Delegated Regulation (EU) No 480/2014. |
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Duration | The lending period of the financial instrument shall be set in order to ensure that the programme contribution as referred in Article 42 of Regulation (EU) No 1303/2013 is used for loans disbursed to final recipients no later than by 31 December 2023. |
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Lending and risk-sharing at financial intermediary level (alignment of interest) | Alignment of interest between the managing authority and the financial intermediary shall be achieved through:
Performance fees as provided by Articles 12 and 13 of Delegated Regulation (EU) No 480/2014.
The financial intermediary must contribute under local market conditions to the financing with at least 15 % of the total financing commitment for lending to final recipients (allowing determining the risk sharing rate).
The losses and recoveries shall impact pro-rata the financial intermediary and the managing authority within their respective liability.
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Eligible financial intermediaries | Public and private bodies established in a F10Member Stateconstituent nation which shall be legally authorised to provide Renovation loans to persons owning premises and enterprises operating and owning premises in the jurisdiction of the programme which contributes to the financial instrument. Such bodies are financial institutions, and as appropriate microfinance institutions or any other institution authorised to provide loans. |
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Final recipient eligibility | The final recipients shall be eligible under F11Union and national law, the relevant priority, and funding agreement.
Final recipients shall be natural or legal persons or independent professionals (economic activity), as well as administrators or other legal bodies acting on behalf and for the benefit of owners, owning premises (apartment or individual household) implementing energy efficiency or renewable energies measures that are eligible under Regulation (EU) No 1303/2013 and programme support.
Within the eligibility rules under the programme and in line with national F12and Union rules the following examples of types of works may be eligible:
Technical support for the preparation of the part of the project relating to the energy efficiency or renewable energies measures.
Implementation costs of the part of the project relating to the energy efficiency or renewable energies measures.
Major repairs or replacement of heating and hot water systems:
Replacement or refitting of the heating substation or the boiler house (individual boilers) as well as hot water preparation systems.
Installation of balancing valves for stands.
Improvement of heat insulation for pipes.
Replacement of pipes and heating devices.
Installation of individual heating measurement system and thermostatic valves in apartments.
Replacement or refitting of hot water system pipes and installations.
Replacement or refitting of ventilation system.
Replacement of windows and entrance doors.
Roof insulation, including construction of a new sloping roof (excluding construction of premises in the attic).
Insulation of façade walls.
Insulation of cellar ceiling.
Installation of alternative energy sources (sun, wind, etc.) systems.
Major repairs or replacement of elevators by replacing them by more energy efficient elevators.
Replacement or repair of the common use engineering systems of the building (sewage system, electric installations, fire prevention installations, drinking water pipelines and installations ventilation system).
Regarding the final recipients, the following eligibility criteria shall apply when lending to final recipient/owners with an economic activity under a legal entity (for example independent professionals). The eligibility criteria shall be met at the date of the signature of the loan:
- (a)
shall be a micro, small and medium enterprise (SMEs (including individual entrepreneurs/self-employed persons) as defined in the Commission Recommendation 2003/361/EC.
- (b)
shall not be a SME active in the sectors defined in points (a) — (f) of Article 1 of the de minimis Regulation.
- (c)
shall not be part of on one or more restricted sectorsf2.
- (d)
shall not be a firm in difficulty as defined by State aid rules.
- (e)
shall not be delinquent or in default in respect of any other loan or lease either granted by the financial intermediary or by another financial institution pursuant to checks made in accordance with the financial intermediary internal guidelines and standard credit policy.
In addition, at the time of the investment and during the reimbursement of the loan, final recipients shall have a registered place of business in a F13Member Stateconstituent nation and the economic activity for which the loan was disbursed shall be located in the relevant F14Member State and Region/Jurisdictionconstituent nationF15of the ESIF programme.
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Characteristics of the product for the final recipients | The financial intermediary shall deliver to final recipients new loans that contribute to the objective of the programme and that are co-financed by the programme under the Renovation loan, to the exclusion of the refinancing of existing loans. Their terms shall be grounded on the ex-ante assessment referred to in Article 37 of Regulation (EU) No 1303/2013.
The Renovation loan maturity shall be for a period of up to 20 years.
The maximum amount of each Renovation loan shall be fixed in relation with the ex-ante assessment findings justifying the programme contribution to the financial instrument and shall be fixed in the funding agreement between the managing authority, fund of funds and the financial intermediary. The maximum amount per loan per individual household shall not exceed EUR 75 000. Loans for a building administrator are the sum of individual households of the building.
The financial instrument may require from the final recipients or the administrators of common property acting on behalf of final recipients, an ‘own funds’ contribution.
The Renovation loan shall be subject to annual fixed interest rate and shall include regular amortisation. The interest rate on the financial intermediary participation is set at market basis. The interest rate applicable to the relevant eligible loan included in the portfolio shall be reduced by the proportion of the programme public contribution in favour of the final recipients.
An interest rate subsidy, as under Article 37(7) of Regulation (EU) No 1303/2013, may be awarded to low income households or vulnerable householdsf3 The maximum interest rate subsidy shall correspond to the interest rate to be paid by the low income households or vulnerable households on the contribution of the financial intermediary in each loan.
Certain technical support costs may be included in the financial instrument in the context of Article 37(7) of Regulation (EU) No 1303/2013. Support must be provided for project preparation only (preparatory studies and assisting in the preparation of the investment up to the investment decision). These technical support costs shall only be eligible in the event that a Renovation loan is signed between the financial intermediary and the final recipients and regardless of the entity that provides these services (e.g. regardless of whether the financial intermediary provides such services or they are obtained from another entity).
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Reporting and targeted results | Financial intermediaries shall provide the managing authority or fund of funds with at least quarterly information in a standardised form and scope.
The report shall include all the relevant elements for the managing authority to fulfil the conditions of Article 46 of Regulation (EU) No 1303/2013.
F16Member StatesThe relevant authority shall also fulfil their reporting obligations pursuant to the de minimis Regulation.
Indicators must be aligned with the specific objectives of the relevant priority of the F17ESIF programme financing the financial instrument and on the expected results of the ex-ante assessment. They shall be measured and reported at least quarterly for the Renovation loan and aligned as a minimum with the regulation requirements. In addition to the common indicators of the priority axis of the ESIF programme (number of households with improved energy consumption classification, estimated annual decrease of GHG …) other indicators are:
Number and volume of the loans
Renovated family houses (square meters)
Renovated apartments in buildings (square meters).
Defaults (numbers and amounts)
Resources repaid and gains
Number and amounts of the technical support
Number and amounts of interest rate subsidies
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Evaluation of the economic benefit of the programme contribution | The financial intermediary shall reduce the overall effective interest rate (and collateral policy where appropriate) charged to the final recipients under each eligible loan included in the portfolio reflecting the favourable funding and risk sharing conditions of the Renovation loan.
The entire financial advantage of the programme public contribution to the instrument shall be transferred to the final recipients in the form of an interest rate reduction. The financial intermediary shall monitor and report on the GGE for final recipients as referred in the State aid section. This principle shall be reflected in the funding agreement between the managing authority or fund of funds and the financial intermediary.
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