JESSICA IN LITHUANIA An Effort to Renovate Apartment

JESSICA IN LITHUANIA: An Effort to Renovate Apartment Blocks Inesis Kiškis Lithuanian Ministry of Environment BRUSSELS, March 23, 2011

Facts about Lithuanian Housing (I) • • population - 3, 37 million more than 38, 000 apartment blocks more than 800, 000 apartments 66 % of population lives in multi family buildings built before 1993

Facts about Lithuanian Housing (II) • most in poor condition, lack of proper management • inefficient heating systems and engineering equipment, poor quality windows, roofs, seals between panels • more than 57 % of households are not satisfied with their houses • During privatization, only apartments were privatized, but not the buildings as such • 97% private, only 3 % municipal rental stock

Energy supply pattern 65 % of multifamily buildings are served by district heating systems Current energy consumption ~ 160 k. Wh/m 2

Why JESSICA? • Attempts to launch modernisation of apartment blocks in early 90’s were rejected; • World Bank Project in 1996 -2004 • Subsidised renovation program launched in 2006 • Program ran out of money in late 2007 • Decision to launch a “win-win” scheme using JESSICA in early 2009

JESSICA Holding Fund Committed: € 227 million: - € 127 million European Regional Development Fund - € 100 million National co-financing Actual Contribution to date: € 149, 4 million - € 127 million European Regional Development Fund - € 22, 4 million National co-financing

“Old” Renovation Program • 50% of investment cost compensated • Commercial banks participated in offering “own” contribution at market rates • Borrowers were home-owner associations

“New”Renovation Program Fixed interest rate at 3% Maturity up to 20 years 2 years grace period (during construction) No collateral 15% written-off if certain energy efficiency level achieved (upon completion) 85 -110 k. Wh/m 2 (Class “C”) 110 -145 (Class “D”) • 100% of costs to prepare renovation documentation reimbursed (paid from national funds) • 100% of reimbursement of installments to low income families • • •

Some additional figures • Number of eligible apartment blocks – 24000 • Estimated cost to renovate one apartment block (60 apartments @50 m 2) 290, 000 Euro • After the modernization, one house would halve energy consumption and save 125 MWh a year

Eligible costs • Costs contributing to increase of energy efficiency: – Replacement of windows – Replacement of doors – Insulation of ceilings/roofs – Insulation of walls – Installation of solar panels/wind mills – Replacement of energy related equipment – Replacement of elevators and electrical wiring in shared areas (stair wells, basements)…

Major actors (I) • House-owner associations – project proponents

Major Actors (II) • Housing and Urban Development Agency (HUDA) – advisory services and certification of works

Major Actors (III) • Commercial banks aka Urban Development Funds (UDFs) – assess creditworthiness, award and administer loans

Who Does What: Flowchart

Achievements to Date • Agreements with 3 UDFs signed • 3 loans with home-owner associations signed • 71 home-owner associations have decided to join the program • 31 investment projects have been vetted by Housing and Urban Development Agency (HUDA) • 5 applications under review by UDFs

Major Challenge To overcome the distrust, to restore confidence in Government sponsored programs

EIB Involvement • • Selected without any procurement procedure Contract negotiations pretty fast and smooth EIB does a lot of analytical and technical work Authorities hardly would have had enough human resources to accomplish all tasks – Review of the relevant legal acts: EU and national – Identification of the stumbling blocks – Prepare selection criteria for selection of Urban Development Funds (UDFs) – Selection of UDFs – Negotiation and signing agreements with UDFs

The Challenges • Number of challenges indentified during negotiations with UDFs – Possible state aid issues – need to identify and register – Legality of personal data handling – Turning the apartment owners into borrowers (possibly) against their will, and as a consequence: – Questioning the constitutionality of entire scheme

It Shall Work Like This Before Thank you! After