Financing mechanism for energy efficient renovation in Lviv’s residential buildings

Honorata Fijalka
0ctober 2019

The general market barrier can be described as lack of affordable bridge financing to homeowners and homeowners associations to pay the construction works until these are completed, approved as energy efficient and a 50% - 70% grant payments can be disbursed by The Energy Efficiency Fund (EEF).  

EEF has been established by the Government of Ukraine (GoU) and co-funded by the EU and Germany to support energy efficient modernization of Ukraine’s residential housing stock. The EEF plans to provide grants to Homeowner Associations (HoAs) to co-finance the implementation of energy efficiency measures in multi-family buildings.  

The HOAs need to pre-finance 100% of the construction measures (approximately 1-year pre-financing) from start of the construction until verification. Preliminary engineering assessments estimate the construction works’ cost per multifamily building at average EUR 250,000 or approx. EUR 2,500 per dwelling. These funds need to be mobilized by the homeowners to pay construction bills. The monthly average per capita wage in 2019 is below EUR 380 per month i.e. EUR 4,560 per annum. To most HoAs and in particular to those with socially vulnerable population (pensioners, subsidy recipients and young families), savings or other financial resources are not available to finance significant investments such as comprehensive energy efficient measures including the buildings’ envelope.

The other side of the market barrier is the lack of incentive to local financial institutions’ to develop financing products to homeowner associations. Ukrgasbank as the only Ukrainian financial institution started to offer lending to homeowners associations.

Experienced with the implementation of residential energy efficiency credit lines with local financial institutions for the EBRD and IFC in Europe, Caucasus and Central Asia, Concordiste was entrusted with an analysis of potential financing options including a subsidy mechanism for further discussions with the stakeholders.

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