Making public funding go further, ma imising the le erage of pri ate f ndingmaximising the leverage of private funding –KfW’s experience

Brussels, March 3, 2011

60 years of KfWFinancing with a public mission

P i l b k f h F d l R bli f● Promotional bank of the Federal Republic of Germany

● Founded in 1948 asKreditanstalt für Wiederaufbau

● Shareholders: 80% Federal Republic,20% federal states

● Headquarters: Frankfurt am MainBranches: Berlin and BonnBranches: Berlin and Bonn

● Representative offices: around 60 offices and representations worldwide

● Balance sheet total at end-2009: EUR 400 billion● Around 4,200 employees (2009)● Best rating: AAA/Aaa/AAA

244

KfW Bankengruppe

● Founded 1948 as Promotional bank of the Federal● Founded 1948 as Promotional bank of the Federal Republic of Germany, Shareholders: 80% Federal Republic, 20% federal states

● Balance sheet total at end-2009: EUR 400 billionT l C i i 2010 EUR 81 billi● Total Commitments in 2010 EUR 81 billion

● KfW has a wide array of functions● Environmental and climate protection is a major

promotional priorityp p y● Focus: investments in renewable energies and

energy efficiency in housing and SMEs● Commitments in this sector in 2010 EUR 25 billion

KfW Bankengruppe is one of the world's biggest financing institution for energy

333

gg g gyefficiency and renewable energy

A bank with a wide array of functions

International businessDomestic promotion

Financing municipal

We promote Germany We ensure internationalisation

We promote development

Business Area Mittelstandsbank

Business Area Privatkundenbank

Business Area Kommunalbank

Business AreaExport and Project

Finance

Business Area Promotion of

Developing and

Promotion of developing and

transition countries

Promotion construction

of new housing and modernisation

as well as education

Promotion SMEs, business founders,

start-ups

Financing municipal infrastructure projects and global loans

Germany/Europe agency business for Federal Government

International project and

export finance

p gTransition Countries

Federal Government

Promotion of environmental and climate protection

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Challenges of Promoting Energy Efficiency

Sector Target Challenge

Housing- single family homes- apartment buildings

- high initial investment costs- lack of knowledge and awareness- credit risks

h t hi t t

SMEs- buildings (office and

manufacturing)manufacturing facilities

- heterogeneous ownership structures

- lack of financial resources- lack of information and knowledge- energy as minor portion of overall costs- manufacturing facilities - energy as minor portion of overall costs- short amortisation periods anticipated

Municipal - public buildings- public transport

- high initial investment costs- cost effectivenessp

Infrastructurepublic transport

- budget constraints- lack of knowledge and awareness

retail business

555

retail businessbroad scale impactsprivate and municipal investors

Character of the projects

Promoting Energy Efficiency in Housing in Germany

Basic Facts

Capability of energetic renovation in Germany● 39 m housing units ● 75% built before 1979● potential of renovation 20 m housing units

Programme started in 2001M th 630 000 l● More than 630.000 loans

● Commitment volume of 40 billion euros● 1,8 m housing units

Macroeconomic Evaluation since 2006● Sustained CO2 reduction of 7,7 m tons p.a.● Investments of 70 bn euros

6

● On average 200.000 jobs per year safeguarded or created● Accumulated Savings in heating costs of 1.5 m euros

Promoting Energy Efficieny in Housing in Germany

Factors of success

All groups of investors can apply- eligibility criteria are linked to the type of building

Focus on interest subsidised loans- provides capital and incentives- Higher energy efficiency means higher promotion

KfW-Efficiency House as a brand for energy efficiency

creates visibility and transparency- creates visibility and transparency

On-lending principle

b d di t ib ti l t k th h h b k

7

- broad distributional network through home banks

- local risk assessment

Leverage of funds in Germany

Refinancing through KfW and On-lending through private Banks

refinancing loan loan to homeownerCapital market refinancing loan loan to homeowner market

Funding

Interest t

Bank Individual homeowner

Interest t

AAA-Rating

raterateMargin for credit risk

and handlingGerman

Interestsubsidy

8

Governmentor KfW

Promoting Energy Efficiency in Europe - ELENA

Energy efficiency for small and mediums sized municipalities

Technical assistance- support in development and implementation of promotional

programmesdefinition of promotional criteria and energy efficiency- definition of promotional criteria and energy efficiency standards

- development of carbon crediting schemes as a supplementary source of financing

and

Global loansSource of financing energy efficiency programmes- Source of financing energy efficiency programmes

- efficient channel of distribution- enable know how transfer

9

A way to mobilize sustainable investments of small and medium sized municipalities and ESCOs.

Leverage of funds - a model for Europe

Revolving loan fund with ERDF means

Promotional Institution

Revolving loan fund

E

KfWadvice ondesign of

Funding agreement

Government

European financial institution

Global loanfund and promotional scheme

On-lending bank

On-lending bank

Global loan

bank- Long term loans 10/15/20 years - Low interest rates- Guarantee for “house owner risks” if

required by banks

bank

10

- Possibility of using parts from ERDF means for a partial dept relief (= grant)

Promoting Energy EfficiencyConclusions/Solution

Standardised, modular solutions with high leverage

FundsEU means as source for refinancing, incentives and risk coverage leveraged by financial institutions

, g g

advantages: high visibility, bundling of sources, broad scale effects examples: EFSE Fund, Green for Growth Fund, KfW’s-Estonian Model

Global Loans Refinancing of intermediaries with additional incentivesadvantages: Lean handling, cooperation with local banks, small investment volumes, high flexibilityexamples: Finance Facilities of DG ECFIN (KfW-ELENA)

Supplementing Instrumentscarbon certificates as additional financing sourceguarantee and risk mitigation schemes (similar to CIP-Guarantee or Risk Sharing Finance

111111© KfW • Thema der Präsentation • Ort • Datum

Facility)grants for consulting activities to build up energy efficiency financing expertise

Christian KrämerChristian KrämerHead of Federal and European Affairs DepartmentTel.: ++49 69 7431 3170Christian.Kraemer@KfW.de

AnnexAnnex

Promoting Energy EfficiencyBest Practice - SMEsBest Practice SMEs

ERPs Energy Efficiency Programme

Interest subsidised promotional loans- raise awareness - improve cost effectiveness- improve cost effectiveness- provide financial resources- reduce dependence on energy prices

Grants for information and consulting- promotes the engagement of experts

KfWs offers an experts platform- provides easy access to expertise

14

Green for Growth Fund Southeast EuropeGreen for Growth Fund Southeast Europe

InvestorsAsset

PortfolioInvestment Managers The Fund

Asset Portfolio

Investment Managers The Fund

Issue Proceeds

-Dividends/Redempt

A Shares(initially: KfW, EIB,

EBRD, later mainly private

Investors)

Issue Proceeds

-Loans to SMEs,private

Lending through Dividends/Redempt

SICAV-SIFIssue Proceeds-Pool

Dividends/Redempt. )initially 60 MEUR

B Shares(EIB, KfW,

EBRD)(Luxembourg) Issue Proceeds

private households and small RE projects

financial institutions Dividends/Redempt.

SICAV-SIF

Dividends/Redempt.

Issue Proceeds- C Shares

EBRD)initially:

ca. 15 MEUR

( g)

Dividends/Redempt.

Issue Proceeds

Funding for ESCOs, larger industrial companies,small EE/RE projects

Direct lending

C t di

Dividends/Redempt.

C Shares(EU, Govts.),

Initially: 30 MEUR

small EE/RE projects

C t di

Dividends/Redempt.

15

CustodianBank AuditorsCustodianBank Auditors

Promoting Energy Efficiency in Housing in Germany KfW Efficiency House Standard

New Buildings

KfW-Efficiency House Standard

Broad Scale Top Runner

gFuture

(EU-RL)

KfW KfW KfW KfW KfW KfW KfW KfWKfW-EH 130

KfW-EH 115

KfW-EH 100

KfW-EH 85

KfW-EH 70

KfW-EH 55

KfW-EH 40

KfW-EH 25

Broad Scale Top Runnermodell Scheme

Future

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Building Stock

Energy Efficiency (EE) & Renewable Energies (RE)Best Practice - European Global Loans

EE Housing Modern., Czech Rep. 2010 -

- Volksbank finances standardised EE hous. modernisation packages (approx. 12,000 € per appartment)

Global Loan to Volksbank, 40 mil. €

packages (approx. 12,000 € per appartment)- Final beneficiaries receive subsidy from govt. after approval of

the “standard modernisation package”

RE C ech Rep 2010 C f f (RE, Czech Rep. 2010 -Global Loan to

CMZRB, 30 mil. €

- CMZRB finances greenfield renewable energy projects (solar, wind)

EE & Generation of ERUs, Poland 2009 -Global Loan to BOS

Bank 30 mil €

- BOS financing small, standardised EE measures in SME and housing sector, qualifying for ERUs on a programme basis

- BOS sells ERUs to KfW, and employs earnings for interest d ti i EE l diBank, 30 mil. € reduction in EE lending programme

EE SMEs, Bulg. 2009 -Global Loans to

- Banks financing EE investments of SME fulfilling EU criteria - EU TA Funds (Energey Efficiency Finance Facility EEFF) for

171717© KfW • Thema der Präsentation • Ort • Datum

Raiffeisen and ProCredit, 30 mil. €

EU TA Funds (Energey Efficiency Finance Facility, EEFF) for Project Prep. and Energy Audits / Verification (up to 7.2 million €)