KfW Promotional programs for energy efficiency in buildingsMain elements and success factors

Financing energy efficiency inGermany, France and Austria

Frankfurt, 5 December 2018

Bettina DorendorfSenior Product Manager / PrincipalMittelstandsbank und Private KundenBettina.Dorendorf@kfw.de

Agenda

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2 Promotional offer for the building sector

3 Key principles and results

4 Customer orientation and quality management

5 Monitoring of promotional effects and lessons learnt

1 KfW in a Nutshell

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1. KfW – Financing with a Public Mission

› Founded 5.11.1948 – celebrating 70th birthday 2018

› Promotional bank of the Federal Republic of Germany

› Shareholders: 80% Federal Republic, 20% Federal States

› Headquarters: Frankfurt am Main Branches: Berlin, Bonn and Cologne

› Representative offices: about 80 offices and representations worldwide

› Balance sheet total 2017: EUR 472 billion

› Financing volume 2017: EUR 76.5 billion› 6,100 employees› Best long-term rating: Aaa/AAA/AAA

1. KfW Banking Group - an overview

We promote development

Developing countries &

emerging economies

International financing

We promote Germany

Private clientsSMEs Municipalities

Domestic promotion

We support internationalisation

Export & projectfinance

Support for climate and environmental protection

Financing volume (FV): 51.8 billion (2017, EUR) FV: 13.8 billion FV: 8.2 billion and 1.6 billion

− Differences in the totals are due to rounding

1. On-lending Principle – a successful business modelPromotional mandate defined by KfW law

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Customer submits loan application with regular bank before start of investment

Financing partner

(customer‘s bank)

Customer

If approved, application will be forwarded

to KfW

Customer’s bank enters into the loan

agreement and disburses the loan to

customer

KfW refinances the loan for the financing partner at favorable interest rates

Advantages Promotion available in all regions No KfW branch network necessary Neutral w.r.t financing partners Diversification of risks

KfW Domestic Promotion

No direct customer contact

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Total Commitments ( billion EUR) 2017 76.5

KfW Domestic Promotion51.81

(37.1 per 10/2018)

Mittelstandsbank / SME clients 21.9

Public and private clients / financial institutions 29.9

Financial markets 1.5

Export and project finance 13.8

Promotion of developing countries and emerging economies (incl. DEG) 9.7

KfW Group 79.3

2/3 of volume for domestic promotion: key areas – promotion of SMEs and building sector

KfW commitments amount to around EUR 70-80 billion p.a. – 43% directed to support environmental and climate protection

1. KfW - one of the largest global financiers supportingenvironmental protection

expansion of renewable energies (EUR 6.8 bn in 2017) andincrease in energy efficiency (EUR 21.1 bn in 2017)In addition, technological innovations for climate protection are supported in the context of innovation financing

Public BuildingsResidential Buildings Commercial Buildings

KfW-Bildarchiv / Rüdiger Nehmzow KfW-Bildarchiv / Torsten GeorgeKfW-Bildarchiv / -

2. KfW promotion for the building sector –a success story

Support for 5m housing units since 2006

40% newly constructed housing units supported

KfW Efficiency House setting market standard

EUR 260 bn investments triggered over 12 years

Mandatory involvement of an energy expert (quality management)

Products contribute 17% to accomplishment of national efficiency goals

50 TEURper housing unit

* As per 1.12..2018; ** based on maximum corresponding loan amount

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2. Promotional programs for residential buildings – Set-upEnergy Efficient Refurbishment

Interest rate Partial debtrelief

KfW-Efficiency House 100

100 TEURPer housing unit

KfW-Efficiency House 85

KfW-Efficiency House 70 22,5 %

17,5 %

0,75 %p.a.

effective * +

KfW-Efficiency House Monument

KfW-Efficiency House 55 27,5 %

Loan-schemeMaximum

promotional loan amount

Promotional Level basedon the Energy Efficiency

Ordinance

KfW-Efficiency House 115

Heating or ventilation package

Single Measures

12,5 %

12,5 %

15 %

12,5 %

7,5 %

Grant-scheme% of eligible costs**

15 %

15 %

17,5 %

15 %

10 %

25 %

20 %

30 %

Private customershave the choice

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German Energy Saving Ordinance (EnEV) is the baselinePromotional programs are based on legal framework Promotional incentives require higher efficiency standard than legal framework

Promotional programs are focused on a holistic approachFocusing on energy efficiency and renewable energiesFree choice of technology (heating system and building envelope)Cost efficiency and reduction of energy demand are crucialOpen for all types of investors (including contactors)

KfW-Efficiency House: brand for energy efficiencyMarket standard for new and existing buildings Easy to understand: the smaller the number the higher the energy efficiencyCreates high transparency

The better the energy efficiency level reached, the higher the promotional incentives

3. Promotional programs for residential buildingsEnergy- efficient construction and refurbishment Key principles

3. 12 years Energy Efficient Construction andRefurbishmentSuccess story: promotional support for 5 million housing units

10 centralmessages

Largest product family ofdomestic promotion Sometimes negative effective interest rate due to

combination of low interest rate plus partial debt relief

40% of newly constructedhousing units

Tripling of promotionalvolume since start of programin 2006

KfW-Efficiency House - setting marketstandards for efficient construction andrefurbishment

Digital application andapproval processes

In 2017 energy efficient constructionof 118.000 new housing units

Products contribute 17% toaccomplishment of national efficiency goals (energy savingsand CO2e reduction in building.

EUR 300 bn investments triggeredover 12 years

In 2017 energy efficient refurbishmentof 275.000 housing units

4. Online access to promotional product informationOnline processing of promotional loan and grant application

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4. Mandatory involvement of Energy ExpertsSupport and advise for customers - Quality management

Grants of 50 % of eligible costs of energy consultant, max. 4.000 Euro per applicant and project

For planning of energy efficiency measures and assistance until implementation of the measures

Available in combination with KfW programme Energy Efficient Construction as well asEnergy Efficient Refurbishment

All energy efficiency experts involved in promotional process must be listed in a targeted register, set up in 2012 to support the promotional programs (approx. 13.000 experts as of today). www.energieeffizienz-experten.de Listing requires proof of professional experience and quality; re-listing every 3 years; Ongoing training required to keep up with technical, legal, market development “AAA-list” reputation among energy efficiency experts due to high professional expectations

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Yearly Monitoring by IWU/Fraunhofer – proof of promotional effectiveness5. Monitoring of promotional effects 2017

No. of housing units : 275.000 (129.000 promotional approvals)

CO2e emission reduction: 480.000 tons CO2e / year (CO2-equivalent)

Investments triggered: 10,9 bn. € (incl. VAT.)

Job effects: 118.000 man years

No. of housing units 117.000 housing units in approx. 54.000 new buildings

CO2e emission reduction 139.000 tons CO2e / year (CO2-equivalent)

Investments triggered: 30,1 Mrd. € (inkl. MwSt.) bewirkt

Job effects: 317.000 man years

Promotional program „Energy efficient refurbishment“

Promotional program „Energieefficient construction“

Since 2006: - CO2e emission reduction 9.4 million tons per year; ; - 470.000 new jobs created or saved for one years per year (as of 31 December 2017)

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5. Lessons learntEnergy-efficient construction and refurbishment

The more transparent and simple the promotional scheme the better it is to understand and the easier it is to distribute

Availablility via digital channels and access everywhere where the customer seeks for information

The mandatory involvement of an energy expert is very important to provide help and advise to the investor regarding assures a high degree of quality and reliability and assures target-

oriented use of public funds

Monitoring of promotional effects is important to show economic and climatic impact and contribution to meet the goals of the

Federal government

Bank aus Verantwortung

Thank you for your attention!

Bettina.Dorendorf@kfw.de+49 30 20264-3277

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Back-up

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The basis for success

1 Government/public mandate important role in implementing the energy transition

2 KfW’s top capital market refinancing conditions benefit for on-lending banks (cheap refinancing)

3On-lending model and distribution/marketing broad network with business/ financing partners ongoing training / information on

product development for financial institutions and other multipliers

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Awareness raising: maintaining a tailor-made, ongoing stakeholder information & dialogue across the entire spectrum of stakeholders

owner associations, housing associations all kinds of representatives of the building sector representatives of the energy-efficiency industry chambers of architects & engineers, chambers of commerce, chambers of craft energy efficiency experts political spectrum (ministries, members of parliament, political parties)

The basis for success

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Availability of public budget Long term availability of public funds to support promotional programmes creates the

basis for the development of promotional products Careful management of the limited public budget required to support the promotional

products in accordance with market conditions and product strategy

6Stability and attractiveness of promotional product offer – established brand (KfW Efficiency House) basis for customer investment planning

7 High degree of standardisation through KfW-Efficiency House Standard and component requirements

8Focus on customer orientation through ongoing improvement of product access

Use of modern digital communication channels and ways of interaction

Creating a win-win situation for all parties involved

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For promotional customers Attractive promotional conditions (flexibility – choice between loans and grants;

financially attractive conditions: very low interest rate; partial debt relief;) Easy access to promotional product spectrum (web-based; customer bank) Professional client support through mandatory involvement of an energy expert Fast online approval process for promotional loan and grant products (“cappuchino”)

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For on-lending institutions (commercial banks/savings banks and insurance companies) Enhanced product spectrum for their clients, improvement of cross-selling potential Access to liquidity without capital market refinancing costs Attractive handling fee to compensate for on-lending activities Free of charge ongoing training and information for bank employees

3 For the public budget Additional income from tax and social security contributions

Overview of Promotional InstrumentsBroad Spectrum Tailored to Financing Needs

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Student loans Structured financing Financing of municipalities

Broadening the risk-assumption capacity of financial partners

Low refinancing ratesAdditional interest rate subsidy

Long-term contracts

e.g., financing of business founders

GrantsRedemption grants Investment grants

e.g., for energy-efficient construction

for technology-oriented start-ups

Venture capital

Risk Sharing

Loans

Direct Loans

Equity

DomesticPromotion

500,000individual loans and grants per year

KfW Domestic Promotion

* As per 30.08..2018, 20 year maturity, fixed interest rate for 10 years, 3years amortisation free period

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2. Promotional programs for residential buildings– Set-upEnergy-efficient Construction

(as % of the requirements defined for the Reference Building)

Interest RatePartial debt

relief

100 %100 %

KfW-Efficiency House 55 70 %55 %

KfW-Efficiency House 40 55 %40 % 10 %

5 %

1,56% p.a.

effektiv * +

Reference Building EnEV 2014

KfW-Efficiency House 40 Plus 55 %40 % 15 %

Loan-schemeAnnual Primary Energy Demand (QP)

Promotional Level basedon the Energy-efficiency

regulation

Transmission Heat Loss (HT´)

EnEV 2014 (1.1.2016) 75 % 100 %

Cons

truct

ion

Refu

rbis

hmen

t

KfW-Efficiency House 70

KfW-Efficiency House 100

KfW-Efficiency House Monument

Single Measures

2. Non-residential buildings – public sector clientsEnergy-efficient Construction and refurbishment for non-residential buildings (introduced in 10/2015)

KfW-Efficiency House 70

KfW-Efficiency House 55

Promotional Level based on the Energy Efficiency Ordinance

Risk-adjusted interest ratefrom 1% p.a. effective

--

17,5 %max. 175 EUR/sqm

5%max. 50 EUR/sqm

7,5%max. 100 EUR/sqm

10 %max. 100 EUR/sqm

5%max. 50EUR/sqm

Interest Rate Partial DebtRelief

+

Promotional Loan

Risk-adjusted interest ratefrom 1% p.a. effective +

Up to EUR 25m

per investmentinterest

Up to EUR 25m

per investmentinterest

Promotion available for Comprehensive refurbishment

Single measures

Promotional elements Subsidized interest rate

Partial debt relief

Grant for project

development assistance

Digitizing Domestic Promotion‘On-Lending Online 2.0’: Advanced Customer Orientation – Efficient, Automated Processes

Kunden

Banking

Changed customer behaviour transforms business models

Very high market dynamics in banking – opportunites ofdigitization are allocated now

Through the use of new technologies, KfW associates with digitization theopportunity…

› to sustainably secure its promotionalactivities especially with regard to customers and partners and

› to identify and raise new efficiencypotentials

On-Lending Online 2.0

Implication for the promotion-relatedbusiness

KfW Domestic Promotion 23

Customer orientationKfW-Online-portal for grantsHow it works

Registration Application Identification Payment

› Establishment of account in online gant portal

› Easy: only few data required

› Secusity questions in cse of lost pass word and and Double-Opt-In-Procedure

› Direct integration of sulutions for personal

identification

› Post-Ident

› Online-Identification (chat)

› Complement personal data and information on targeted investment

› Direct Feedback on the screen and after sending the application

› Instant access to approval

› Confirmation of accomplishment of investment (upload invoice)

› Bank account details for payment of grant

› direct feedback available on screen

› Instant information regarding disbursement date

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