Modernisation of housing stock will lower energy bills and improve quality of life
Addressing a core issue in the effort to improve the energy balance of Lithuania, the EBRD is providing a €50 million loan to the Lithuanian Public Investment Development Agency UAB (VIPA) for energy efficiency and rehabilitation investments in apartment buildings.
Lithuania has a housing stock of some 38,000 apartment buildings, housing around 66 per cent of the population, with approximately 35,000 built in the Soviet era. To date, only around 4 per cent of apartment buildings have been renovated while the vast majority remains in urgent need of an upgrade to reduce energy consumption.
As these investments lead to reduced costs for owners or tenants while improving their quality of life, demand for energy efficiency loans is high, but remains unsatisfied. The EBRD loan is addressing this issue by leveraging available EU structural funds financing. Under this framework sub loans will be on-lent to individual borrowers.
In addition, the EBRD is also implementing a technical cooperation project to assist the Ministry of Finance in reforming the legal regulatory framework in Lithuania to enable securitisation of future cash flows. This would allow VIPA to attract institutional investors interested in green finance to recycle available funds to implement more residential energy efficiency investments.
Susan Goeransson, EBRD Director of Municipal and Environmental Infrastructure, said: “This is an important investment for the EBRD and our first major investment in building energy efficiency in Lithuania. It is strongly aligned with the Bank’s strategy to deliver the transition to a green economy and climate change mitigation. Old, un-renovated apartment buildings are some of the key contributors to CO2 emissions. Working with VIPA is a way to tackle this problem.”
Matti Hyyrynen, EBRD Head of the Baltics, added: “This loan combined with the technical cooperation on securitisation paves the way for increased private sector involvement in the financing of energy efficiency investments in Lithuania.”
Gvidas Dargužas, the head of VIPA, stated “The residents of multi-apartment buildings in our country have already seen the benefits of renovation – the numbers of those who want to renovate their apartments and lower their heating bills by half are growing rapidly. In order to meet the growing demand, we have taken measures to attract further financing".
In 2015, the Lithuanian government established the Apartment Building Renovation Fund (ABRF) with the support of a €74 million financing provided by the EU structural funds. ABRF extends funds to sub-borrowers in the form of long term loans rather than grants to ensure a sustainable financing approach. The EBRD loan aims to increase the outreach of the ABRF.
The investments will modernise existing infrastructure and introduce more energy efficient and environmentally-friendly technology in line with the EBRD’s new transition concept. It argues that a well-functioning market economy should be integrated, competitive, inclusive, well-governed, green and resilient.