Alternatively financing the Green Deal
Consortium to bankroll cheap loans
A group of blue chip companies, which include major retailers and banks, have signed a deal to create a unique not-for-profit financial company that will help to finance energy efficiency projects for both households and small businesses.
The aim of the consortium, known as the Green Deal Finance Company (GDFC), is to ensure that low-cost finance is available to the 14 million buildings the government hopes will be refitted by 2020 under its Green Deal programme, which as we stated before, starts next October (yr.5, iss.7, pg.7, see The next step).
What’s the point?
The idea of the Green Deal is to enable companies and homeowners to access loans to pay for energy efficiency improvements. The rule of the scheme is that the savings on energy bills must be at least as much as the loan repayments. But many companies and banks fear that if loans are priced at personal rates, only basic improvements will be paid for without breaking the rule, making the scheme pretty pointless. This new company says it has a solution and will “put together as many loans as possible and very quickly give access to the capital markets”.
Is this a good move?
The companies involved are large, which is key because it means the GDFC can quickly and regularly access the bond market and obtain “investment grade” money. Plus, by pooling resources, it means that there’s less chance of the money that will support the Green Deal running dry, as so often happens with government-backed schemes.
It’s expected that the finance consortium will run a loan book worth billions of pounds per year, rising over the next decade to £10 billion annually.
Note. The more routes there are for you to access Green Deal money the better. The GDFC will allow the Green Deal loan rate to drop by 3-4%, perhaps from 9% to 6%.
Can you take advantage of it?
Yes.The GDFC is open to any company or local authority and if you want to take advantage of the Green Deal because you have earmarked improvements, this is one of the best options.
Tip. Unlike previous schemes, it will be much easier to secure the funding, as you don’t have any interaction with the GDFC directly. There payments are made to your energy efficiency solutions provider. So if you want to take advantage of the fund, all you need do is speak to the supplier of the equipment that you’re purchasing.
Can you expect more of the same?
Most certainly. The 16 companies involved in the GDFC no doubt expect a big take-up of Green Deal finance next year, and although this consortium is not-for-profit, the likes of HSBC will hope to attract new customers through the company’s activity.
For a previous article on the Green Deal, visit http://environment.indicator.co.uk(EN 06.06.05).
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