Retrofitting Financial Tool

The Financial tool uses a simple excel sheet which focuses on financial analysis, return on investment, cost control and evaluation of rehabilitation of public buildings. It includes data from a case study which is to be completed and understood by the course participants. It also focuses on strategies and opportunities provided by alternative financing mechanisms (ESCOs, EPCs, etc.). To use the tool click on the excel financial-analysis-tool_rev6 and follow the instructions within the programme.

The Financial Tool is developed using an excel based programme with a clear financial methodology to assess financial profitability and risks taking into consideration public building retrofitting projects.

The analysis of the public procurement mechanism for public building retrofitting (regulations, procedures, financing options, etc.) and the identification of technical / economic input for the financial analysis (investment costs, O&M costs, energy and water saving, etc.) are listed:

Main Concepts and Features

Investment Global Cost (Cg) is the sum of the different type of costs related to the considered investment, discounted back to the starting year, plus the discounted residual value
Simple Pay-Back Period (PB) is the time, in years, for a project cumulative annual savings to equal its upfront cost.
Discounted Pay-Back Period (DPB) is based on the same rationale which is behind PB; the only difference is represented by the fact that the net cash flows are discounted in order to account for the time value of money
Net Present Value (NPV) is the sum of the present values (PVs) of the individual cash flows of a project; its calculation depends on the selected discount rate as well as on the length of the calculation period.
Internal Rate of Return (IRR) is a rate of return used in capital budgeting to measure the profitability of investments. It represents the discount rate at which the NPV of an investment becomes zero.
Benefits over Cost Ratio (BCR) is the ratio of the benefits of a project, expressed in monetary terms, relative to its costs, also expressed in monetary terms.

Risk Assessment – NPV Sensitivity

Other factors to consider is the risk assessment aimed at evaluating how the variability of the financial model input data affects the investment profitability and the risk assessment on the sensitivity analysis of NPV variation to technical/economic/financial input data variation.finance-risk-assessment

Financial support and public financial resources is an important part of the success of retrofitting. The financial tool will provide an overview of public procurement within the European Union and identify the main stakeholders involved in the public building retrofitting project such as: Local municipality, Engineering firms and consultants, Lenders & investors, Energy Service Companies (ESCOs), Public energy suppliers and Technology providers.

finance-procurement

The analysis of different financial options was also carried out such as:

  • Budgetary funds – Project financing,
  • Debt financing – Leasing,
  • Equity financing – Loan, subsidies, tax deduction, VAT reduction, etc.
  • Mezzanine financing – Public Private Partnership (PPP)

The investment financial analysis is based on the definition of a set of input data, namely:

  • Technical input: energy and water saving achievable thanks to the retrofitting investment (deriving from the building modelling);
  • Economic input: CAPEX, O&M costs and residual value of the equipment;
  • Financial assumptions: discount rate, energy/water prices, prices escalation and financial calculation period.

The Tool Interface is organised in 3 main sections composed in several parts.

finance-tool-interface

To use the tool click on the excel financial-analysis-tool_rev6 and follow the instructions within the programme.