FUNDING ENERGY EFFICIENCY FOR SOCIAL HOUSING

LEASING GAS CENTRAL HEATING AND OTHER WARM HOME IMPROVEMENTS

Recent changes in the Regulatory, tax and commercial environment means that equipment used for energy efficiency improvements can now be financed out of the Housing Revenue Account or Major Repairs Allowance.

This can be accomplished by levering your existing finance through the private funding arrangements now being offered by Longriver - up to ten times as much can be installed for the same annual budget than by utilising capital.

Owing to the transfer of risk inherent in such arrangements, Longriver funding can be better value for money even than capital. It is equally applicable to new or replacement installations or refurbishment work. Furthermore, our funding is independent of the contractors or suppliers, giving the Council or Social Landlord freedom to make the best value choice.

Longriver has gained a reputation second to none in the Public Sector for value for money, no risk funding solutions for housing assets. We have, for example, financed more than 60,000 gas central heating installations for 28 Local Authorities, and we have enabled one Council to install £25m of replacement windows in this way. Other Councils have used our funding to replace lifts, install door entry and security systems or purchase white goods and other equipment for their tenants.

Benefits of Longriver Funding

• Repayments are made out of revenue, either the Housing Revenue Account or Major Repairs Allowance
• Can therefore be used to fund both new and replacement systems
• Capital is freed up for use elsewhere
• Value for Money calculations show that an operating lease can represent better value than capital expenditure
• Operating lease leverage can be between seven and ten-fold, e.g. an annual budget of £1m can be used to rent up to £10m of equipment
• Programs can be brought forward many years
• The benefit of grants (e.g. SoP) can also be levered
• No risk to the Council as our operating lease is a proven funding mechanism
• Available immediately with no requirement for further government approvals
• Associated costs such as asbestos removal or insulation can be included

Some facts about recent developments

Audit Commission
A Technical Release (LGTR5/99) has now been published by the Audit Commission which deals exclusively with operating leases for gas central heating. It provides clear guidance on how the arrangements for leasing should be viewed. These arrangements are remarkably similar to those developed by Longriver over the past decade and endorses our approach.

Tax
The Finance Act 2000 states that Capital Allowances may be claimed by lessors for gas central heating plant and equipment. Longriver has been claiming and passing on the benefits of such allowances for many years to Councils through our operating lease scheme. Longriver does not require an indemnification from its clients with regard to whether it is successful in obtaining such allowances - a major benefit in transfer of risk.

Suitable Assets
Recent developments by Longriver allows Social Landlords to rent a much wider range of new installations or replacement equipment/refurbishment schemes in a way which will allow them to continue to pay out of revenue. Such equipment can include:

• Gas, electric, solid fuel or oil fired central heating
• Community Heating or CHP schemes
• Security, alarms and access equipment
• Energy efficient lighting and white goods
• Lifts
• Replacement doors and windows
• Cladding and insulation

Best Value
The advent of Best Value means that the transfer of risk inherent in an operating lease has become a valuable element of the Best Value audit trail. Furthermore, the benefits offered by leasing such as the ability to make better use of revenue and to free up capital resources, as well as bringing programmes forward by many years, have become part of the assessment that the Council can take into account.

Affordable Warmth
Transco has launched this initiative which promotes the adoption of a range of energy efficiency measures, not simply gas central heating, funded through operating lease. Moreover Longriver has already financed over 1200 systems under the Affordable Warmth scheme to date.