Introduction to Energy-Efficiency Loans

from the Carbon Trust

What are Energy-Efficiency Loans?

The Carbon Trust Energy-Efficiency Loans are part of a £10 million government backed

initiative. The interest-free loans of between £5,000 and £100,000 are available to

qualifying small and medium sized enterprises (SMEs) in England and Wales* (regional

variations may apply) looking to invest capital in energy saving projects. All businesses

based in Northern Ireland* that have been trading for at least 12 months may now be

eligible to apply for an interest free loan of up to £200,000. The loans are repaid over a

period of up to 4 years.

*subject to terms and conditions

Why should SMEs be interested?

Energy efficiency makes sound economic sense. When upgrading existing equipment even

a modest investment in energy saving equipment can save a company over 20% on energy

bills. In favourable cases the amount of money saved each month will exceed the loan

repayments thereby increasing company profits by hundreds, or thousands, of pounds each

year throughout the payback period. Thereafter the full value of the saving contributes to

the bottom line.

Acknowledging that capital for such investment is often difficult to obtain, Energy-

Efficiency Loans are intended to reduce this barrier by providing access to capital on very

favourable terms:

As well as reducing the operating costs of business, greater energy efficiency also reduces

the amount of carbon dioxide emissions thereby helping combat climate change.

What are the Eligibility Criteria to Apply for an Energy-Efficiency Loan?

Both the company making the application and the energy saving project itself have to meet

some basic criteria. These are outlined below.

The Company

To be eligible the company must be based in England or Wales and has to fall within the

definition of an SME, namely:

(i.e. it is part of a larger organisation)

In Northern Ireland all businesses maybe eligible.

In addition the company should have a trading record of more than 12 months. We are

generally unable to make loans to companies in the Transport sector, activities linked to

the production, processing, or marketing of Agricultural or Fisheries products, or for

The Investment

Energy-Efficiency Loans are intended to encourage qualifying companies to invest in energy

saving equipment that either upgrades or replaces existing facilities. Any project where

the cumulative value of the energy savings resulting from the project over the first 5 years

exceeds the capital value of the loan may qualify.

Examples of the type of equipment that can offer considerable energy savings to business

include:

Note also that the loan may be used to cover, for example, installation and commissioning

as well as the capital cost of the equipment provided the payback criteria are still met.

How to Apply for an Energy-Efficiency Loan

are encouraged to complete the preliminary eligibility checklist on our website

Once initial eligibility has been confirmed each project, or set of projects, is assessed on

its technical merits and energy saving potential. In cases where the applicant has not

completely specified their project, i.e. decided on specific equipment and a chosen

supplier, the Carbon Trust offer free technical advice. The applicant(s) could qualify for a

Free Site Survey if their energy bills are over £50,000 per annum.

In addition the Carbon Trust Delivery Programme offers more general advice to help

enterprises identify areas where and how they can make energy savings at ‘no cost’, ‘low

cost’, or through capital investment.

For Loan applications the company must obtain its own quotations for the project from

suppliers and ultimately take the decision on whether to invest. We expect the chosen

supplier to provide the client with data that quantifies the likely cost and energy savings as

part of the loan application submitted. A Carbon Trust consultant will then contact the

client to discuss the project and to calculate its potential for carbon dioxide emissions

abatement.

Once a technically eligible project has been identified by the Loans Team, a credit check

will be carried out. We assess the overall application and, if appropriate, offer the

interest-free loan. The company may then order the equipment and we will forward the

loan upon receipt of a copy of the supplier’s invoice covering the project.

The Loans Team aims to make a loan decision within two weeks of receiving the fully

completed loan application together with all the required supporting information. You

must therefore send all of the following to us when you apply:

1. Fully completed Application Form

2. Quote(s) from your supplier(s)

3. Account records as specified on the Application Form

Further Information

Energy-Efficiency Loans are considered to be State Aid. They are offered under the ‘de

minimis’ exemption to the State Aid regulations. This exemption does not cover the

Transport sector, activities linked to the production, processing, or marketing of

Agricultural or Fisheries products, or for export-related activities. As a result Energy-

Efficiency Loans cannot usually be offered in these cases.

The amount of ‘de minimis’ aid offered to any company in a three year period is limited to

€100,000 (currently approximately £70,000). We ask applicants to complete a declaration

that they are not receiving other aid that would take them over this limit.

Applicants must fall within the EU definition of a small and medium size enterprise in the

case of England and Wales applicants: an organisation having no more than 250 full time

employees, an annual turnover of no more than €50 million (approximately £35m), or an

annual balance sheet total not exceeding €43 million (approximately £30m), and not more

than 25% of the capital or voting rights owned by an enterprise which is not itself an SME.

In Northern Ireland all businesses maybe eligible.

To qualify, the cumulative value of energy savings estimated for the project in its first 5

years must be greater than the value of the loan. Other savings, e.g. maintenance, are not

taken into account for this calculation. For example, for the minimum loan amount of

£5,000 the project would require a saving of at least £1,000 a year.

Energy-Efficiency Loans are primarily intended for projects to replace inefficient existing

equipment with a more efficient alternative which uses less energy. However other

projects may be considered providing they achieve a reduction in carbon dioxide emissions.

A minimum hurdle for emission reductions per £ loaned can be obtained from the Advice

Line. This is only likely to be an issue for projects that involve switching from one fuel to

another, where cost savings derive from differing fuel tariffs without actually reducing

energy consumption.

Energy-Efficiency Loans are primarily aimed at trading, profit-making companies. Other

organisations (e.g. partnerships, not-for-profit companies, charities) are encouraged to

apply, however they must still pass a credit check and may need to provide additional

information.

Each application will be assessed on a case by case basis, taking into account the credit

rating of the company, the suitability of the proposed project and its potential for energy

saving. A project that qualifies for a loan for one company is not guaranteed to qualify for

any other company.

Loan availability

The Carbon Trust reserves the right to manage a balanced portfolio of loans by limiting

applications from certain sectors, or through loans of certain sizes, or based on other

criteria. We will endeavour to let applicants know at the earliest opportunity if their

application is unlikely to be successful on these grounds.

The Energy-Efficiency Loans are available in England, Wales and Northern Ireland. A similar

scheme, Loan Action Scotland, is available in Scotland. For more information visit

Application process

An adviser (usually a Carbon Trust consultant) will be assigned to validate each application

and may also assist the applicant with identification of suitable energy saving projects.

However, the adviser cannot recommend individual equipment suppliers or specific items

of equipment. During technical assessment the adviser’s primary role is to verify the

suitability of the project to the Carbon Trust, and not to the applicant. The Carbon Trust

cannot ‘guarantee’ energy savings.

Following completion of the project the applicant must send us a copy of a commissioning

certificate from the supplier to confirm the work has been undertaken.

Terms and Conditions

Loans are repayable over a period of up to 4 years in equal instalments by monthly direct

debit. Repayments must be made, even if the project does not achieve the savings

projected in the loan application.

A full set of terms and conditions for the Loan agreement are available on request.

The Carbon Trust is a company limited by guarantee. Registered in England and Wales Number 4190230.

Registered at: 8th Floor, 3 Clement’s Inn, London WC2A 2AZ© The Carbon Trust 2005. All rights reserved.

What is the Carbon Trust?

costs by increasing energy efficiency through professional and impartial advice and support. In

addition to interest-free Energy-Efficiency Loans, the Carbon Trust’s services include:

Wales of between £5,000 and £100,000. And all businesses in Northern Ireland up to £200,000.

They are aimed at businesses wanting to upgrade or replace equipment with more energy

efficient model(s) as part of an energy saving project. The loans are unsecured and interestfree.

They are repaid over 12, 24, 36 or 48 months dependent upon the value of energy

savings associated with the project. Terms and conditions apply.

Whilst reasonable steps have been taken to ensure that the information contained within this document is correct, neither

the Carbon Trust nor the Government give any warranty or make any representation as to its accuracy or accept any liability

for any errors or omissions.

The Carbon Trust works with business and the public sector to cut carbon emissions and capture the commercial potential of

low carbon technologies. The Carbon Trust is an independent company funded by the Department for Environment,

Food and Rural Affairs, the Department of Trade and Industry, the Scottish Executive, the Welsh Assembly Government and

Invest Northern Ireland.