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Green Deal boost to retrofit market

Private finance is set to back the Green Deal market as councils gear up to begin the first stages of multi-billion-pound housing retrofit programmes.

Last week, Construction News reported Birmingham City Council is about to tender for a lead partner for its Green Deal retrofit programme, which could see the council use its borrowing to underpin the initial stages of the programme.

With private finance the scheme could be expanded to retrofit about 200,000 homes, spending around £1 billion by 2026.

PWC partner in corporate finance Paul Davies said private finance institutions were taking a keen interest in the Green Deal, potentially unlocking spending on retrofit work. “Ultimately the Green Deal will be attractive to financial institutions,” he said.

“If properly structured, Green Deal loans are assets which private sector investors will value highly.

“Because the underlying loans attach to the property not the individual, their default rates should be extremely low - far lower than the energy suppliers’ experience with their energy bills.”

Birmingham plans to be the first authority-backed programme to go live once the Green Deal is launched next year. A group of authorities in the Manchester area is piloting a retrofit scheme it hopes to extend using the Green Deal programme.

KPMG director of corporate finance Nick Greenwood said: “Birmingham’s approach is a sensible one because it is starting with an ‘on-balance sheet’ solution that it is hoping to migrate off balance sheet through refinancing mechanisms as the opportunity arises.”