Financial simulation tool
Introduction to use
Main author:
Christophe MILIN (ICE)
Co-authors:
Natalia ZUGRAVU (ICE), Laziza RAKHIMOVA (ICE)
I.C.E. (International Consulting on Energy), BURGEAP Group
27 rue de Vanves, 92 100 Boulogne-Billancourt, FRANCE
+33 (0)1 46 10 25 51 – [email protected]
This publication was designed in the context of FRESH (Financing energy REfurbishment for
Social Housing). FRESH is a European cooperation project for the development and promotion
of energy performance contracting to finance comprehensive refurbishment operations in the
Social Housing sector.
For further information on the project or on products of the project see: www.fresh-project.eu
FRESH Project Partners
Acer Reggio Emilia | Bulgarian Housing Association | International Consulting on Energy |
Fontenergy | Places for People | Société Immobilière des Chemins de Fer (ICF)
The project FRESH is supported by the Intelligent Energy Europe (IEE) program of the European
Union. More details on the IEE program can be found on:
http://ec.europa.eu/energy/intelligent/index_en.html
The sole responsibility for the content of this publication lies with the authors. It does not
necessarily reflect the opinion of the European Communities. The European Commission is not
responsible for any use that may be made of the information contained therein.
Page 2/5
Financial simulation tool - Introduction to use
INTRODUCTION TO USE
In the framework of FRESH project, Social Housing Operators (SHOs) and Energy Saving
Companies (ESCOs) from France, United Kingdom, Italy and Bulgaria proposed to address
energy performance contracting (EPC) in social housing aiming at comprehensive
refurbishment.
This financial simulation tool has been designed to support SHOs operating in Europe and
willing to proceed with comprehensive energy refurbishment on their buildings, so they can
define the most optimal solution financeable under an EPC scheme.
The tool primarily intends to facilitate the negotiation process between SHOs, ESCOs and
financial institutions (if any). It can also be useful in producing credible analysis for
communication with public authorities on comprehensive energy refurbishment projects and
their mass replication obstacles (in particular of financial and economic performance nature).
This note provides a brief description of the financial simulation tool, the way to perform
simulations and analyze results.
The financial simulation tool has been developed, based on the technical, financial and legal
knowledge and expertise accumulated during the FRESH project implementation. The tool is
multipurpose, flexible and tailor-made. Although it has been developed principally for the
SHOs, it can be used by a wide variety of actors involved in the social housing rehabilitation in
different European countries. It provides the user with the quantitative assessment that allows
selecting the best implementation solution in monetary terms among the considered
alternative scenarios.
The financial simulation tool is based on hypotheses and does not target to provide very
profound and detailed financial analysis. The results simulated are therefore approximations
but close to the real figures. They can be used in comparing different energy retrofitting
solutions but do not constitute a complete bankability study. Alongside the negotiation
process between SHO and ESCO, the investor will need to conduct a more comprehensive
bankability study, taking into account all specific and detailed refurbishment and financing
parameters for the site considered.
The financial simulation tool was developed using Microsoft Excel and is made of one single
workbook divided in several worksheets. The data to be entered or the results to be generated
in the financial simulation tool are presented in specific worksheets as specified hereafter.
The worksheets of the financial simulation tool may be grouped in two categories:

“Hypotheses” blue sheet (data to be entered);

“Results...” orange sheets (data generated): including synthesis of simulation results as
well as detailed results for each of the scenarios considered.
The financial simulation tool is designed in English and in French. The user can switch between
languages by selecting the proper language in the filter in the top right corner of the
“Hypothesis” worksheet.
Page 3/5
Financial simulation tool - Introduction to use
All available data on various scenarios (current situation, in-house solution and several options
for externalized service) has to be entered in the Hypotheses worksheet, which includes the
following:

General Project information - project calendar, costs, services charged and energy savings
recouped from tenants. A strategic part of this section concerns energy performance data
allowing the tool to estimate energy savings and other potential “cash flows” (by-products
valuable in monetary terms: e.g. white/green/black certificates). The user has thus to input
all data regarding expected results after energy retrofitting, namely energy consumption,
production as well as the amounts of certificates to be generated.

Context - all general economic data: energy prices, prices of tradable certificates, taxation,
financial and/or fiscal incentives.

Financing conditions - discount rate and financial schemes for SHO.

Sensitivity analysis checks the robustness of the financial simulation by adjusting the
annual prices. The analysis is performed using assumptions on inflators.
To facilitate this tool handling, general explanations/definitions of considered parameters are
given in the Hypotheses worksheet.
Once all data is entered in the Hypotheses worksheet, the detailed results for each of the
scenarios are generated in the corresponding worksheets: “Results current” for the current
situation, “Results in house” for in-house option, and “Results proposal X” for the Xth external
intervention solution. These worksheets display the nominal as well as discounted cash flows
for:

SHO: project implementation and running costs, energy savings recouped from tenants
and revenues from on-site produced energy, generated certificates, etc.,

Tenants: energy and other service charges, energy savings retroceded to SHO in order to
estimate the total costs for tenants after refurbishment.
The summary and comparison of all these scenarios after simulations are generated in the
“Results (synthesis)” worksheet. To help SHO make the optimal decision, in addition to the
generation of the cumulative Net Present Values for each scenario with their ranking from the
less to the most costly solution, the tool computes the additional cost ratios SHO/tenants may
bear for each scenario in comparison to the second or third best (in terms of real costs) option.
The Synthesis of the results is the last step in analyzing the EPC interest and thus choosing the
optimal solution, using this simulation tool. The graphs in this worksheet visually illustrate the
discounted cash-flows for SHO and tenants for all considered scenarios. In this worksheet you
can also input and modify the time period of the project in order to evaluate the simulation
results’ sensitivity to the time horizon considered.
We do hope that this financial simulation tool will provide you with a probabilistic framework
for forecasting a range of outcomes for the alternative scenarios, thus allowing you to choose
the most likely solution for your social housing energy refurbishment project.
The author of the financial simulation tool would welcome any feedback, comments and
suggestions related to its functioning.
Page 4/5
Financial simulation tool - Introduction to use
Users, interested in further exploring this tool and getting its up-gradable version, are invited
to contact the author.
Have a good simulation!
Page 5/5
Financial simulation tool - Introduction to use