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EC Eurostat Guidance Note: Impact of Energy Performance Contracts on Government Accounts

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Energy Performance Contracts (EPCs) are part of the energy transition promoted by the EU Commission with a view to achieve better efficiency in energy use, resulting in possible  substantial energy savings in a context of global external dependence of the EU for its energy supply. Government units, as owners of public buildings and constructions used in the context of different of functions, may be involved in energy performance contracts and contribute to energy savings.

This note provides guidance on how to record the impact of EPCs on government accounts. The main issue to be determined is the allocation of the capital expenditure (gross fixed capital formation in national accounts), related to some specific asset(s), which may take place in the first phase of the contract, to the appropriate institutional sector.

Although such contracts show specific features and may cover in practice various arrangements, some analogies could be found with Public-Private-Partnerships (PPPs).
The accounting rules developed for PPPs by Eurostat should be applied whenever an EPC could be assimilated to a PPP contract. It is to be underlined that, in order to be considered as a PPP, the capital expenditure should be at least 50% of the value of the assets, a percentage which might be difficult to reach in case of EPC contracts. Additionally, another condition for being considered a PPP is that the performance of the partner must be precisely measured.

In case the capital expenditure (gross fixed capital formation) undertaken by a specialised unit (the Energy Service Company - ESCO) would be allocated to the government unit owning the assets, the assets shall be recorded on government balance sheet. This would have an impact on government surplus/deficit (net lending/borrowing (B.9)) at the time when the capital expenditure is undertaken, while the financing of this expenditure will be included in government debt. The contract would be split between a capital procurement contract and a service contract.

However, under some very specific conditions, an EPC could potentially be assimilated to an operating lease and show therefore a different impact on government accounts


To read the full Guidance Note: