Adrien Bullier
Senior Project Adviser
Executive Agency for Small and Medium-sized Enterprises (EASME)
Unit B1 Energy
EE-10: Mainstreaming energy efficiency finance
Challenge
Ø High risk premiums on energy efficiency due to lack of data
Ø High transaction costs
Ø Lack of standardisation prevents aggregation of assets and hampers refinancing by capital markets through securitisation
Ø Energy efficiency investments usually don't aim only at energy savings, but the associated benefits are not factored into financial models (property value, vacancy rates…)
Ø Energy efficiency needs to become as normal as a car loan!
The scopeProposals should address 1 or more of the following issues:
1. Frameworks for the standardisation and benchmarking of energy efficiency investments
2. Capacity building for banks and investors
3. Gathering, processing and disclosing large-scale data on actual financial performance of energy efficiency investments,
4. Further integration of non-energy benefits in project valuation, in particular in the building sector, leading to evolution of existing financial products or creation of new targeted products;
5. Targeting institutional investors (e.g. public pension schemes) in order to increase the share of their funds invested in energy efficiency
6. Exploring the impact of revised risk ratings and requirements for energy efficiency on financial regulations (Basel III, Solvency II).
The expected impact
Ø Number of financial institutions and other stakeholders reached as well as their potential volume of investment concerned;
Ø Frameworks, standardisation, benchmarking, standardised descriptions and data evidence of financial returns of energy efficiency investments agreed and accepted by the market;
Ø Higher allocation of institutional investments to energy efficiency; Ø Standardisation of assets enabling securitisation; Ø Development of a secondary market for energy efficiency assets (in
million Euro of investment within 5 years after the end of the project);
Ø Primary energy savings triggered by the project (in GWh/year);Ø Investments in sustainable energy triggered by the project (million
Euro).
Key features for a successful proposal
Ø Adequate analysis of the market needs and barriers to overcome
Ø Clear and detailed concept answering the real needs of market actors – a good idea is not enough!
Ø Engagement of market actors at proposal stage and during the whole duration of the action – in particular financial institutions
Ø Clear viability of the solution(s) envisaged
Projects selected under call 2017 – under Grant Agreement Preparation
Ø Designing a standardised protocol for reporting large scale technical and financial data on energy efficiency of mortgage assets and to make these data accessible to institutional real estate investors and lenders via a centralised portal
Ø Developing a tool that will allow investors in the commercial real estate sector to analyse the risks of stranded assets due to low energy performance and to reallocate investment into more energy efficient buildings
Ø Creating a framework and a toolkit to support non-state actors and specifically financial institutions, in framing their commitment to the Paris Agreement, setting targets and measuring and reporting their contribution to energy and climate goals.
Relevant projects examples
Ø Investor Confidence Project Europe / I3CP: • Replicates a US initiative in the EU• Increase investor confidence and reduce transaction costs through
standardisation • Joint development with the finance sector of protocols for process and data
management in building energy retrofit projects (ICPEU) and industry, street lighting and district heating (IC3CP)
Ø SEAF – Sustainable Energy Assessment Framework• IT based framework for valuation and benchmarking of smaller sized
sustainable energy projects (energy efficiency, demand response, distributed renewable generation etc.),
• reduction of transaction costs and risks and enhancement of bankability • enhance investors' confidence, through innovative and relevant asset
valuation methodologies accepted by the market and standardized descriptions of sustainable energy investments.
Relevant projects examples
Ø SEI Metrics (Sustainable Energy Investment Metrics)
• Develop an assessment toolbox that will enable to measure the performance of investors' portfolios vis-à-vis climate and energy scenarios.
• Create visibility on the market in order to monitor the impact of investment portfolios.
• Methodology is currently being tested by >70 institutional investorsØ ET RISK (Energy Transition Risk)
• Methodology to assess the risks associated to an Energy Transition scenario for institutional investors.
• Equity valuation models and credit risk models will be integrated into the products of mainstream service providers such as Standard & Poor's (part of the consortium).
Relevant projects examples
Ø EEMAP – Energy Efficiency Mortgage Action Plan• Investigating the effects of energy efficiency improvements on the
value of a home and the risks of default associated to a mortgage, and how this could result in lower interest rates and higher lending capacity for home energy renovations
Ø QualitEE• Establish 8 national quality certification frameworks for energy
efficiency services, and develop guidelines on EU-wide standardized criteria
Thank you! #H2020Energy
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Björn ZAPFEL
Project Adviser
Executive Agency for Small and Medium-sized Enterprises (EASME)
Unit B1 Energy
LC-SC3-EE-9-2018-2019
Innovative financing for energy efficiency investments
Challenge
• "Smart Financing for Smart Buildings" initiative• More effective use of public funding
• Aggregation and assistance for project development
• De-risking
• Innovative regional/national financing schemes• Adequate private finance supply for EE investments
• Maximised leverage ratio of private finance to public funds
• Development or replication and implementation of innovative financing schemes for EE investments• Various financing models/schemes
• Different organisation types/ownership structures
• Complementarity to already available funding
• Provision of finance and structuring of demand (regional/national level)
• Targeting specific areas (e.g. energy-intensive industries, buildings etc.)
• Tailored and innovative for the targeted regions and market segments
• Demonstration of market potential, as well as business case and financial viability(including investment sizes targeted, expected savings, transaction and management costs, expected returns etc.)
Scope
• Exemplary financing schemes• Dedicated credit lines
• Guarantee facilities
• Factoring/forfaiting schemes
• On-bill (e.g. utility-financed) or on-tax financing schemes
• Citizen financing (e.g. crowd-funding) for EE
• Models for deep renovation of buildings (property and rental market)
• Schemes for different industry sectors and cross-sectorial initiatives
• Solutions integrating existing market-based instruments relevant for EE(e.g. carbon finance instruments, including those under the EU ETS; EE obligations, incl. white certificates etc.)
• Schemes based on project aggregators/clearing houses at regional/national level (project development support; matching demand & supply of EE finance)
Scope (cont.)
• Set-up of new innovative, operational financing schemes
• Replication of previously successful solutions(e.g. developed/implemented under various PDA facilities, incl. ELENA of EIB)
• Establishment of regional/national aggregators able to develop large (standardized) project pipelines
• Creation of EU or regional/national energy efficiency investment roundtables/platforms to• Organise dialogue with and between the relevant stakeholders and
• Develop roadmaps
• Propose improvements in the legal frameworks
• Develop and validate template documents and contracts, leading to a better understanding of the market
Clear action plan to communicate across Europe towards potential replicators
Scope (cont.)
Expected Impact
Ø Depending on scope addressedØ Quantified indicators and targets, wherever possible
• Delivery of innovative financing schemes that are operational and ready to finance EE investments
• Regional/national aggregators with demonstrated/traceable capacity to set up large-scale pipeline of (standardized) sustainable energy investments (in terms of number of and/or amount of investment)
• EU or regional/national EE investment roundtables/platforms providing a comprehensive range of support and/or services to facilitate access to EE finance
• Primary energy savings triggered by the project (in GWh/year)
• Investments in sustainable energy triggered by the project (in million Euro)
• Additional positive effects (reduction of GHGs/air pollutants)
Relevant Horizon 2020 projects
CITYnvestØ Introduction of innovative financing schemes (revolving funds, EPC,
third party financing, cooperative models etc.)in 3 pilot regions (Belgium, Bulgaria, Spain)
Ø Analysis of models (opportunities and barriers)Ø Large-scale capacity building and training (for public authorities)Ø Web-based portal for practical guidance and match-making3
TrustEEØ Investment fund focused on industrial energy efficiencyØ Fund-internal guarantee facility to reduce risksØ Third Party Financing – institutional investors
Relevant Horizon 2020 projects (cont.)
Call 2017
Ø Energy savings insurance mechanism for SMEs combined with retention guarantees by technology providers and (simplified) independent validation/verification based on standardised contractual arrangement.
Ø On-tax financing mechanism for energy renovations linking debt to the property rather than to the owner and collecting debt repayment through property taxes.
Ø Capacity building activities and roll-out of operational innovative financing schemes (incl. energy performance contracting, crowdfunding and leasing) in Eastern Europe and Caucasus region
Project Development Assistance projectsØ EE-11: Aggregation - Project Development AssistanceØ IEE (Intelligent Energy – Europe) PDA projects:
https://ec.europa.eu/easme/en/project-development-assistance-pda
Ø Sufficiently clear, concrete and mature concept(e.g. financial solution(s) to be developed or tailored and replicated, sectors/investment types targeted etc.)
Ø Adequate market and barrier analysis
Ø Demonstrated response to real market needs and corresponding concrete (market) impact
Ø Clear economic/financial viability of the solution(s) envisaged
Ø Suitable addressing of market acceptance(e.g. involvement of and/or engagement strategies regarding key stakeholders and, in particular, financial sector actors)
Key proposal features
Thank you! #H2020Energy
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Céline TOUGERON
B.1.3 H2020 Energy - Public Authorities, Energy Services and Financing
EASME
EE11: Aggregation - Project Development Assistance
PDA in a nutshell
• Started in 2011 under the Intelligent Energy Europe programme and continued under H2020
• Build capacity and a project pipeline across Europe
• 32 projects funded triggering >€771m investments
LC-SC3-EE-11-2018-2019 (expected 2020): Aggregation - Project Development Assistance
What?§ Launch of concrete sustainable energy investment projects
§ Building technical, economic and legal expertise
Who?• Public and private project promoters (e.g. public authorities or their
groupings, public/private infrastructure operators and bodies, energy service companies, retail chains, large property owners and services/industry)
• Proposals from 1 single entity are eligible!
Sectors targeted?
• Existing public & private buildings including social housing
• Street lighting
• Water / Wastewater services
• Retrofiting of existing district heating/cooling
• Industry and services
• Urban Transport
Main features?
• Lead to investments launched before end of the action (i.e. signed contracts for sustainable energy investment – e.g. construction work, energy performance contract, turnkey contracts)
• Every million Euro of H2020 support should trigger investments worth at least EUR 15 million (1:15)
• Have an exemplary/showcase dimension in their ambition (i.e. reduced energy consumption and/or investment size)
• Deliver organisational innovation in financial engineering (e.g. on-bill financing schemes, guarantee funds, factoring funds) and/or mobilisation of investment programme (e.g. bundling, pooling, stakeholder engagement)
• Demonstrate high degree of replicability and include clear action plan to communicate experiences/results across EU towards potential replicators
• Build on the experiences from previous PDA
'Investment costs' refers to• Investments which are directly related to or required for energy savings
and/or renewable energy generation (“energy investment costs”)
• Other measures should not be included in the proposed investments
• For example in a building refurbishment: o energy costs could include changing windows, insulating the façade and painting it
after insulation,
o but not painting the hallways or changing the bath tub.
• Investment costs should include VAT only for entities which cannot reclaim it
Size of investment portfolio: EUR 7.5 million – EUR 50 millionLarge scale investment projects: see ELENA programme
Examples of activities
þ Creating capacity and demand at local level
þ Retrofit of public lighting
þ Retrofit of public buildings (EPC bundling)þ EPC in the rental social housing sector or multi-family housesþ One-Stop-shops, home renovation
Investment
Legal
TechnicalFinancial
Project Promoters
How to prepare a convincing proposal?
Organisational innovation• Innovation in the mobilisation of investment programme: bundling, pooling,
framework contracts, stakeholder engagement, community finance…
• Innovation in the financial engineering: alternatives to traditional financing (by public authorities: direct financing or subsidies)o Soft loans; Energy performance contracting (with third-party financing); Public ESCO’s;
Investment funds on energy efficiency (Jessica / ERDF…); on-bill or on-tax finance; or anything relevant!
• Innovation can also mean: new target sectors, higher levels of ambition (e.g. EPC’s for low-energy retrofitting of buildings)
• You should demonstrate sufficient project maturity (starting point)
• The final beneficiaries (signing the investment contracts) should be involved
Credibility
Implementation method: Procurement aspects
• Procurement is essential in most PDA projects: o Services (subcontractors) for the PDA, works or turnkey contracts (investments)
• Inform the market in advance – you will get more offers
• Prepare financing solutions in case of third-party financing: o Inform the banking and financial sector, Secure the participation of public financial institutions
(EIB, EEEF, EBRD…)
• Bundling projects and joint procurement: plan how you will work
• Guide on Innovation through Sustainable Procurement: www.smart-spp.eu/index.php?id=7633
Impacts: investments• Impact indicators: € invested (incl. leverage), saved energy, RES
production, capacity building
• Investments must be described with sufficient precision
• Clarify the evidence provided for the investments
Table 2.1a: Detailed description of the proposed investments
Investment sector: (please specify)
# Location (area, town…)
Type of investment Description of the investment
Quanti-‐fication
Total surface (m2)
Current energy consump-‐tion
Energy savings (%)
Renewable energy production (MWh/year)
Other quantifications
Payback time
Energy investment costs (thousands €)
1
2
…
Total/average
More information and help• EASME Energy Efficiency webpage: http://ec.europa.eu/easme/en/energy
• Public workshop on innovative financing for energy efficiency and renewables (28 April 2015): http://bit.ly/1Ohtl42
• Innovative financing for energy efficiency and renewables: feedback from successful projects (8 October 2014): http://bit.ly/1G7tMXC
• Innovative financing solutions: experiences from Intelligent Energy Europe projects (2-3 April 2014): http://bit.ly/1G9L9VQ
10 PDA projects• supported under Horizon 2020 since 2014
• 2014 PDA projects: http://europa.eu/!Mj83GK (EE-11-2014)
• 2015 PDA projects: http://europa.eu/!hX94qJ (EE-11-2015)
• 2016 PDA projects: http://europa.eu/!nd94rd (EE-22-2016)
22 MLEI projects• supported under Intelligent Energy Europe from 2011-2013
• https://ec.europa.eu/easme/sites/easme-site/files/mlei-projects-2011-12.pdf
For all questions:[email protected]
National Contact Points:http://ec.europa.eu/research/participants/portal/des
ktop/en/support/national_contact_points.html
Thank you! #H2020Energy
www.ec.europa.eu/research
@H2020EE
Christophe MILIN
Project Adviser
Executive Agency for Small and Medium-sized Enterprises (EASME)
Unit B1 Energy
LC-SC3-EE 2-2018-2019
Integrated home renovation services
LC-SC3-EE-2-2018-2019:"Integrated home renovation services"
• Why?- Many project promoters lack the skills and capacity to set up, implement and
finance ambitious sustainable energy projects
- In addition, many lack access to attractive and adequate financing products from the market
• How?- Create (or replicate) "integrated home renovation services", operational by the end
of the action
- Cover the whole "customer journey": from technical and social diagnosis, technical offer, contracting of works, structuring and provision of finance, to the monitoring of works and quality assurance.
- Create more demand for holistic approaches as a result of improved offer by trustful market operators and better awareness from homeowners
CSA100%
LC-SC3-EE-2-2018-2019:"Integrated home renovation services"
• What?- Optimise the services required along the renovation process
(based on a thorough analysis of the local needs and actors in place),
- Reduce renovation costs and time on-site through standardised approaches (e.g. optimized business processes, standardised contractual arrangements, branding of the proposed services, …),
- Mainstream innovative technical solutions adapted to the local context,
- Improve trust and awareness of homeowners towards such services,
- Help improve the legal and regulatory environments and
- Overall improve financing conditions for energy renovation.
• More information- Webinar on "Home Renovation": 21 November 2017 (11:00 – 12:30)
- see https://ec.europa.eu/energy/en/financing-energy-efficiency/sustainable-energy-investment-forums
Thank you! #H2020Energy
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Cooperation for refurbishment of municipal buildings in Limburg (B)
Context: the partners
• 838 050 inhabitants in 44 (small) cities and towns
• The province as a partner for the municipalities
• Limburg wants to be climate neutral
• All 44 cities and towns signed the COM in 2011
• The province is territorial coordinator for COM
• Infrax: public grid operator in Flanders
• Electricity, gas, cable and sewage
• Provincial consultancy for sustainable building
• Building and renovation advice
ESCOLIMBURG2020: our motive
• Building stock of Limburg local authorities was not
energy efficient
• Local authorities lacked expertise and/or means to
manage complex renovation projects
• Local authorities needed to set a good example
for own citizens
ESCOLIMBURG2020: the project• IEE - MLEI– PDA – Call 2012
• Duration: April 1, 2013 - March 31, 2017 (incl.prolongation)
• Accelerated realization of energy-efficient government buildings by investing EUR 19.8 million in energy saving measures (17% leverage)
• Starting point: the existing ESCO-service of Infrax
ESCOLIMBURG2020: our approach
• Development and implementation of an optimized
ESCO-model
• Investigation of alternative financial models
• Increasing the engagement of municipalities
• Capacity building of local authorities and building
sector
Feasibility studies (free)
Detailed studies(charged)
TenderingWorks supervisionPre-financing
Transfer andrepayment
Decision municipality
Decision municipality
Calculated savings, ‘unburdening’ and (pre)financing
But no real EPC
Municipality:- ESCO contract- List of buildings- Global ambition SEAP > Retrofit & Renewables Action Plan
policy dialogues
(in-house or by external engineering consultancy) ESCO process
Municipal projects(via ESCO)
€€€• Own financing• Own bank loans• Loan via Infrax
loans
Initial financing possibilities
(Pre-)Financing investments by Infrax• Deferred repayment of total amount after transfer• Deferred repayment in installments (~loan) (on balance sheet!)
Own financing or bank loan by municipality(on balance sheet!)
• Loan capacity?
Exploring alternative financial models
Feasibility study by KPMG
Two models were selected (and tested) • EPC light with sculpted financing
• Cooperation with public financial parties:
Green Investment Fund
public grid operator €€€
loan
Innovative financial models?EPC Light with sculpted financing
Municipal projects(via ESCO)Bank €€€
EPC Light:• Calculation energy savings = Repayment ‘loan’ • ‘Loan’ term max. 20 years and adaptable• Postcalculation (3 years) > Adaptation of repayment or ‘loan’ term• No real savings guarantee or contract• Only real energy investments (no other investments/maintenance)• On balance!
• Offered to municipalities on various occasions• No real success because: • Most Limburg municipalities lack a real cash flow issue• Due to the fall in commercial interest rates, municipalities seek funding on private finance market
• We continue offering EPC Light to municipalities with
cash flow issues and/or limited borrowing capacity
Innovative financial models?EPC Light with sculpted financing
Municipal projects (via Infrax ESCO!)
€€€
shares
public grid operator
Other projects
Green
Private bank(s)
NUHMAholding
equity
equity
loans
€€€
loansorleasing
loans
Innovative financial models?Green Investment Fund
ESCOFIN(Green Investment Fund)
loans
Limburg Climate FundMobilise ‘cheap’ money for municipal ESCO-projects by using existing Limburg Climate Fund:
• Cooperative fund (subordinated loans, shares, …)
• Create revenue for shareholders (1% > savings account)
• Founded 2012, approval by supervisory authority 2014
• Create involvement of citizens and organisations
• Put on hold for the time being, but can quickly be reactivated when
interest rate environment changes
www.limburgsklimaatfonds.be
Double-check assumptions before you start• Few Limburg municipalities have actual cash flow problems
• Many Limburg municipalities have subjective feeling of risk aversion because of:
– Uncertainty about impending cuts
– Uncertainty about changes in government financing
– Possible mergers of departments and municipalities
– Lack of knowledge and LT vision on patrimony
LESSONS LEARNED
Context and unexpected set backs can
undermine planning and good ideas
• Local elections
• Organizational restructuring
• Low interest rates making alternative financing
uncompetitive
• …
Keep this in mind and set realistic goals
LESSONS LEARNED
Persuasion is custom work:
take time to invest in relationships!
•Knowledge of whom to approach and with which arguments
•Knowledge of natural changes and urgent renovation needs
•Not only generates follow-up projects, but also creates ambassadors
Decision-making is not (always) rational!
LESSONS LEARNED
www.escolimburg2020.eu
Dirk [email protected], Trichterheideweg 8, 3500 Hasselt (Belgium)www.infrax.be
Ine [email protected], Centrum-Zuid 1111, 3530 Houthalen-Helchteren www.dubolimburg.be
Patrick [email protected] of Limburg, Universiteitslaan 1, 3500 Hasselt (Belgium)www.limburg.be
ESCOLimburg20201 april 2013 - 1 april 2017www.ESCOLimburg2020.eu
Björn ZAPFEL
Project Adviser
Executive Agency for Small and Medium-sized Enterprises (EASME)
Unit B1 Energy
LC-SC3-EE-17-2019
European City FacilityEuropean cities as key innovation hubs to unlock finance for energy efficiency
Challenge
• Cities and Communities key for energy transition• Tremendous potential for building substantial pipeline of investment
projects across Europe (energy efficiency and renewable energy)
• Aggregation of smaller projects into sizeable packages
• Mobilisation of significant amount of finance needed
• Barriers for tapping full potential• Lack of credible, robust and sufficiently mature investment concepts to
enable access to financing
• Missing capacity of public authorities to transform long-term strategies (e.g. SEAPs)
• Limited resources to access (financial and legal) expertise to:
• Collect additional data
• Design an investment programme of scale (e.g. pooling projects and/or bundling with neighbouring constituencies)
• Develop adequate finance strategies
Challenge
• Need for robust investment concepts• Clear identification of potential project pipeline,
based on (local) market/barrier analysis, sample energy audits etc.
• Analysis of local stakeholders controlling the project pipeline, incl. commitments (by asset owners) and engagement strategy
• Legal analysis (regional, national, international) to define available investment types and framework conditions, actual investment approach and structuring/timeline of investment steps (incl. e.g. public procurement or debt accounting rules)
• (Pre-feasibility) analysis of available financing solutions, incl. basic modelling of investment costs, transaction costs, expected (cost) savings and other revenues etc.
• Roadmap: basic process to launch investments, incl. work planning and resource allocation
Investment Concept
Draft project pipeline
Market/barrier analysis
Local actor analysis
Legal analysis
Finance pre-feasibility
Investment process
Investment Concept
Scope• Set up/operation of 'European City Facility'• Offering financial support and services to large
number of cities and municipalities (or groupings)
• To develop innovative investment concepts, covering:• Clear identification of potential project pipeline with
critical investment scale (e.g. pooling projects and/or bundling with neighbouring constituencies)
• Financing strategy and process to launch investments, considering different financing routes
• Legal and governance analysis etc.
• Within a limited period of time(e.g. 6-12 months)
• Via "cascade funding"(max. lump sum: EUR 60,000)
Mobilisation of investments(incl. combination with EFSI, ESIF, PDA, investment platforms)
Scope (cont.)
• Selection of intermediate to operate 'European City Facility'• Deep rooting in municipal sustainable energy planning and EE financing
• Ability to:• Mobilise critical mass of cities/municipalities (or groupings)
• Run large-scale support scheme in accordance with Horizon 2020 standards
• Select most cost-efficient and appropriate city/community applications
• Sound, inclusive outreach strategy regarding cities/communities across Europe
• Suitable concept to select, support and monitor city/municipality proposals, e.g.:
• Organisation of calls (e.g. cut-off dates, templates, evaluation criteria and procedure etc.)
• Form of support (e.g. lump sum, access to expertise etc.)
• Definition of output (e.g. standardised investment concepts responding to market needs)
• Duration and form of monitoring (incl. assessment)
Scope (cont.)
• Minimum content of city/municipality applications• Minimum 100,000 inhabitants covered (single city/municipality or grouping)
• Proof of political commitment
• Demonstration of additionality to existing planning processes and resources
• Investment sector(s) targeted
• Ambitious scale of potential investment(s) and level of energy savings(based on a politically approved SEAP, SECAP or similar plan)
• Type of financial solution(s) envisaged
• Plan to engage with representatives of the key segments and citizens
• Governance to develop the investment concept
• Plan for (long-term) capacity building within the public administration
• Commitment for monitoring for 2 years
Scope (cont.)
• Budget• Approx. EUR 10 million
• Min. 80% directly benefitting cities/municipalities (or groupings)
• 10% for common activities/services underpinning European added value
Expected impacts
• Number of investment concepts (overall and transformed into investments)
• Investments (in sustainable energy) triggered by public authorities
• Increased leveraging of finance into EE investments by public authorities
• At least EUR 20 million EE investments triggered for every million EUR of H2020 support (leverage 1:20)
• Primary energy savings, renewable energy production triggered
• Public staff with increased capacity to develop investible EE projects
• Innovation uptake by potential replicators
• Additional positive effects (e.g. reduction of GHGs and /or air pollutants)
LC-SC3-ES-8-2019
European Islands FacilityUnlock financing for energy transitions and supporting islands to develop investment concepts
Thank you! #H2020Energy
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