NCPPP Connect. Energy Projects at Federal Facilities. July 29, Josh Evans Senior Director Bostonia Partners

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1 NCPPP Connect Energy Projects at Federal Facilities July 29, 2014 Josh Evans Senior Director Bostonia Partners

2 Bostonia Overview Bostonia Group (Bostonia) has completed over $10 billion of transactions in energy, real estate, and contract finance since 1998.The firm consistently ranks in the top ten among all banks for U.S. for domestic private placements. Bostonia Partners, the investment banking arm of Bostonia Group, specializes in financing federal, corporate, and institutional energy and real estate projects. Bostonia Global Securities, the broker/dealer arm of Bostonia Group, provides direct access to institutional investors through daily activity in the capital markets. Rank Bank Number of Deals Market Share 1 BAML 18, % 2 JPM 12, % 3 Wells Fargo 5, % 4 Citi 5, % 5 Morgan Stanley 3, % 6 US Bank 3, % 7 Mitsubishi 2, % 8 Barclays 2, % 9 Key Banc 2, % 10 Bostonia 1, % 11 Goldman 1, % 12 RBS 1, % 13 RBC % 14 Mesirow % 15 SunTrust % 16 Deutsche Bank % 2

3 Energy Savings Performance Contracts A partnership between a federal agency and an energy service company (ESCO). ESCO conducts audit to identify improvements to save energy. In consultation with federal agency, the ESCO designs, builds, finance, operate and maintains the project. ESCO guarantees improvements will generate energy cost savings to pay for the project over a 25 year period. After term, all savings accrue to the agency. 3

4 Asset Classes Have to Meet Three Criteria Is there a pipeline? 4

5 Asset Classes Have to Meet Three Criteria Is there a pipeline? Is the contract replicable? 5

6 Asset Classes Have to Meet Three Criteria Is there a pipeline? Is the contract replicable? Is the contract executed consistently? 6

7 Financing Risks and Mitigants Contract Risk Contractor Risk Risks Termination for Convenience Debt service offsets Construction/acceptance risk Performance Risk Mitigants Fixed termination schedule Very unlikely, conservative assumptions, debt service coverage, ESCO indemnification, Replacement of ESCO, payment & performance bonds, ESCO indemnification Typically operated by government or replacement of ESCO without contract termination Customer Risk Closure/Realignment Fixed termination schedule Timely payments Assignment of claims, Prompt Payment Act Project Risk Equipment Operation & Maintenance Measurement & Verification Proven technologies, guaranteed by ESCO Replacement of ESCO without contract termination, ESCO indemnification Conservative assumptions relative to savings; debt service coverage; indemnification by ESCO 7

8 Financing and Contracting Options PPA ESPC UESC Utilization: Power Purchase with secure fixed, long term pricing Achieve energy savings and ancillary benefits through installation of ECMs - may Include renewable energy Utilities provide energy improvement projects and demand reduction services Term: 10 years (EAB Part 41), DOD up to 30 years (10 USC 2922a) Up to 25 Years 10 years for DOD Up to 25 Years for Non- DOD PPA pricing may need to be higher than brown power ESCO provides savings and performance guarantees UESC, utility may provide projects on a streamlined basis. Key Considerations: Taxable entity required to own the project in order to utilize tax incentives Easement, site license, lease or EUL M&V is required Experience with ESA structure Renewable energy component may be subsidized by energy efficiency Partner with local servicing utility or gas company Savings and performance guarantees not required 8

9 Rates trend lower during first quarter Key Points Current 30-year UST of 3.43% is 72 bps below the 10-year average of 4.15% Current 30-year MMD of 3.36% is 81 bps below the 10-year average of 4.17% 30-Yr. Benchmark Taxable Rates 231 bps between the minimum and maximum Decrease of 97 bps since January 1, 2011 Max. = 4.77% Min. = 2.45% 1-year avg. = 3.66% Current = 3.43% 30-Yr. Benchmark Tax-Exempt Rates 261 bps between the minimum and maximum Decrease of 132 bps since January 1, 2011 Max. = 5.08% Min. = 2.47% 1-year avg. = 3.93% Current = 3.36% Current as of June 6, 2014 Source: Bloomberg, Thomson Reuters Markets Inc. The MMD data contained herein has been obtained from Thomson Reuters Markets Inc., which is the sole owner and copyrights holder of such data. Such data is subject to copyright protection. 2

10 Josh Evans Senior Director Direct This information has been prepared solely for information purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy. No representation or warranty can be given with respect to the accuracy or completeness of the information, or that any future offer of securities, if any, will conform to the terms hereof. Bostonia disclaims any and all liability relating to this information, including without limitation, any express or implied representations or warranties for, statements contained in, and omissions from, this information. 10