Financing E 2 and ARRA

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Darrell Elliott
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1 THE 2008 NATIONAL SYMPOSIUM ON MARKET TRANSFORMATION Efficiently Institutionalizing Institutional Efficiency Financing Financing E 2 and ARRA March 31, 2009 Presented by: Neil Zobler President Working in support of EPA ENERGY STAR s Program Catalyst Financial Group, Inc. Independent Financial Services Firm Design/Implement Financial Programs Energy & Water Traditional & Non-traditional Investment Banking Consulting & Training Domestic and International Incorporated

2 Catalyst Clients Include: Edison Electric Institute Excel Energy Consolidated Edison Co. of NY InterAmerican Development Bank National Grid (NEES & KeySpan) Pacific Gas & Electric Tennessee Valley Authority US EPA ENERGY STAR Financial Crisis! How is it Affecting E2 Projects? 2

3 Financial Crisis! US Banks Facing Liquidity Crisis Shorter Terms Lower Risk Tolerance otighter Credit Criteria olower Credit Limits High Rates to Borrowers Clients Limited Borrowing Capacity ohold onto Credit Lines Who is Lending? Try your Existing Bank Large National Banks Special Energy Groups Community Banks Leasing Companies Specialty Funds 3

4 Combining Funding Sources Commonly done Bonds, Internal Budgets, Leases, State and Local Funds, etc. No reason why you can t add the Stimulus Funds to the list Rethink your project Faster Paybacks = Financing Longer Payback = Stimulus Funds Financing leverages Labor Logos after the Crisis 4

5 Recognize this Symbol? We are paying for energy efficiency projects whether or not we do the projects! 5

energy conservation measures US DEPT OF HOUSING AND URBAN DEVELOPMENT an agreement with a private energy service company (ESCO) [that] will identify and

6 Energy Performance Contracting. Energy Performance Contracts Defined an innovative financing technique that uses cost savings from reduced energy consumption to repay the cost of installing energy conservation measures US DEPT OF HOUSING AND URBAN DEVELOPMENT an agreement with a private energy service company (ESCO) [that] will identify and evaluate energy-saving opportunities and then recommend a package of improvements to be paid for through savings. The ESCO will guarantee that savings meet or exceed annual payments to cover all project costs.if savings don t materialize, the ESCO pays the difference... - ENERGY SERVICES COALITION 6

7 Energy Performance Contract Defined Energy performance contracts are generally financing or operating leases provided by an Energy Service Company (ESCo) or equipment manufacturer. What distinguishes these contracts is that they provide a guarantee on energy savings from the installed retrofit measures, and they usually also offer a range of associated design, installation, and maintenance services. -US DOE An EPC is a method of implementation and project financing, whereby the operational savings from energy efficiency improvements is amortized over an agreed-upon repayment period through a tax-exempt lease purchase arrangement -NYSERDA An energy savings performance contract is an agreement between an energy services company (ESCO) and a building owner. The owner uses the energy cost savings to reimburse the ESCO and to pay off the loan that financed the energy conservation projects. -OREGON DEPT OF ENERGY Components of a Performance Contract Related but Independent Documents Project Development Agreement Energy Services Agreement Finance Agreement 7

8 Lease Financing. Leasing: Creative Financing Municipal Lease Tax Lease Tax Exempt Lease Purchase 8

9 Commercial vs. Municipal Commercial Leases (tax strategy) Long-term rental agreement w/ Purchase Option Capital vs. Operating (FASB 13) True (Tax) Municipal Leases (budget strategy) Conditional Sales Agreement Tax Exempt Rates (lower) Conditional Sales Agreements Renews yearly Not considered Debt in most states Non-Appropriation or Abatement Language Anatomy of a Financing 9

ENERGY STAR Tools and Resources Helping to Realize the Financial Benefits of Energy Improvements Financial Tools and Resources Portfolio Manager (on line) Statement of Energy Performance/Rating

10 ENERGY STAR Tools and Resources Helping to Realize the Financial Benefits of Energy Improvements Financial Tools and Resources Portfolio Manager (on line) Statement of Energy Performance/Rating Lenders Due Diligence Building Value Manager (Excel) Developed with BOMA Financial impact on office properties Financial Value Calculator (Excel) Public Companies Key Financial Metrics (profit margins, earnings per share & shareholder value) Cash Flow Opportunity Calculator (Excel) Cost of Delay All Sectors 10

11 Quantifying the COST OF DELAY What is the CFO Calculator? An energy efficiency financial decision- making tool, built on Microsoft Excel Instructions Four analysis spread sheets A summary report Helps quantifies the costs of delay. 11

12 What Does it Do? Addresses three critical questions about installing energy efficiency projects: 1. How much new energy efficiency equipment can be purchased from the anticipated savings? 2. Should this equipment purchase be financed now or is it better to wait and use cash from a future budget? (avoid paying interest) 3. Is money being lost by waiting for a lower interest rate? Energy Efficiency: A Cash Flow Opportunity 12

13 Data Entry Tab Investment Values Tab 13

14 Cash Flow Tab Interest Rate Tab 14

determine the actual size of your savings

15 Reminder An investment grade audit performed by a qualified engineering company will be required to determine the actual size of your savings opportunity. Cash Flow Opportunity Calculator 15

Cash Flow Opportunity Calculator www.energystar.

16 Cash Flow Opportunity Calculator Scroll down to Or, go directly to: Catalyst Contact Neil Zobler, President Catalyst Financial Group, Inc. (an EPA ENERGY STAR Subcontractor) 152 Deer Hill Ave., Suite 208 Danbury, CT

Catalyst Financial Group, Inc.

Catalyst Financial Group, Inc. Financing Energy Efficiency Projects February 23, 2011 Presented by: Neil Zobler President. Independent Financial Services Firm Incorporated 1992 ENERGY STAR Partner Design/Implement Financial Programs