C-PACE: CEFIA’s Commercial
Efficiency Financing Product
Jessica Bailey, Director of C&I Programs, CEFIA
February 6, 2014
Washington, D.C.

Agenda

202.777.7700

• What’s the Situation?
• What’s the Complication?
• What’s the Resolution?
• What...
Washington, D.C.
202.777.7700
What’s the situation? From whose perspective?

Building Owner
Wants property value
to go up,...
Washington, D.C.

Barriers for building owners

202.777.7700

4
Washington, D.C.

What’s the Complication?

202.777.7700

• Repossessing collateral too difficult
– Means banks must give ...
Washington, D.C.

What’s the Resolution?

202.777.7700

• Somebody other than the owner funds most, if not all, of
the upf...
Washington, D.C.

Property Assessed Clean Energy
•

202.777.7700

An innovative financing structure that enables commercia...
Washington, D.C.

C-PACE addresses key barriers

202.777.7700

Near term plan to sell?

Tax obligation fixed to property

...
Washington, D.C.
202.777.7700
PACE is around the country, but little is happening

9
Connecticut Special Session

Washington, D.C.

Public Act 12-2 (June 2012)

202.777.7700

• Commercial, industrial & multi...
Washington, D.C.

Critical that CEFIA is central administrator

202.777.7700

• Under CT law, towns must sign up individua...
Washington, D.C.

CEFIA’s Role in C-PACE

Design
Program

Administer
Program

Attract
Private
Capital

202.777.7700

• Pub...
Washington, D.C.

The C-PACE Process

202.777.7700

• 1. Building owner engages
contractor to develop scope
of work; works...
Washington, D.C.

The C-PACE Process

202.777.7700

• 4. C-PACE alerts
municipality; lien is placed
on property
• 5. CEFIA...
Washington, D.C.

The C-PACE Process

202.777.7700

• 7. Owner remits payment to
municipality as benefit
assessment charge...
Washington, D.C.

CEFIA Sources Capital
Construction and Term
Financing from CEFIA
•

CEFIA authorized $40M short
term fac...
Washington, D.C.

CEFIA can sell-down loans to recycle funds

202.777.7700

• After CEFIA lends money to customers, it can...
Washington, D.C.

Setting C-PACE deal terms

202.777.7700

• Conversation with capital providers: 300-400 basis points
ove...
Washington, D.C.

What are the challenges

202.777.7700

• Need adequate staff for acquiring customers
• Educating state m...
Washington, D.C.

What have we learned

202.777.7700

• No substitute for senior lien
• Work with banks early on consent –...
Appendix

Jessica Bailey, Director C-PACE
Clean Energy Finance and Investment Authority
860.257.2888
Jessica.Bailey@ctclea...
Washington, D.C.
202.777.7700

C-PACE Timeline: 2012-13
June 2012

•

Public Act 12-2 signed by Governor, enabling C-PACE ...
Washington, D.C.

Case Study: Solar and Lighting Upgrade
Norwalk Shopping Center

202.777.7700

Project
▪ $550,000 exterio...
Washington, D.C.

Case Study: Energy Efficiency Upgrade
855 Main Street Bridgeport

202.777.7700

Project
▪ $1,990,000 ene...
Washington, D.C.

Case Study: Boiler Replacement
Bushnell Center for the Performing Arts

202.777.7700

Project
▪ $650,000...
Washington, D.C.

Case Study: Solar and Energy Efficiency Upgrade in
202.777.7700
Middletown
Project
▪ $2,535,766 includin...
Washington, D.C.

Case Study: Solar Project in Hartford

202.777.7700

Project
▪ $325,000 solar installation

Financing
▪ ...
Washington, D.C.

Deal Status

202.777.7700

FY 2014 (July through December)
Project Type Estimated Annual
Savings

Instal...
Green Bank Academy
Washington, DC February 6-7, 2014
www.greenbankacademy.com
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This presentation given by CEFIA's Director of Commercial and Industrial Programs gives an overview of C-PACE characteristics critical to a successful commercial energy efficiency program.

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Green Bank Products - Commercial Efficiency

  1. 1. C-PACE: CEFIA’s Commercial Efficiency Financing Product Jessica Bailey, Director of C&I Programs, CEFIA February 6, 2014
  2. 2. Washington, D.C. Agenda 202.777.7700 • What’s the Situation? • What’s the Complication? • What’s the Resolution? • What have we learned? 2
  3. 3. Washington, D.C. 202.777.7700 What’s the situation? From whose perspective? Building Owner Wants property value to go up, not focused on energy savings Building Tenant Wants to save electricity costs, but won’t invest to do it Green Banks Wants to reduce demand for energy to curtail GHG emissions Energy Efficiency Project Traditional Investors Offering short terms and high rates ESCO/Installer Installers limited by building owner’s lack of capital 3
  4. 4. Washington, D.C. Barriers for building owners 202.777.7700 4
  5. 5. Washington, D.C. What’s the Complication? 202.777.7700 • Repossessing collateral too difficult – Means banks must give unsecured loans – More like a credit card than a mortgage, short terms and high rates • Building owners change faster than payback • Owners want to leverage property as high as possible, paying for EE means more equity investment 5
  6. 6. Washington, D.C. What’s the Resolution? 202.777.7700 • Somebody other than the owner funds most, if not all, of the upfront cost • Property itself has to be part of collateral in order to have commercial entity fund any of the upfront cost • Pass a law that allows the building to be collateral for the loan = PACE 6
  7. 7. Washington, D.C. Property Assessed Clean Energy • 202.777.7700 An innovative financing structure that enables commercial, industrial, and multi-family property owners to access financing for qualified energy upgrades and repay through a benefit assessment on their property tax. Private capital provides 100% upfront, low-cost, long-term funding Repayment through property taxes A senior PACE lien is put on the property and stays regardless of ownership 7
  8. 8. Washington, D.C. C-PACE addresses key barriers 202.777.7700 Near term plan to sell? Tax obligation fixed to property Lack of funding? 100% upfront, 20 year financing Cannot assume more debt? Assessments may qualify as OPEX Insufficient payback/ROI? Positive cash flow in year 1 Split incentives? Assessment/savings pass to tenants Uncertain savings/technical expertise? Technical underwriting / SIR>1 8
  9. 9. Washington, D.C. 202.777.7700 PACE is around the country, but little is happening 9
  10. 10. Connecticut Special Session Washington, D.C. Public Act 12-2 (June 2012) 202.777.7700 • Commercial, industrial & multi-family property • Requires the consent of the existing mortgage lender • Requires SIR>1 • Single statewide program with CEFIA as named administrator • Renewable and energy efficiency – and soon micro grids! 10
  11. 11. Washington, D.C. Critical that CEFIA is central administrator 202.777.7700 • Under CT law, towns must sign up individually – nobody would do this except a green bank • Efficiency measures are low priority among real estate developers – need a specific institution dedicated to this • Need consistent underwriting standards – both financial and technical • Scale problem – no single developer can attract a commercial bank, green banks aggregate demand 11
  12. 12. Washington, D.C. CEFIA’s Role in C-PACE Design Program Administer Program Attract Private Capital 202.777.7700 • Publish Program Guidelines November 2012 • Bring on Technical Administrator • Onboard Municipalities • Launch website (www.c-pace.com) • Financial and Technical Underwriting • Marketing & Outreach • Work with Existing Mortgage Lenders • Qualify Capital Providers • Secure internal warehouse of capital to originate and finance deals • Sell-down portfolio (close Feb 2014) 12
  13. 13. Washington, D.C. The C-PACE Process 202.777.7700 • 1. Building owner engages contractor to develop scope of work; works with utilities (CEEF) to incorporate incentives • 2. Owner applies to CPACE program at www.cpace.com • 3. Third party review of technical and financial details 13
  14. 14. Washington, D.C. The C-PACE Process 202.777.7700 • 4. C-PACE alerts municipality; lien is placed on property • 5. CEFIA offers 100% upfront financing to owner • 6.Project commences 14
  15. 15. Washington, D.C. The C-PACE Process 202.777.7700 • 7. Owner remits payment to municipality as benefit assessment charge • 8. Municipality remits PACE assessment to CEFIA • 9. CEFIA “sells down” transaction to capital provider to replenish funds 15
  16. 16. Washington, D.C. CEFIA Sources Capital Construction and Term Financing from CEFIA • CEFIA authorized $40M short term facility for construction and term financing • Sells down transaction through bid process Qualified Capital Providers • CEFIA qualified 14 capital providers through a RFI. Owner Arranged Financing • Property owner is free to choose their capital provider from the private market. There is no government financing required. 202.777.7700
  17. 17. Washington, D.C. CEFIA can sell-down loans to recycle funds 202.777.7700 • After CEFIA lends money to customers, it can sell loans to replenish cash, increase scale • Avoid holding notes and tying up funds for long time • Bundle loans, sell in tranches • Recycling funds accelerates deployment Step 1: CEFIA lends to customers Step 2: CEFIA bundles loans Step 3: CEFIA sells loans, gets cash Step 4: CEFIA makes new loans 17
  18. 18. Washington, D.C. Setting C-PACE deal terms 202.777.7700 • Conversation with capital providers: 300-400 basis points over the relevant LIBOR swap (had to solve for 20 year rates) • Our initial rates (4.5% for 10 years ... 5.5% for 20 years) = 300bps over the amortizing 10 year LIBOR swap • Sell-down auction process last fall confirmed pricing • Adjusted our rates for late 2013/early 2014 based on an amortizing 10 year LIBOR and moved our range up 50 bps to 5.0% for 10 years ... 6.0% for 20 years. 18
  19. 19. Washington, D.C. What are the challenges 202.777.7700 • Need adequate staff for acquiring customers • Educating state mortgage industry about C-PACE, consent • Mandate to get dollars flowing means internal processes built in real-time 19
  20. 20. Washington, D.C. What have we learned 202.777.7700 • No substitute for senior lien • Work with banks early on consent – get creative • Need to be managed out of Green Bank • Green Bank needs to have $ to be taken seriously • Get deals done – proof of concept • Write the law that works for your state (ex: including water in Texas, resiliency in Florida) 20
  21. 21. Appendix Jessica Bailey, Director C-PACE Clean Energy Finance and Investment Authority 860.257.2888 Jessica.Bailey@ctcleanenergy.com www.c-pace.com 21
  22. 22. Washington, D.C. 202.777.7700 C-PACE Timeline: 2012-13 June 2012 • Public Act 12-2 signed by Governor, enabling C-PACE financing in CT Sept 2012 • Bridgeport & Norwalk become first 2 municipalities to opt into program Dec 2012 • Qualified capital providers join C-PACE Jan 2013 • C-PACE program launches; website & application go live Feb 2013 • CEFIA Board approves $20M warehouse Mar 2013 • C-PACE program trains 150+ contractors Apr 2013 • First C-PACE project closes Aug 2013 • CEFIA releases details for capital providers to sell the initial portfolio Sept 2013 • • C-PACE total approved deals reach $20M CEFIA approves increase of warehouse to $40M Nov 2013 • Capital provider selected to purchase first $27M of C-PACE transactions. Closing anticipated 2/14 Dec 2013 • 70 towns and 80% of C&I market eligible for C-PACE in CT
  23. 23. Washington, D.C. Case Study: Solar and Lighting Upgrade Norwalk Shopping Center 202.777.7700 Project ▪ $550,000 exterior LED lighting upgrade and solar parking canopy. Financing ▪ $185,000 of lighting upgrade financed through 13 year C-PACE assessment. CEFIA providing construction financing. ▪ $365,000 solar parking canopy received a ZREC ▪ Savings of $55,000 plus 30% ITC Impact ▪ 741k kBTUs saved ▪ Produces 5.8M kWh in clean energy 23
  24. 24. Washington, D.C. Case Study: Energy Efficiency Upgrade 855 Main Street Bridgeport 202.777.7700 Project ▪ $1,990,000 energy efficiency measures, ranging from the installation of variable frequency drives to chiller replacements to new energy efficient windows to new cooling towers. Financing ▪ Save owners $241k per year versus $166k in annual C-PACE assessment. Net savings of $80k. Impact ▪ 133M kBTUs saved over life of project 24
  25. 25. Washington, D.C. Case Study: Boiler Replacement Bushnell Center for the Performing Arts 202.777.7700 Project ▪ $650,000 boiler replacement Financing ▪ $384,000 of replacement financed through 20 year C-PACE assessment. ▪ $250,000 covered with grant from Department of Economic and Community Development. Impact ▪ Annual savings of $48,000 25
  26. 26. Washington, D.C. Case Study: Solar and Energy Efficiency Upgrade in 202.777.7700 Middletown Project ▪ $2,535,766 including – the installation of air units, variable frequency drives, high efficiency lights, occupancy sensors, air leakage improvements, an upgraded energy management system, – and a 260 kW ground-mounted photovoltaic system. Financing ▪ Energy savings of $224,272 annually Impact ▪ 51M kBTUs saved ▪ 8.5M kWh clean energy produced 26
  27. 27. Washington, D.C. Case Study: Solar Project in Hartford 202.777.7700 Project ▪ $325,000 solar installation Financing ▪ ZREC award of $164.22 / MWh from CL&P, ▪ With ZREC and energy savings, owner expected to see revenue of $49,916 per year Impact ▪ 2,8M kWh clean energy produced 27
  28. 28. Washington, D.C. Deal Status 202.777.7700 FY 2014 (July through December) Project Type Estimated Annual Savings Installed Capacity Amount Financed Financing Terms Building Size 55 kW 100 kW 260 kW --71 kW 5.5% for 20 years 5.5% for 20 years 5.5% for 20 years 5.5% for 18 years 5.5% for 20 years 5.5% for 20 years 5.5% for 20 years 5.5% for 20 years 5.5% for 20 years 5.5% for 20 years 5.5% for 20 years 5.5% for 20 years 5.5% for 14 years 34,500 sqft 40,000 sqft 81,368 sqft 42,456 sqft 100,000 sqft 20,000 sqft 165,000 sqft 25,000 sqft 17,107 sqft 110,000 sqft 50,000 sqft 459,292 sqft 53,577 sqft 1,148,300 sqft 5.5% for 20 years 5.5% for 20 years 5.5% for 15 years 5.7% for 17 years 6% for 20 years 5% for 10 years 5.5% for 20 years 5.5% for 20 years 5.5% for 20 years 5.5% for 15 years 38,000 sqft 30,000 sqft 65,000 sqft 40,000 sqft 29,290 sqft 36,000 sqft 30,000 sqft 60,000 sqft 50,000 sqft 55,000 sqft 433,290 sqft Closed 41 Walnut Street 1841 Broad Street 100 Roscommon 86 Hopmeadow 855 Main Street 228 Route 81 80 Lamberton Larsen Ace Hardware Danbury YMCA Insports Trumbull NPB Assets Norwich 290 Pratt 22 Waterville Road Avon CLOSED TOTAL - 13 Renewable Renewable Both Energy Efficiency Energy Efficiency Renewable Both Renewable Energy Efficiency Both Renewable Energy Efficiency Energy Efficiency 221 MMBtu/yr 491 MMBtu/yr 3,339 MMBtu/yr 1,021 MMBtu/yr 6,650 MMBtu/yr 275 MMBtu/yr 5,965 MMBtu/yr 188 MMBtu/yr 929 MMBtu/yr 1,160 MMBtu/yr 367 MMBtu/yr 7,123 MMBtu/yr 2,361 MMBtu/yr 30,090 MMBtu/yr 45 kW -252 kW 150 kW --933 kW $145,000 $325,000 $2,513,915 $674,566 $1,992,683 $259,000 $1,818,486 $148,500 $87,938 $1,001,298 $350,000 $1,790,847 $419,346 $11,526,578 Both Renewable Renewable Energy Efficiency Both Renewable Renewable Renewable Renewable Energy Efficiency 489 MMBtu/yr 883 MMBtu/yr 2,038 MMBtu/yr 1,311 MMBtu/yr 1,207 MMBtu/yr 517 MMBtu/yr 1,019 MMBtu/yr 982 MMBtu/yr 467 MMBtu/yr 836 MMBtu/yr 9,749 MMBtu/yr -200 kW 500 kW -206 kW 157 kW 250 kW 250 kW 122 kW -1,685 kW $372,466 $850,000 $1,500,000 $517,590 $829,399 $478,000 $750,000 $750,000 $386,345 $410,009 $6,843,809 39,839 MMBtu/yr 2,618 kW $18,370,387 Approved Meriden YMCA Quality Inn Bourdon Forge 255 Bank Street 1095 Dayhill Road Shagbark Sofia East Windsor Sofia East Windsor Signature Advertising Bridgeport International Academy APPROVED TOTAL - 10 CLOSED AND APPROVED TOTAL - 23 1,581,590 sqft 28
  29. 29. Green Bank Academy Washington, DC February 6-7, 2014 www.greenbankacademy.com

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