ENERGY STAR®®   Money for Your   Energy Upgrades         Upgrades An Introduction to Financing Energy Efficiency Upgrades ...
Today’s Discussion•	 Paying for Energy Efficiency with   Operating Budget Dollars•	 Tax Exempt Lease-Purchase   Agreements...
Public Sector Defined• Governments  – State  – County  – Local/Municipal  – Agencies• Schools  – K-12• Higher Education  –...
Private vs. Public Sector       • Approval Process     • Financial Instruments    • Authorization to Commit               ...
Private vs. Public Sector         • Budget Savings     • Maintenance Savings  • Environmental Improvements                ...
Public Sector FinancingGoals of Presentation:  – Change traditional thinking    about energy financing in the    public se...
Public Sector FinancingEnergy Optimization  – Focuses on decreasing energy cost    while increasing productivity  – Combin...
Energy Management StrategyThese guidelinesare the result of the“best practices”from top ENERGYSTAR partners.Put their expe...
“We are paying for  energy efficiency      projects   whether or notwe do the projects!”
Public Sector Financing           So…  where does the money    come from to pay for energy efficiency projects?
Accounting 101Capital Budget            Operating Budget (Debt)                    (Expense)•	 What is the approval   •	 A...
Categorizing Financial       Instruments• Capital         • Operating  Expense           Expense – Bonds            – Leas...
Categorizing Financial       Instruments• Capital         • Operating  Expense           Expense – Bonds            – Leas...
Performance Contracts        Leases          PCs         Loans
Performance Contracting  Market segment trends over time         for ESCO projects                          Source: Nation...
What is an ESCO?“An ESCO, or Energy Service Company, is    a business that develops, installs, and finances projects desig...
What Services Can An ESCo         Provide? •   Walk-through energy audit •   Comprehensive energy audit •   Design and spe...
What Services Can An ESCo         Provide? • Walk-through energy audit � Comprehensive energy audit � Design and specifica...
Common Performance Contracts • Shared Savings Agreement   • Fixed payment      • One-time verification      • Taxable or t...
Common Performance Contracts • Guaranteed Savings Agreement   – Can separate financing from technical     performance   – ...
Common Performance Contracts Related but Independent Documents   – Project Development Agreement   – Energy Services Agree...
Private Sector Financing          Leases             PCs           Loans
Why Companies Ask for“Off Balance Sheet Financing”? • No Capital Budget for Energy Project   – Freeze on Capital Spending ...
What Qualifies as“Off Balance Sheet Financing”?  • Operating Leases  • True Performance Contracts  • Rental Agreements  • ...
Tax-Exempt Lease-Purchase Agreements               Agreements     (AKA Municipal Leases)             Leases               ...
Benefits of Tax-ExemptLease-Purchase Agreements• Title to the Equipment Rests with Lessee• Access to Low Cost, Tax-Exempt ...
Tax-Exempt Lease-Purchase • Three Considerations   – Legal     • Authority     • Voter Approval Issues   – Financial Repor...
When Is 5% Not 5%?  Bond          LeasePlus Fees    Fees Included                              28
Tax-Exempt Lease-Purchase Financing                  by StateFew or no barriers    An Incomplete ListingCheck with advisor...
Quantifying the cost of Delay
Energy Efficiency:A Cash Flow Opportunity
A simplified general approach                        0                 Use existing data
The Value of Your Investment
The Value of Your Investment
Cash Flow
Cash Flow  $1,042,136   $883,170
Cost of Delay
Cost of DelayBreak-Even Point   2.2
Cost of DelayOpportunity Cost if delayed 12 months*   15.4%
Reminder   An investment grade audit done by a qualified engineering   company will be required to  determine the actual s...
How ENERGY STAR Can Help• Peer Information   • Similar situations that met with success   • Impact of sharing the benefits...
Internet PresentationsDistance Learning Opportunities–   ENERGY STAR -Overview for Public Sector Organizations–   Higher E...
Summary•	   Significant cost savings are possible from     energy efficiency projects•	   Many projects are delayed or pre...
For More Information...•	 Neil Zobler            (203) 790-4177  (Catalyst Financial Group, Inc.)•	 Catalyst Financial Gro...
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Self Guide Es Finance

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“We are paying for
energy efficiency
projects
whether or not
we do the projects!”

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Self Guide Es Finance

  1. 1. ENERGY STAR®® Money for Your Energy Upgrades Upgrades An Introduction to Financing Energy Efficiency Upgrades in the Public Sector
  2. 2. Today’s Discussion• Paying for Energy Efficiency with Operating Budget Dollars• Tax Exempt Lease-Purchase Agreements – the basics• Performance Contracts – the basics• Delaying the installation is an expen$ive decision
  3. 3. Public Sector Defined• Governments – State – County – Local/Municipal – Agencies• Schools – K-12• Higher Education – State Universities and Community Colleges – Private Colleges and Universities
  4. 4. Private vs. Public Sector • Approval Process • Financial Instruments • Authorization to Commit 4
  5. 5. Private vs. Public Sector • Budget Savings • Maintenance Savings • Environmental Improvements 5
  6. 6. Public Sector FinancingGoals of Presentation: – Change traditional thinking about energy financing in the public sector – Accelerate the installation of energy-efficient equipment
  7. 7. Public Sector FinancingEnergy Optimization – Focuses on decreasing energy cost while increasing productivity – Combines energy efficiency equipment with operational procedures that can transform energy bills into “cash flow opportunities”
  8. 8. Energy Management StrategyThese guidelinesare the result of the“best practices”from top ENERGYSTAR partners.Put their expertiseto work for yourorganization!
  9. 9. “We are paying for energy efficiency projects whether or notwe do the projects!”
  10. 10. Public Sector Financing So… where does the money come from to pay for energy efficiency projects?
  11. 11. Accounting 101Capital Budget Operating Budget (Debt) (Expense)• What is the approval • Already in utility process? payments – Board/Council • Easier approval process – Referendum • Energy efficiency• Ceiling on capital projects may provide expenses? access to captive funds for other needs• Restructure capital expense budget?
  12. 12. Categorizing Financial Instruments• Capital • Operating Expense Expense – Bonds – Lease/Lease- • GO Purchase • Revenue – “Performance – Loans Contract” – “Performance Contract” • No Expense • Grants • Rebates/Incentives
  13. 13. Categorizing Financial Instruments• Capital • Operating Expense Expense – Bonds – Lease/Lease- • GO Purchase • Revenue – “Performance – Loans Contract” – “Performance Contract” • No Expense • Grants • Rebates/Incentives
  14. 14. Performance Contracts Leases PCs Loans
  15. 15. Performance Contracting Market segment trends over time for ESCO projects Source: National Association of Energy Service Companies
  16. 16. What is an ESCO?“An ESCO, or Energy Service Company, is a business that develops, installs, and finances projects designed to improve theenergy efficiency and maintenance costs for facilities over a seven to 10 year time period. ESCOs generally act as project developers for a wide range of tasks andassume the technical and performance risk associated with the project.” www.naesco.org
  17. 17. What Services Can An ESCo Provide? • Walk-through energy audit • Comprehensive energy audit • Design and specification of new equipment • Vendor of energy efficiency equipment • Installation/construction management • Performance guarantees • Ongoing maintenance • Training of personnel • Measurement and verification of project performance • Financing • Indoor Air Quality problems • Procurement and purchase of energy commodity
  18. 18. What Services Can An ESCo Provide? • Walk-through energy audit � Comprehensive energy audit � Design and specification of new equipment � Vendor of energy efficiency equipment � Installation/construction management � Performance guarantees � Ongoing maintenance • Training of personnel • Measurement and verification of project performance • Financing • Indoor Air Quality problems • Procurement and purchase of energy commodity
  19. 19. Common Performance Contracts • Shared Savings Agreement • Fixed payment • One-time verification • Taxable or tax-exempt • Variable payment • Requires measuring and monitoring • More expensive
  20. 20. Common Performance Contracts • Guaranteed Savings Agreement – Can separate financing from technical performance – Most commonly used for Public Sector • Own-Operate – ESCo owns facility and sells back “output” • “Chauffage” – Buy end-result, i.e., lumens or ambient temperature
  21. 21. Common Performance Contracts Related but Independent Documents – Project Development Agreement – Energy Services Agreement – Finance Agreement
  22. 22. Private Sector Financing Leases PCs Loans
  23. 23. Why Companies Ask for“Off Balance Sheet Financing”? • No Capital Budget for Energy Project – Freeze on Capital Spending – Competing with Other Projects • Pay for Project from Operating Expenses – Cumbersome Capital Budget Process • Restrictions on New Debt – Internal Restrictions – Over-leveraged – Covenants with Existing Lenders
  24. 24. What Qualifies as“Off Balance Sheet Financing”? • Operating Leases • True Performance Contracts • Rental Agreements • “Project Financings” – Large Projects
  25. 25. Tax-Exempt Lease-Purchase Agreements Agreements (AKA Municipal Leases) Leases PCs Loans
  26. 26. Benefits of Tax-ExemptLease-Purchase Agreements• Title to the Equipment Rests with Lessee• Access to Low Cost, Tax-Exempt Funds• Payments may be Subject to Annual Appropriation of Funds by Lessee• Accommodates Construction Financing• Payments in arrears• You may already be leasing something! Fast and Easy!!!
  27. 27. Tax-Exempt Lease-Purchase • Three Considerations – Legal • Authority • Voter Approval Issues – Financial Reporting • GAAP/GASB – Internal Accounting • “Materiality”
  28. 28. When Is 5% Not 5%? Bond LeasePlus Fees Fees Included 28
  29. 29. Tax-Exempt Lease-Purchase Financing by StateFew or no barriers An Incomplete ListingCheck with advisors (for illustrative purposes only)Some legal issues
  30. 30. Quantifying the cost of Delay
  31. 31. Energy Efficiency:A Cash Flow Opportunity
  32. 32. A simplified general approach 0 Use existing data
  33. 33. The Value of Your Investment
  34. 34. The Value of Your Investment
  35. 35. Cash Flow
  36. 36. Cash Flow $1,042,136 $883,170
  37. 37. Cost of Delay
  38. 38. Cost of DelayBreak-Even Point 2.2
  39. 39. Cost of DelayOpportunity Cost if delayed 12 months* 15.4%
  40. 40. Reminder An investment grade audit done by a qualified engineering company will be required to determine the actual size of your opportunity.
  41. 41. How ENERGY STAR Can Help• Peer Information • Similar situations that met with success • Impact of sharing the benefits• Expert support with your financing process• Assist with presentations to decisionmakers
  42. 42. Internet PresentationsDistance Learning Opportunities– ENERGY STAR -Overview for Public Sector Organizations– Higher Education ENERGY STAR Overview– ENERGY STAR Overview for Service & Product Providers– Benchmarking with ES Portfolio Manager– Money for Your Energy Upgrades– Introduction to The CFO Calculator– Purchasing and Procurement– PC Power Management– Designing Top Energy Performing Building for Your Clients To register, please visit ENERGY STAR Online Trainings and Presentations www.energystar.gov
  43. 43. Summary• Significant cost savings are possible from energy efficiency projects• Many projects are delayed or prevented due to financial concerns• Third-party financing can provide funds for these projects• Delaying projects is expensive• ENERGY STAR can help identify third party financing that works for you
  44. 44. For More Information...• Neil Zobler (203) 790-4177 (Catalyst Financial Group, Inc.)• Catalyst Financial Group, Inc. is an EPA contractor working for ENERGY STAR• E-mail nzobler@catalyst-financial.com• Call the ENERGY STAR Hotline at 1-888-STAR-YES (1-888-782-7937)• Visit www.energystar.gov
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