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Com service prod-#7388680-v1-financing_your_retrofit_25_july_2012


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Com service prod-#7388680-v1-financing_your_retrofit_25_july_2012

  1. 1. City of Melbourne Financing your retrofitScott Bocskay, Chief Executive Sustainable Melbourne Fund 25 July 2012
  2. 2. Sustainable Melbourne Fund–  Wholly owned, independent trust established by Melbourne City Council in 2002 with an investment of $5 million - currently a $6.4 million fund–  Expertise in energy efficiency, renewable energy and project management and delivery–  We have two distinct roles 1.  Through our investment program provide loans of up to $500,000 for up to 6 years; $8.1 million invested in energy generation, water savings and energy efficiency projects since inception 2.  Administer environmental upgrade finance on behalf of the City of Melbourne
  3. 3. Council drivers–  To retrofit 2/3rds of the City of Melbourne’s commercial office–  38% reduction in energy use in commercial buildings with 383 kilotonnes of CO2-e and five gigalitres annual savings–  Drives investment at an accelerated pace – $2 billion in retrofit activity–  Strengthens community through job creation – 8,000 new jobs
  4. 4. What is environmental upgrade finance?
  5. 5. How the process works
  6. 6. Key Features–  ‘Super’ senior –senior to existing mortgages (do not interfere with existing creditors rights)–  Charge attached to property - Finance not registered on title, rather is a council ‘special rate or charge’ and remains with the property – multiple charges can exist–  Tenant Pass Through – EUC’s are council statutory charge, can be passed through under triple net leases by agreement–  Local Government rights unfettered – The EUC’s are only payable to lenders upon receipt–  Voluntary – The EUC’s are voluntarily entered into by the parties to the EUADesign Principles to Projects–  Must deliver energy, greenhouse or water savings–  “Nailed down”–charge and benefits to remain with building the improvements also remain with the building–  Recognise long flat tail of technology performance and encourage innovation–  Real opportunity lay in working with tenants to deliver comprehensive projects and new cash flows
  7. 7. Role of Sustainable Melbourne Fund –  Work in partnership with City of Melbourne to set up the project underwriting criteria, program guidelines and application processes of the environmental upgrade finance mechanism –  Third party administrator - Assess and process project applications on behalf of City of Melbourne –  Work with financiers to the program to make their products available to customers –  Fee for service model – user pays, as benefits accrue to building owner and occupiers
  8. 8. Environmental upgrade agreements - economics
  9. 9. Environmental upgrade agreement economics- Building Owner Providing Building Owners real benefit EUA DEBT Total Initial Project Costs Total Initial Project CostsDescription Cost Description CostBase Building Improvement measures $ 817,600 Base Building Improvement measures $ 817,600Tenant Improvement measures $ 499,827 Tenant Improvement measures $ -Project fees $ 105,000 Project fees $ 60,000VEET Incentive -$ 59,979 VEET Incentive $ -Total Anticipated Cost $ 1,362,448 Total Anticipated Cost (+/- 15%) $ 877,600 Building owner Benefit Building owner BenefitAnticipated Annual EUC (10yr, 7.5% Anticipated Annual debt Payment (3yrs, P&I) -$194,879.78 8% P&I) -$330,010Anticipated receipts from tenants $ 195,222 Anticipated receipts from tenants $ -Net cash position of Building owner $ 343 Net cash position of Building owner -$ 330,010
  10. 10. Environmental upgrade agreement economics- TenantProviding tenants with an energy price hedge Fixed cost Variable costs
  11. 11. Environmental upgrade agreement economics- TenantProviding tenants with an energy price hedge Year Ending 2012 2013 2014 Expenditure Pre retrofit EUC Payment to Owner $ - $ - $ - TLP Energy Bills $ 393,108 $ 432,419 $ 475,660 Tenant outgoings $ 396,933 $ 436,627 $ 480,289 Total Expenditure $ 790,041 $ 869,045 $ 955,950 Expenditure post retrofit EUC Payment to Owner $ 195,222 $ 195,222 $ 195,222 TLP Energy Bills $ 309,435 $ 340,378 $ 374,416 Tenant outgoings $ 277,853 $ 305,639 $ 336,203 Total Expenditure $ 782,511 $ 841,239 $ 905,841 Net Position $ 7,531 $ 27,806 $ 50,109
  12. 12. 460 Collins Street, Melbourne–  $400,000 project–  Installation of high efficiency chiller unit and building management system upgrade–  Aims to cut annual CO2-e emissions by approximately 170 tonnes
  13. 13. 123 Queen Street, Melbourne–  $1.3 million project–  Installation of trigeneration system, occupancy sensors and double glazing–  Aims to cut annual CO2-e emissions by approximately 2500 tonnes–  First privately funded environmental upgrade agreement through the National Australia Bank (NAB)
  14. 14. Kings Business Park precinct, South Melbourne–  $3.4 million project–  Installation of high efficiency chiller units, cooling towers, lighting system upgrades, heating and air conditioning units and controls–  Aims to cut annual CO2-e emissions by approximately 2600 tonnes
  15. 15. Updated Victorian Legislation –  Bill passed to correct unintended consequences of drafting matters –  Enables property portfolio’s who’s debt is secured by multiple buildings to partake –  Came into effect at July 1st 2012 –  Applies to a large amount of NLA within Melbourne
  16. 16. Thank You Scott Bocskay, Chief Executive Sustainable Melbourne +61 3 9658 8666