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.
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
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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
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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
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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
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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
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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!
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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
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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)
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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
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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
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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
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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. 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
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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.
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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
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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)
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21. Appendix
Jessica Bailey, Director C-PACE
Clean Energy Finance and Investment Authority
860.257.2888
Jessica.Bailey@ctcleanenergy.com
www.c-pace.com
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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. 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
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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
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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
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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
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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
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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
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