Project Financing

1
Project Financing

• Harold Meyer Ameresco - Business Development
  Manager
• Kimberly Albertson Ameresco - Finance Manager
• Gunner Broadwick CitiCapital - Senior District
  Manager

2
ESCo is Single-Source Provider
3
Financing Options

• Performance Contracting allows Municipalities to
  procure energy infrastructure projects without
  the need for any capital
• Repayment of all costs over time and based on
  on-going energy savings
• ESCo typically handles financing component just
  as it would all other facets of turnkey project

4
Financing Instruments

• Loan
• Bond
• Lease
• ESCo arranges financing between Municipality and
  3rd party lender
• Separate financing allows much lower cost of
  financing due to Tax-Exempt status of
  municipality
• Total project cost repayment covered by energy
  savings which are guaranteed by ESCo

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Municipal Lease is most popular

• Repayment treated as an annual operating expense
  as is utilities expense
• Voter referendum is not required
• Lease payments are not considered debt due to
  Non-Appropriation Provision
• No effect on municipalitys debt ceiling
  limits/borrowing limits
• Tax-exempt interest rates are low
• No transaction costs
• Quick process 30-45 days
• Municipality takes immediate title to new
  equipment
• Lender is granted security interest on the
  equipment
•  

6
Financing Process

• Financing should occur in sync with the auditing
  and finalizing of the performance contract
• Credit review
• Structure/Documentation
• Draw schedule construction term, repayment term,
  rebates, finalize financed amount
• Develop Financing RFP to competitively select a
  Lender jointly with Municipality
• Rate basis/index or Rate lock/hold
• Escrow agent/fees
• Security requirements
• Prepayment provisions
• Closing date
• Other terms and conditions

7
Financing Package

• 3 years financial statements
• Current budget
• Outstanding ratings
• Demographics
• Investment-Grade Energy Audit
• Energy Services Agreement

8
Lenders Perspective

• Evaluating the Project
• Essential use of the equipment
• Projected savings to debt service ratio
• Experience and Financial Strength of ESCo
• ESCo Guarantee for term of project
• Maintaining the equipment
• Construction Performance Payment Bonds

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Typical Municipal Lease Structure

• Installment Purchase Agreement for state and
  local governments and political subdivisions to
  purchase equipment
• Periodic principal and interest payments made
  over a specific period of time, matching the
  useful life of the asset
• Full Ownership at end of the lease, usually 1.00
  payout at the end
• Net Lease, Lessee is responsible for all
  maintenance, insurance and applicable taxes

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Financing Scenario
Baseline Cost Oil Bill 205,011 Gas
Bill 25,355 Electric Bill 165,040
Water Sewer Bill 53,881
Total Base Bill 449,287 Savings Oil
Savings 20 41,002 Gas Savings 15
3,803 Electric Savings 25 41,260 Water/Sewer
Savings 30 16,164 Total Savings 102,230
Financing Term 10 Years Interest
Rate 4.50 Capital Potential 808,917
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Capital Investment
Potential Cost Buydowns
ESCo will seek out all available financial
rebates and incentives on behalf of the
customer Electric and Gas utility company
conservation programs Massachusetts Technology
Collaborative - Massachusetts Renewable Energy
Trust Emission Credits US EPA and Mass DEP -
New efficient equipment reduces power plant
emissions - Clean Air Act provides economic
incentives