Performance based Contracting an Overview

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Performance based Contractingan Overview
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Meeting Agenda

• Introductions
• Meeting Objective
• Todays Market Drivers
• Overview of EPC
• (Energy Performance Contracting)
• Next Steps?

Bob Mewis Business Development Manager
Energy Solutions
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Drivers

• Climate change
• CRC
• National indicators
• Council finances
• Reducing income
• Long term energy price forecasts 17 by 2020
• Availability of capital funding

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Energy Performance Contracting

• An EPC program is designed to enable the
  redirection of existing financial resources to
  achieve strategic environmental and energy
  objectives.
• Energy spend is reduced, pressures on existing
  budgets are eased and carbon energy targets
  achieved by optimised operational performance.
• The programme is a long term self funding
  spend-to-save programme and performance is
  underwritten by the ESCO.

The search for that elusive funding solution is
over EPC delivers
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Maintaining Safe, Secure Energy Efficient
Facilities
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The current situation - why do you need EPC?
EPC is targeted to primarily capture the larger
and longer term 5 -15 year opportunities that
current funding streams do not address
You are positioned here?
Salix funding is available to pick off the low
hanging fruit. However harvesting these projects
alone will not meet long term targets. It could
even restrict future opportunity.
Honeywell EPC
EPC delivers the step up your team needs to break
through that glass ceiling
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Avoid Cream Skimming

• Cream skimming is the uncontrolled yet
  encouraged practice of investing in high impact
  carbon saving projects with relatively low
  initial costs and quick paybacks. While such
  investments are attractive in the short term,
  pursuing them may prevent an Authority from
  capturing more significant long-term benefits
  that are likely to result from more extensive and
  capital intensive retrofits. By emphasizing
  short-term paybacks, cream skimming weakens an
  Authorities ability to finance more capital
  intensive improvements that leverage the value of
  those short-term paybacks.
• A holistic approach to whole estate asset
  management is required. Only apply short term
  measures when an asset has no long term future.

EPC opens the door for you to formulate a long
term strategy
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The cost of Diminishing Returns
Expectations starting here will be achieved at an
optimised cost VFM
Traditional approaches lead to protracted
negotiations, high overall cost and poor VFM
Incremental certainty
value of improved certainty gt cost of improved
MV
Balance point of diminishing returns
Value of information
Cost of incremental MV
Cost
How Much Compliance MV is Enough?
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How the Process Works
Step1
Step 2
Step 3
Step 4
Step 5
T12 -18 months
T 18 months
T6-9 months
T9-12 months
Today- 6 months
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Critical Requirements

• High level sponsorship
• Leader of the Council
• Chief Executive
• Director of Resources (finance)
• Financial viability
• Establish during the discovery stage
• Simple desktop audit
• Opportunity review in key buildings
• Procurement, Procurement, Procurement
• Selection driven by results not price
• CD process
• Framework partner not a specific project
• Law of diminishing returns
• Due diligence is necessary
• Excessive compliance and 3rd party expert
  involvement is not

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Advantages of EPC

• Long Term
• Enables a holistic view of estate strategy based
  on a whole useful life cost of asset ownership
  basis
• Accountability
• ESCO is single source of responsibility
• Risk Reduction
• Guaranteed min level of performance (inc.
  savings)
• Overcomes capital restrictions
• EPC is a prudent investment affordable and
  sustainable
• EPC can be off balance sheet
• EPC solutions can allay elected members borrowing
  concerns
• Levelised cash flow
• Payment can be structured to match allocated
  revenue income (predicted savings)

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• Thank you!

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Typical Building ECMs

• Boiler Upgrades
• Combined Heat Power
• Absorption Cooling
• Chiller Replacement
• Building Management Systems
• VSD Motor Control
• Ventilation Fans
• High Efficiency Motors

• Power Factor Correction
• Lighting Replacement
• Lighting Control Systems
• Air Recirculation
• Damper Control
• Heat Pumps
• Heat Recovery and Wheels

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Additional Technologies

• Tri-Generation (CHP Absorption Cooling)
• Solar (Heating Photovoltaic)
• Small Scale Wind Turbine
• Rainwater Harvesting
• Green Roofs
• LED lighting
• Biomass
• Ground Source Heat Pumps
• River Water Cooling
• Landfill Gas Utilisation
• Chilled water / Ice storage
• Anaerobic digesters
• Energy Cockpit

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EPC its a 5 stage process
Preliminary audit of a small number of
representative schools
LOI
Invitation to shortlisted bidders to enter
Dialogue
Procurement preparation
IGP Financing
Final tenders
PQQ publication, submissions evaluation
Call-off contract signed
Sign contract (single supplier framework)
Reduce to two bidders
Discovery
Prequalification
Initial Assessment
Final Tender
IGAs Installation

• Energy Saving Guarantee
• Maintenance
• Measurement Verification service

Evaluation clarification
Install energy saving measures
OJEU Noticeissued
Initial qualification process interview
presentation
Select one ESCO
IGA detailed design
Competitive Dialogue
A compliant procurement process