Financial

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Financial Economic Consulting for Government
Contract Financing
Making the Most Out of Compact Covenant Payment
Streams
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• HA Advisory Services advises government and
  corporate clients on how to use multiyear Federal
  funding to acquire critical infrastructure needs.
  HA Advisory Services is an affiliate of Hannon
  Armstrong Capital, which for over 25 years has
  provided financing for government infrastructure
  projects. This experience has given us highly
  sophisticated expertise in
• Feasibility Studies
• Life cycle cost / benefit analysis
• Business case analysis
• Analysis of alternatives
• Legal regulatory procurement analysis

Hannon Armstrong has financed projects for
virtually every Federal civilian agency as well
as every Service of the Department of Defense.
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Portfolio of Federal Performance Contracts
Hannon Armstrong Finances Federal Transactions
Across the U.S. and Worldwide
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Economic Advantages of Contract Financing over
the Status Quo
Before
Project
During
After
Implemented
Project
Project
Excess Savings
Excess Savings
Debt Service
Energy, Overhead, Operations and Maintenance Costs
Energy, Overhead, Operations and Maintenance Costs
Energy, Overhead, Operations and Maintenance Costs
In 1987 Hannon Armstrong was the first to use
private capital to construct a US Government
energy asset, investing 100 of the funds for a
cogeneration plant for the Department of Energys
Energy Technology Engineering Center operated
by Rockwell.
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Bundled Solutions Contract Description While
equipment and service acquisition contracts are
distinct categories, in practice there is often a
huge overlap contracts where the contractor
provides a solution that encompasses a mix of
equipment and services. The Government
pays for the solution over time, so long as the
need exists. The contractor must amortize its
upfront investment within this period, subject to
Government termination, non-renewal and
appropriations risk.
Service
Equipment
The overlap, where the Government does not
acquire equipment, but receives the beneficial
use of equipment as part of a solutions contract
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How it Works
Agreement to Buy Goods or Services
Delivery of Goods or Services
Annual Payments upon Completion
Delivery of Completed System On-Going
Operations Maintenance
Compliance with Department of Interior Terms and
Conditions
Upfront Funding
Sub-System Deliveries
LOCAL CONTRACTORS AND SUPPLIERS
Sub-Contracts
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How it Works
Agreement to Buy Goods or Services
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How it Works
Agreement to Buy Goods or Services
Upfront Funding
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How it Works
Agreement to Buy Goods or Services
Upfront Funding
LOCAL CONTRACTORS AND SUPPLIERS
Sub-Contracts
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How it Works
Agreement to Buy Goods or Services
Upfront Funding
Sub-System Deliveries
LOCAL CONTRACTORS AND SUPPLIERS
Sub-Contracts
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How it Works
Agreement to Buy Goods or Services
Delivery of Completed System On-Going
Operations Maintenance
Upfront Funding
Sub-System Deliveries
LOCAL CONTRACTORS AND SUPPLIERS
Sub-Contracts
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How it Works
Agreement to Buy Goods or Services
Delivery of Goods or Services
Delivery of Completed System On-Going
Operations Maintenance
Upfront Funding
Sub-System Deliveries
LOCAL CONTRACTORS AND SUPPLIERS
Sub-Contracts
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How it Works
Agreement to Buy Goods or Services
Delivery of Goods or Services
Delivery of Completed System On-Going
Operations Maintenance
Compliance with Department of Interior Terms and
Conditions
Upfront Funding
Sub-System Deliveries
LOCAL CONTRACTORS AND SUPPLIERS
Sub-Contracts
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How it Works
Agreement to Buy Goods or Services
Delivery of Goods or Services
Annual Payments upon Completion
Delivery of Completed System On-Going
Operations Maintenance
Compliance with Department of Interior Terms and
Conditions
Upfront Funding
Sub-System Deliveries
LOCAL CONTRACTORS AND SUPPLIERS
Sub-Contracts
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Case Study How the Federal Government Upgraded
Capability and Saved 140 Million Using
Alternative Financing
The Problem U.S. Government collects
time-critical information from numerous
polar-orbit satellites at a unique and remote
location above the Arctic Circle. Once collected
at the remote location, the information had to be
re-transmitted to the U.S. through other
geo-synchronous satellites, which was expensive,
slow and unreliable. NASA, NOAA and USAF agreed
that the solution was the installation of a 1,300
kilometer fiber-optic cable connecting the remote
Arctic Ocean island with the European
mainland. However, this solution had a barrier
there were no capital appropriations to implement
the 40 million project only 10 million in
annual operating funds to purchase satellite time.
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Case Study Economics

• The Solution
• Convert budgeted operating dollars into a stream
  of payments that could support the 40 million
  upfront capital investment required to implement
  the service contract.
• 2004 2005 2006 . 2025
• Budgeted Operating Payments 6m 10m
  10m . 10m
• Total Projected Payments 200m
• System Cost (paid over 5 years) 40m
• Net Savings (years 6 thru 25) Approx 140m

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Case Study Structure
Service Contract
Installation Contract
Assigned Payments over 5 Years
40 million Funding
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Case Study Results
Federal Government realizes substantial budget
savings while receiving the benefits of a vastly
improved information system. Specifically, the
fiber-optic system is Faster -- 12 times
faster Better -- No bi-annual sun outages and
other atmospheric effects Cheaper -- Saves 140
Million for the U.S. Taxpayer
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Federal Agencies
Dept of Navy
Dept of Energy
Dept of Army
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Major Federal IT Telecommunications Clients
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Contact Gerald S. Koenig Managing
Director Office [phone] Mobile (703)
725-4002 email gkoenig_at_hannonarmstrong.com HA
Advisory Services LLC 1997 Annapolis
Exchange Suite 520 Annapolis, MD
21401 www.hannonarmstrong.com