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Financing Energy Efficiency Programs

Financing Energy Efficiency Programs. PERFORMANCE CONTRACTING Energy Services Company (ESCO) designs and installs Energy Conservation Measures (ECMs) ESCO guarantees the energy savings which are used to make debt payments for the project (budget neutrality)

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Financing Energy Efficiency Programs

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  1. Financing Energy Efficiency Programs • PERFORMANCE CONTRACTING • Energy Services Company (ESCO) designs and installs Energy Conservation Measures (ECMs) • ESCO guarantees the energy savings which are used to make debt payments for the project (budget neutrality) • Tax-exempt, non-appropriation financing is preferred financing vehicle (if available)

  2. Financing Alternatives • Issue Bonds • Lowest Rates and Highest Fees • Good for Large, Long-Term Projects • Reported on Balance Sheet Capital Lease • Competitive rates and low/no fees • Tax-exempt for public and qualifying non-profits • Subject to Annual Appropriation for public institutions

  3. Financing Alternatives • Customer Arranges own Financing • Unrestricted Cash is Available, or • Lease / Banking relationship already in place • Offers speed and simplicity • Shared Savings Program • Debt Payments are limited to savings achieved • ESCO pays lender if savings are short • Interest rate is taxable and limits project size

  4. How Funding is Accomplished • Search for grants, rebates and special program monies • - Arrange Financing on Remaining Balance • 30-60 days is typical for Lease Purchase • Bonds require 60-120 days lead time (90 is average) • State Programs are subject to funds availability • Funds are escrowed, invested and released as work is done • Escrow Earnings belong to the customer

  5. Third Party Financing • No financial institution offers best solution for every project • Different institutions prefer different term lengths, project sizes, geographic areas and ECMs • Chevron Energy Solutions will conduct a financing RFP for a lease focused at the correct group of lenders • Results are very competitive with bond financing • Most of our lenders belong to: • ELA (Equipment Leasing Association), or • AGLF (Asso. for Governmental Leasing & Finance)

  6. Recent Project Financings • LACCD (CA) $ 20.0 million 20 years 3.94% Jan ‘08 • JC Schools (FL) $ 3.5 million 8 years 3.64% Dec ’08 • Alameda County (CA) $ 3.3 million 15 years 4.08% Dec ‘08

  7. Before Improvements After Improvements Maintenance Costs Maintenance Costs EnergyCosts EnergyCosts Savingsto Pay for Improvements

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