King’s Strategic Energy Partners

1. KCH Strategic Energy Partners Presentation to: 14th January 2014 Iain France iain.france@nhs.net King’s Strategic Energy Partners

2. Questions What’s the difference between and EPC and an ESCo? In an energy-performance contract, does the supplier have to provide the finance? We’ve been advised that ‘off-balance sheet’ transactions will no longer be allowed, and all transactions will have to be shown on the balance sheet. How do we get around this? In an energy-performance contract (EPC), does the supplier have to take over the operation and maintenance of the estate, or of the equipment supplied? King’s Strategic Energy Partners

3. KCH Strategic Energy Partners Mission: enable public-sector to undertake successful strategic estate-development projects, backed by guaranteed revenue savings Method: lifecycle support - feasibility study, procurement, contracts, financial-modelling, funding, project-management, guarantee M&V Experience: initiated over 2 dozen projects, capital value >£100m; ten years’ public-sector procurement Structure: procurement framework owned by King’s; services delivered by Ecovate Group in collaboration with King’s King’s Strategic Energy Partners

4. Principles and Methods DEMAND SUPPLY THEN • Strategic Approach: • Energy consumption • Energy supply • Student comfort • Backlog maintenance • Risk & resilience • Maintenance • Energy-security • Money ROI (years) X X X X X X X X X Cost King’s Strategic Energy Partners

5. Holistic Approach to… Technologies The Estate -18% Controls Heating Lighting -25% -20% Fabric Cooling IT -15% -20% -2% -10% +15% All revenue costs Cost Reactive maintenance PPM Energy King’s Strategic Energy Partners Time

6. Process Guarantee + Continuous Improvement Investment-Grade Audit Project-Installation Feasibility Study Procurement 6 months 1 month 1-2 months 6-18 months 1-20 years Phased approach to manage changing estates: IGA 1 Project 1 Guarantee 1 IGA 2 Project 2 Re-baseline IGA 3 Etc. King’s Strategic Energy Partners

7. Case Study: University of Sheffield • Requirement: • A more sustainable University / reduction in carbon footprint • Improved, long term quality, indoor climate and fitness for purpose • Reduction of operational / utility costs • Reduce corporate risk (legionella, risk of mechanical failures etc.) • Development of competency within estates team & University’s staff (“good housekeeping” etc.) King’s Strategic Energy Partners

8. Case Study: Taunton NHS • Situation: • Estate condition deteriorating due to long-term under-investment: backlog £6m • Corporate risk “significant” • Mandatory CO2 targets (34% by 2020; 80% by 2050) • Rising energy costs (£1.8m p.a.) • Carbon taxes (£108,000 p.a.) • New Surgical Wing King’s Strategic Energy Partners

9. Case Study: King’s NHS • Situation: • Concerns re. patient comfort • £4m energy consumption and rising • Backlog £10m, rising towards £25m over next 5 years • Planned building projects £90m King’s Strategic Energy Partners

10. Financial Illustration (borrowing) Project capital cost £3.52m Funded via 12-year on-balance sheet capital borrowing @ 5.5% interest King’s Strategic Energy Partners

11. Financial Illustration (borrowing) Energy savings: 20% of £2.2m energy bill Year 1: £400k; rising to >£1m with 6% energy inflation Cumulative energy saving £11m over 15 years King’s Strategic Energy Partners

12. Financial Illustration (borrowing) Once capital borrowing repaid, most of the energy saving hits the bottom line King’s Strategic Energy Partners

13. Financial Illustration (borrowing) Cumulative net cash saving after 15 years = £5.7m King’s Strategic Energy Partners

14. Financial Illustration (Sheffield) £3.8m capital project £480k annual saving, rising by 7% energy inflation King’s Strategic Energy Partners

15. Financial Illustration (Sheffield) £3.8m capital project £480k annual saving, rising by 7% energy inflation Including saving of £1.3m backlog maintenance King’s Strategic Energy Partners

16. Financial Illustration (Sheffield) £3.8m capital project £480k annual saving, rising by 7% energy inflation Including saving of £1.3m backlog maintenance King’s Strategic Energy Partners

17. Contracts and Financial Structures General Agreement of Co-operation between Contracting Authority ("CA") and ESCo Investment-Grade Audit Project- Implementation Guarantee • Multiple options may be combined: • Government grants [e.g. SALIX, HEFCE] • Capital purchase • Capital borrowing [own bank / Ecovate source] • Shared-Savings Agreement • Operating Lease [off-balance sheet] • Operation & Maintenance Agreement [off-balance sheet] • Power-Purchase Agreement [off-balance sheet] • Special-Purpose Vehicle / Joint Venture • Government incentives [e.g. RHI, FIT] King’s Strategic Energy Partners

18. Services Offered from King’s / Ecovate Strategic Technical Commercial Financial Present to Board Project-Management Financial-Modelling Funding if required Contracts Monitoring & Verification Manage Continuous Improvement Guarantee + Continuous Improvement Investment-Grade Audit Project-Installation Feasibility Study Procurement Project-Management Framework or OJEU Select Preferred Bidder based on capability Contracts King’s Strategic Energy Partners

19. Have I Answered your Questions? What’s the difference between and EPC and an ESCo? In an energy-performance contract, does the supplier have to provide the finance? We’ve been advised that ‘off-balance sheet’ transactions will no longer be allowed, and all transactions will have to be shown on the balance sheet. How do we get around this? In an energy-performance contract (EPC), does the supplier have to take over the operation and maintenance of the estate, or of the equipment supplied? King’s Strategic Energy Partners

20. KCH Strategic Energy Partners Iain France 07854 540325 iain.france@nhs.net King’s Strategic Energy Partners