Ohio Energy. Workshop DD. Financing Options Available for Efficiency, Alternative & Renewable Energy Products

Transcription

1 Ohio Energy Workshop DD Financing Options Available for Efficiency, Alternative & Renewable Energy Products Wednesday, February 22, :15 a.m. to 12:30 p.m.

2 Biographical Information Greg Steenrod, Vice President, Business Development GEM Energy, 6842 Commodore Drive, Walbridge, OH Greg Steenrod is the VP, Business Development of GEM Energy, Rudolph Libbe Group. A multi-faceted resource for energy supply, on-site power generation and efficient use of energy, GEM Energy is a trusted adviser to leading organizations in the institutional, industrial, government, and commercial sectors. Greg has over 20 years of experience in the industry and helps the clients of GEM Energy with solutions that may include procurement, maintenance, efficiency, alternative and renewable energy. Eric Benington, CFO, Rudolph/Libbe Cos Latcha Rd, Walbridge OH eric.benington@rlgbuilds.com Eric Benington is the Treasurer of GEM Energy, Inc. and Chief Financial Officer of its holding company, Rudolph Libbe Group. A multi-faceted resource for on-site power generation and efficient use of energy, GEM Energy is a trusted adviser to leading organizations in the institutional, industrial, government, and commercial sectors. Eric works with the GEM Energy s client s to evaluate and secure best options available to finance their energy efficiency, alternative and renewable energy projects through an extensive network of financing partners. Eric s has over 24 years of finance, real estate and construction experience that includes serving as Vice President and Assistant Controller at Welltower Inc., a global real estate investment trust and as Vice President of Finance with Sky Financial Group, a multi-billion bank holding company. Eric is a certified public accountant and has an MBA from the University of Toledo. Teresa Smith, Business Development Manager Toledo-Lucas County Port Authority, One Maritime Plaza, 7 th Floor, Toledo, Ohio Mobile: Office: Fax: tsmith@toledoport.org Teresa Smith is currently the Business Development Manager for Toledo-Lucas County Port Authority where she specializes in providing PACE financing for qualified energy efficiency projects throughout Ohio. Over the past several years, she has help facilitate the establishment of seven new energy special improvement districts while expanding the Northwest Ohio Advanced Energy Improvement District (NWOAEID) to include five surrounding communities. To date, the NWOAEID has completed more than 120 commercial buildings for a total of more than 28 million dollars in funding. This level of activity makes NWOAEID one of the largest and fastest growing commercial PACE districts in the nation. Additionally, in 2016, Teresa worked with the Lucas County Land Reutilization Corporation to establish the first PACE residential program in Northwest Ohio. Prior to joining the Port in 2011, Teresa was Vice President of Community Development Banking for KeyBank National Association. She was employed by KeyBank for more than 20 years and held a variety of leadership positions including Regional CRA Compliance Manager, Credit Card Lending Manager, and Commercial Loan Portfolio Manager. Teresa obtained a Bachelors Degree in Economics from Eastern Michigan University, a MBA in Executive Management from the University of Toledo and is currently pursuing a Doctorate Degree in Business Management with a specialty in Leadership from Capella University.

3 Financing Options Available for Efficiency, Alternative & Renewable Energy Projects 21 st Annual Ohio Energy Management Conference February 21 22, 2017

4 Presenting today Greg Steenrod GEM Energy Vice President, Business Development Eric Bennington GEM Energy Chief Financial Officer Teresa Smith Lucas County Port Authority Business Development Manager

5 About GEM Energy

6 Why leverage financing for energy projects? Positive cash flow, self funding Fund more infrastructure improvements, comprehensive approach Off balance sheet considerations Investment decision vs. maintenance request

7 What types of financing are we covering today? Power Purchase Agreements Leases PACE (Property Assessed Clean Energy)

8 Power Purchase Agreement What is a PPA (Power Purchase Agreement)? A PPA is a financial structure where one party agrees to purchase energy from another, commonly from Solar PV, CHP, Wind turbines, or some other form of distributed generation. Why? Can be structured with no customer capital outlay Customer only pays for kwh s generated by the system Investment tax credits and incentives can be structured into the program, reducing the kwh rate structure (good for non profits) Mitigation of longer term energy price risk Operations and maintenance included in PPA structure

9 Ohio Northern University Ada, OH Over 18,000 First Solar thin film panels Single axis tracker to follow the sun, maximizing solar harvest

10 Ohio Northern University Customer Benefits Budget certainty for 25 years No out of pocket investment Annual emissions reduction of about 2,202 tons, equal to 215 average households Preserve capital for Students and Core focus System provides clean, renewable power for about 10% of campus power

11 ONU Electrical Demand Forecast

12 PPA deal structure (example) Credit: SEIA

13 Equipment Lease What is an equipment lease? Financial structure allowing the energy consumer annual payments with a future term buyout Why consider a lease? Lower monthly payments on the equipment to the lessee Lessor may retain tax benefits and depreciation, in cases where the lessee can not take advantage (non profit) Transfer asset risk Operations and maintenance can be included in lease

14 Operating Lease vs. Capital Lease Operating Lessor owns the equipment and assumes asset risk Pros Off balance sheet Payments can be expensed Capital is saved for core investments Can generate positive cash flow Cons Not as profitable as direct purchase Lessor depreciates the equipment Capital Lessee may take ownership of the equipment Pros Lessee can depreciate the equipment In house cash is save for other needs Flexibility of structure Can generate positive cash flow Cons On balance sheet Lease term is a % of the life cycle Only the interest portion is deductible Not as profitable as direct purchase

15 Capital Lease Combined Heat & Power System Year Electricity Savings Heat Cogeneration Total Savings Fuel Costs Lease and O&M Costs Total Costs Net cash flow 1 226,627 72, , ,241 95, ,853 36, ,627 72, , ,241 95, ,853 36, ,627 72, , ,241 95, ,853 36, ,627 72, , ,241 95, ,853 36, ,627 72, , ,241 95, ,853 36, ,627 72, , ,241 95, ,853 36, ,627 72, , ,241 95, ,853 36, ,627 72, , ,241 95, ,853 36, ,627 72, , ,241 95, ,853 36, ,627 72, , ,241 95, ,853 36,980 Increased budget certainty and year over year positive cash flow, with no capital outlay and all life cycle operating costs included.

16 City of Bryan Bryan, OH As one of the state s largest solar installations, this 2011 project involved the design/build and development of a MW ground mounted installation for the City of Bryan, Ohio. A lease structure enabled tax benefits to be secured.

17 BetterBuildings Northwest Ohio Overview A program of the Toledo Lucas County Port Authority Started in 2011 with $15M grant from Department of Energy (DOE) Created $3M Revolving Loan Fund Leveraged Northwest Ohio Bond Fund; placed $10M in Bond Reserves Presently Structuring 5 th Bond Issuance

18 Why Building Owners Love PACE 100% funding for energy efficiency improvements including: architect and design, engineering, construction management, financing and equipment costs and installation labor. Long term fixed rates up to 15 years ~ recent rates have been 5.00% to 6.00%. Paid back semi annually through energy special improvement assessment on property tax duplicate. Preserves existing owner equity, cash, capital budgets and lending lines of credit. Energy Special Assessment transfer with property upon sale. Energy and O&M savings provide cash flow to pay assessments. Easy documentation with funding available upon closing. Projects can range between $25,000 $10,000,000.

19 Business Eligibility Work with all types and sizes of businesses to provide energy efficient solutions for existing structures to make them more efficient and productive while making our environment cleaner. Industrial / Manufacturing Educational K 12 & Colleges/Universities Commercial / Retail Healthcare Government / Municipal Residential

20 One Maritime Plaza Waterfront office building: 60,000 sq. ft.; built in 1982 Problem: Key downtown building at risk, air & water leakage, comfort complaints, high energy use. Solution: Top to bottom retrofit & equipment retro commissioning: cooling tower, envelope repairs, total lighting replacement, overhaul HVAC & controls. Project Costs: $1,055, yrs. Results: 43% energy savings $138,000/year, tenants retained 95% occupancy, building comfortable.

21 Toledo Parking Authority Port Lawrence, Superior & Vistula Parking Garages TLCPA owned and operated parking garages: High electrical power user 1,192,000 kwh/year Problem: Ineffective lighting and high energy use. Solution: Replace lighting and sensor controls. Project Costs: $720, yrs. Results: 17% energy savings. Facility is better lit and controlled with improved security.

22 Toledo School for the Arts Nationally Recognized Private Charter School: 114,000 sq ft; 1930 s former uptown industrial building for Owens Illinois Glass Problem: 60+ year old boilers were putting school operation at risk, comfort issues, high energy use. Solution: Replace Controls & Mechanicals: New Boilers, Air Handlers, Chiller, Cooling Tower, Building Automation System. Project Cost: $1,192, years. Results: 20% Energy Savings and improved learning conditions for the students.

23 Dr. Martin Luther King, Jr. Plaza Historic train station and office building: 107,400 sq. ft.; built in 1950 High energy use building Problem: Aging mechanical systems and deferred maintenance. Difficulty controlling temperature. High energy use. Solution: Install automated building control systems, sensor activated lighting, high efficiency boiler and chiller, and transformer. Project Costs: $436, yrs. Results: 16 20% energy savings $75,000/year; switched from secondary power to less expensive primary power rates

24 The Toledo Club Historic 1889 Private Social Club; Notable Downtown Architectural Beauty: 92,073 sq ft Problem: Aging mechanicals were putting club growth at risk; comfort issues; high energy use. Solution: Top to bottom retrofit to support future service expansion & growth: Air Handlers, HVAC, Chillers, Lighting, Building Automation. Project Cost: $739, year term. Results: 15% energy reduction along with significant O&M savings. Improved space conditions leading to increase club events and new revenue

25 PACE Financing Scenario Cumulative Savings over Financing Term

26 Summary The Value of Financing Implement improvements with no capital expenditure Avoid unplanned cost by including all life cycle cost (e.g. O&M) Increase budget certainty through long term & lockedin structures In the case of a PPA, only pay for what you use Comprehensive approach to a infrastructure investment

27 Common Questions: Can financing be combined with energy incentives? How long is the pre approval process for financing? What economic evaluations should I consider? What are my options to prove the energy savings after implementation? Additional questions?