C-PACE: Commercial & Industrial Property-Assessed Clean Energy
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C-PACE A CLEAN ENERGY FINANCE TOOL FOR BUILDINGS
Transcript of C-PACE: Commercial & Industrial Property-Assessed Clean Energy
C-PACE A CLEAN ENERGY FINANCE TOOL FOR BUILDINGS
Who is CEFIA?
What is C-PACE?
CEFIA’s Role in Designing C-PACE
The C-PACE Advantage
The C-PACE Process
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CEFIA is Connecticut’s Green Bank
Who is CEFIA?
What is C-PACE?
CEFIA’s Role in Designing C-PACE
C-PACE Advantage
The C-PACE Process
An innovative financing structure that enables commercial, industrial, and
multi-family property owners to access financing for qualified energy
upgrades and repay through a benefit assessment on their property tax.
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“Property Assessed Clean Energy”
Private capital provides 100%
upfront, low-cost, long-term funding
Repayment through property taxes
A senior PACE lien is put on the property and stays regardless
of ownership
REFERENCES EE Indicator – NA 2010, Johnson Controls and International Facilities Management Association (IFMA)
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CRE owners face barriers to upgrades
REFERENCES EE Indicator – NA 2010, Johnson Controls and International Facilities Management Association (IFMA)
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PACE addresses key barriers
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PACE is around the country
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CT Special Session 12-2 (June 2012)
Commercial, industrial & multi-family property
Requires the consent of the existing mortgage lender.
Requires SIR>1; permanently affixed
Enables municipalities to opt-in
Enables CEFIA to administer a statewide program
Who is CEFIA?
What is C-PACE?
CEFIA’s Role in Designing C-PACE
The C-PACE Advantage
The C-PACE Process
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CEFIA’s Role in PACE
• Guidelines Published November 2012
• Onboard Municipalities
• Website launch in February 2012 (www.c-pace.com)
Design Program
• Technical Underwriting
• Marketing & Outreach
• Work with Existing Mortgage Lenders
Administer Program
• Qualify Capital Providers
• Offer Credit Enhancement tools (as needed)
• Provide capital (as needed)
• Develop warehouse / bonding authority (Q2 2013)
Attract Private Capital
PACE Opportunities in CT
C-PACE Municipalities
Coming soon: Stratford, Waterbury, East Granby, Fairfield, Stamford,
Manchester, Wethersfield, New Haven, Meriden, Plymouth, Cheshire
Windham
Beacon Falls
Westport
Durham
Middletown
Hartford
West Hartford
Bridgeport
Norwalk
Simsbury
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Website & Application Intake
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CEFIA’s Role in PACE
• Guidelines Published November 2012
• Onboard Municipalities
• Website launch in February 2012
Design Program
• Technical Underwriting
• Marketing & Outreach
• Work with Existing Mortgage Lenders
Administer Program
• Qualify Capital Providers
• Offer Credit Enhancement tools (as needed)
• Provide capital (as needed)
• Develop warehouse / bonding authority (Q2 2013)
Attract Private Capital
3rd Party Administrator:
Buonicore Partners
Program Expertise:
Buonicore Partners
• Milford, CT
• Modeled Energy Profile of CT
• Nationwide PACE experience
Technical Expertise:
Celtic Energy • Glastonbury, CT
• $1bn of energy-related projects
• Experience with large commercial end-users, utilities, and government Real Estate Expertise:
Sustainable Real Estate Solutions
• Trumbull, CT
• Benchmarking Database
• Industry leader in building energy performance assessment
Technical Underwriting
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Anything that saves energy from baseline
High efficiency lighting
HVAC upgrades
New automated building and HVAC
controls
Variable speed drives (VSDs) on motors
fans and pumps
High efficiency chillers, boilers, and
furnaces
High efficiency hot water heating systems
Upgrades: What’s Eligible?
… as long as it isn’t going anywhere
Combustion and burner upgrades
Fuel switching
Water conservation
Heat recovery and steam traps
Building enclosure/envelope
improvements
BMS
Renewable energy systems
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Appliances, e.g., refrigerators,
dishwashers, etc.
Plug load devices
Vending machine controls
Any package of measures with a
weighted average effective useful
life (EUL) that does not meet or
exceed the life of the loan
Any package of measures that does
not achieve an energy savings (over
the life of the loan) to [total
project] investment ratio > 1
Upgrades: What’s Not
Any measure that is easily
removed/not permanently installed
Any measure that does not result in
improved energy efficiency
Extending natural gas lines to the
property line to enable a PACE-
eligible gas conversion project.
C-PACE Program Review Paths
Full Assessment – whole building analysis
Begin with a Level I screening step (by CRE owners consultant), designed
to cost effectively identify projects with compelling potential savings & ROI
Proceed to Level II/III audit when significant savings potential exists.
Determine the optimized bundle of ECMs, calculate project cost,
projected energy savings & key financial metrics
Fast Track
Designed for buildings where prior energy audits have been completed
including ECM recommendations, but failed to get implemented due to
owner inability to self-fund the project
Less technically complex projects (or targeted ECM)
Pre-approved projects under utility EE incentive/rebate programs
PACE Opportunities in CT
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CEFIA’s Role in PACE
• Guidelines Published November 2012
• Onboard Municipalities
• Website launch in February 2012
Design Program
• Third Party Administrator: Technical Underwriting
• Marketing & Outreach
• Work with Existing Mortgage Lenders
Administer Program
• Qualify Capital Providers
• Offer Credit Enhancement tools or capital (as needed)
• Serve as legal conduit
Attract Private Capital
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Qualified Capital Providers
CEFIA qualified 8 capital providers through a RFI.
“Lending tree” model
Owner Arranged Financing
Property owner is free to choose their capital provider from the private market. There is no government financing required.
Funding: Capital Sourcing
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$$$ $$$ C-Pace Capital
Provider Contractor Property Owner
$
$ $
$
CEFIA Town Tax
Collector
Town Land
Records
Property/ECMs
Lien $$$
Mortgage Holder
Notification &
Consent
Assessment & C-PACE
Services Contract
Funding
Agreement
Funding: Capital Flow Process
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Property Audit/
Energy Assessment
Contractor Property Owner
$
$ $
$
$$$
Funding: Capital Flow Process
$$$
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Contractor Property Owner
$
$ $
$
$$$
Funding: Capital Flow Process
$$$
Mortgage Holder
Notification &
Consent
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Contractor Property Owner
$
$ $
$
$$$
Funding: Capital Flow Process
$$$
Mortgage Holder
Notification &
Consent
CEFIA Program
Administrator
Technical
Review
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Contractor Property Owner
$
$ $
$
Funding: Capital Flow Process
$$$
Mortgage Holder
CEFIA
C-Pace Capital
Provider
Notification &
Consent
Funding
Agreement
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Contractor Property Owner
$
$ $
$
Funding: Capital Flow Process
$$$
Mortgage Holder
Notification &
Consent
CEFIA
C-Pace Capital
Provider
Assessment & C-PACE
Services Contract
Funding
Agreement
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Contractor Property Owner
$
$ $
$
Funding: Capital Flow Process
$$$
Mortgage Holder
Notification &
Consent
CEFIA
C-Pace Capital
Provider
Assessment & C-PACE
Services Contract
Funding
Agreement
Property/ECMs
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Contractor Property Owner
$
$ $
$
Funding: Capital Flow Process
$$$
Mortgage Holder
Notification &
Consent
CEFIA
C-Pace Capital
Provider
Assessment & C-PACE
Services Contract
Funding
Agreement
Town Land
Records
Property/ECMs
Caveat
$$$ $$$
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Equipment &
Services
Contractor Property Owner
$
$ $
$
Funding: Capital Flow Process
$$$
Mortgage Holder
Notification &
Consent
CEFIA
C-Pace Capital
Provider
Assessment & C-PACE
Services Contract
Funding
Agreement
Town Land
Records
Property/ECMs
Caveat
CEFIA
$$$ $$$
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Contractor Property Owner
$
$ $
$
Funding: Capital Flow Process
$$$
Mortgage Holder
Notification &
Consent
CEFIA
C-Pace Capital
Provider
Assessment & C-PACE
Services Contract
Funding
Agreement
Town Land
Records
Property/ECMs
LIEN
CEFIA Town Tax
Collector
$$$ $$$
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Contractor Property Owner
$
$ $
$
Funding: Capital Flow Process
$$$
Mortgage Holder
Notification &
Consent
CEFIA
C-Pace Capital
Provider
Assessment & C-PACE
Services Contract
Funding
Agreement
Town Land
Records
Property/ECMs
LIEN
CEFIA Town Tax
Collector
$$$ $$$
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Contractor Property Owner
$
$ $
$
Funding: Capital Flow Process
$$$
Mortgage Holder
Notification &
Consent
CEFIA
C-Pace Capital
Provider
Assessment & C-PACE
Services Contract
Funding
Agreement
Town Land
Records
Property/ECMs
LIEN $$$
$
$
CEFIA Town Tax
Collector
$$$ $$$
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Contractor Property Owner
$
$ $
$
Funding: Capital Flow Process
$$$
Mortgage Holder
Notification &
Consent
CEFIA
C-Pace Capital
Provider
Assessment & C-PACE
Services Contract
Funding
Agreement
Town Land
Records
Property/ECMs
LIEN $$$
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$$$ $$$ C-Pace Capital
Provider Contractor Property Owner
$
$ $
$
CEFIA Town Tax
Collector
Town Land
Records
Property/ECMs
Lien $$$
Mortgage Holder
Notification &
Consent
Assessment & C-PACE
Services Contract
Funding
Agreement
Funding: Capital Flow Process
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Recap:
Audit
Notification to Mortgage Holder / Consent
Project Review by Program Administrator
Referral out to Qualified Capital Providers
Capital Provider Selected by Owner
Negotiations Funding Agreement
Assessment & C-PACE Services Agreement (CEFIA – Owner – Cap Provider)
Caveat on the Property (CEFIA – Town/City)
Funding Disbursement(s) & Project Work Commences
Project Completion
Finalization of the Lien on the Property, Payment Schedule, etc.
Owner Enjoys More Efficient Building & Repays Funding via Tax Bill
Funding: Capital Flow Process
Who is CEFIA?
What is C-PACE?
CEFIA’s Role in Designing C-PACE
The C-PACE Advantage
The C-PACE Process
The CUSTOMER (building owner): PACE addresses key barriers
Near term plan to sell? Lack of funding? Cannot assume more debt? Insufficient payback/ROI? Split incentives? Uncertain savings/technical expertise?
Tax obligation fixed to property 100% upfront, 20 year financing PACE assessments qualify as OPEX Positive cash flow in year 1 Assessment/savings pass to tenants Technical underwriting / SIR>1
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Capital Providers
• Low risk investment opportunity
• Senior lien
• Secure repayment mechanism (taxes)
• Legal and technical structure administered by CEFIA
Mortgage Lenders
• Improves Building Financials/Risk
• Lowers OPEX
• SIR>1
• No acceleration
• Creates a more attractive building for occupants and owners
• Finances deferred maintenance needs
Municipalities
• Creates economic development & jobs
• Reduces energy costs for businesses
• Reduces pollution
Benefits to Other Key Stakeholders
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Funding: SAMPLE BUILDING
Project Cost $ 2,200,000.00
Incentives $ (500,000.00)
Total Cost $ 1,700,000.00
i @ 15 years 5.50%
Term 15
Energy Savings $ 230,000.00
PACE Assessment ($169,363.52)
NOI ∆ $ 60,636.48
Coverage Ratio -1.35
Before PACE After PACE
Loan $ 7,500,000.00 $ 7,669,363.52
LTV 65% 56%
Market Value $ 11,538,461.54 $ 13,738,461.54
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Deeper Savings │ Greater Value
Who is CEFIA?
What is C-PACE?
CEFIA’s Role in Designing C-PACE
The C-PACE Advantage
The C-PACE Process
Pace is 4 easy steps
Make payments
Install project and get funding
Apply for funding
Choose your upgrades
Jessica Bailey Director, Commercial and Industrial Property Assessed Clean Energy
(860) 257-2888
Visit us online
ctcleanenergy.com/cpace
