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Financing Sustainable Retrofits

Financing Sustainable Retrofits

GSMI Conference21 October 2009

Lisa Michelle Galley

Lisa Michelle Galley

2October 21, 2009 GSMI Conference: Financing Sustainable RetrofitOctober 21, 2009

Presentation Overview

1. Energy Efficiency Financing Options

2. Level 1: Project Finance OptionsWhat is the most cost-effective option for financing

energy efficient measures at my property?

3. Level 2: From EE Project Program

3October 21, 2009 GSMI Conference: Financing Sustainable Retrofit

Energy Efficiency

Financing Options

4October 21, 2009 GSMI Conference: Financing Sustainable Retrofit

Level 1: Project Finance Options

Tax-Lien Financing

Energy Performanc

e Contracting

On-billFinance

Conventional Bank

LoanSelf-

financingInitial Capital Outlay

0% 0% 0% 5-30% 100%

Program Availability

Limited, but growing

Primarily for Fed Gov +

MUSH

Limited, but growing

n/a n/a

Typical Capital Limitations

Up to $50,000

noneUp to

$100,000

Limited by Collateral

Valuen/a

Contract/Loan Terms

15-20 years 10-15 years 2-8 years 5-30 years n/a

Program Applicable for Tenants in Leased Space

No Yes Yes No Yes

Additional Information

If property sold, debt stays with the property

Best for Facilities with energy bills greater than $150k/year

Program is on a “per- meter” basis. Limited to measures that also qualify for utility incentives

5October 21, 2009 GSMI Conference: Financing Sustainable Retrofit

A Case Study

2,300 SF Commercial Space (Convenience Retail)

Owner-Occupied Energy Inefficient structure:

needs lighting, lighting control, and refrigeration upgrade.

Electricity Used: 155,000 KWh (per

annum) Electricity Cost:

$12,200 (per annum)

Property Details

6October 21, 2009 GSMI Conference: Financing Sustainable Retrofit

A Case StudyA Fantastic Retrofit Opportunity:Total Cost of EEM: $7,700Energy Use Reduction: 38,500 kWh (per annum)- a 25%

reductionEstimated OPEX Reduction: $3,050 (per annum)Payback Period: 2.5 yearsROI: 196% IRR: 38%

Once you have the $$$$$:62 owner-occupied properties in 5 western states.Retrofit measures needed across entire portfolio- stores have a

similar layout and equipment.Total Cash Needed: $475,000

7October 21, 2009 GSMI Conference: Financing Sustainable Retrofit

Level 1: Project Finance Options

Conventional Bank Loan

Tax-Lien Financing

On-Bill Financing

Annual EEM Savings: Cash Impact 3,050$ 3,050$ 3,050$ Debt Service (EEM) 1,066$ 558$ 771$ Annual Net Cash Flow Impact 1,984$ 2,492$ 2,279$ Cap Rate 10% 10% 10%Potential Asset Value Increase 30,500$ 30,500$ 30,500$

8October 21, 2009 GSMI Conference: Financing Sustainable Retrofit

Level 2: From EE Project ProgramModest Investments add up across Portfolio:

Annual Energy Saved → 2.4 GWh

Financial ImpactAnnual Increase in Cash Flow → $155,000Potential Portfolio Value Increase → $1,900,000

Environmental ImpactReduction in Annual GHG Emission → 1,716 Tons CO2 =

Removing 314 passenger vehicles from the road Power for 156 households

9October 21, 2009 GSMI Conference: Financing Sustainable Retrofit

Level 2: From EE Project Program

Know how different trends can impact your platform: Is your portfolio more affected by market trends, government regulations or both?

What’s your BAU? How does ‘business as usual’ look for your properties and operations?

Do your leases help or hurt your EE program? Do your leases-in-place assure you the EE savings you have contracted for?

Evaluate financing options: What is the most cost-effective method for financing retrofits across my portfolio? Have I secured all available incentives?

Ensure performance: How do I establish appropriate financial and energy targets? What is the best method for measuring post-retrofit measure of performance?

10October 21, 2009 GSMI Conference: Financing Sustainable Retrofit

Next steps, resources & contact

Workshop: Getting Started in Green Finance (sign up on our mailing list)

Recent webinar: Green Finance for Affordable Housing (view on our website)

Articles: Present Your Green Project to Your Lender (download from our website)

Blog: Our Green Journey (subscribe online to get updates)

Get free resourcesWe have published several articles and led many workshops on green finance and investment. A few of them are mentioned below:

Galley Eco Capital+1 (415) 655-6668Email: Info[at]galleyecocapital.comhttp://www.galleyecocapital.com

Ask us about a briefing on finance strategies for your portfolio.We would be happy to discuss your sustainability initiatives and the opportunities you may have to maximize value. Contact us to request a special briefing consultation about your projects – our info is below.