Redevelopment of E & G Facilities:

Public-Private Partnerships

Performance Contracting

July 12, 2011 Kelly Tisdale, CEM, LEED AP

Agenda

• Energy Environment

• Institutional Energy Challenges

• ORC 3345.61-3345.66 (HB7)

• Performance Contracting Benefits

• Performance Contract Structure

• Performance Guarantee

• Performance Contracting Process

• Value Proposition

Energy Environment

• Water

– Local rates escalating at 7-9 % annually

• Natural Gas

– Deregulated utility

– Volatile pricing based on global economic forces

• Electricity

– Deregulation in Ohio

– Minimum price increases of 2-5 % annually

Institutional Energy Challenges

• Issues:– Reliability

– Conservation

– Sustainability

– Achievement of HB 251 Targets

• Solution:– Energy Conservation and Management

Programs Utilizing Performance

Contracting

Performance Based Contracting

ORC 3345.61-66 (HB 7)

• State of Ohio enacts legislation in 1993-1994

• ORC 3345.61-66 (HB7) defines:

– Energy conservation measures (ECMs)

– Avoided capital costs, water conservation measures (WCMs) and

operating cost savings

– RFP issuance process to use performance based contracting

– Exemption from competitive bidding requirements (ORC 153)

– Energy Services Company (ESCO) selection methodology

– Payback period of 15 years for ECMs/WCMs

– Financing options

What is Energy Savings

Performance Contracting?

• Uses energy savings to provide the funding stream for

up-front facility infrastructure and capital improvement

projects

• Utilizes design/build approach vs. spec/bid approach

• Finances up front project construction through a third

party; paid for from the savings stream

• Allows for comprehensive/co-authored scope

• Guarantees results

Performance Contracting Benefits

• Reduces energy and maintenance costs

• Improves comfort and environment

• Improves client satisfaction

• Creates opportunity to address deferred maintenance

without capital expenditure

• Reduces energy consumption

• Reduces greenhouse gases

• Improves sustainability

• Creates opportunity to incorporate sustainable, GREEN

design practices and technology

• Creates competitive advantage for enrollment/donor

strategies

Contract Structure – Key Elements

• Engineering/design/construction/commissioning

• Energy performance guarantee

• Service and audit

• Financing

How does Guarantee Work?

• No risk to the institution

– Bond construction/energy savings

– Contractually defined turnkey program for a fixed price

in a specified time period with guaranteed results

• Guaranteed results

– Savings guaranteed for the contract term

– If savings not achieved, institution reimbursed 100 %

of the savings variance

– Excess savings retained by the institution

Accountability Reduces Institutional Risk

• Allows design/build approach with single contracting entity

• Promotes market-based engineering and innovation

• Bonds design/construction/installation/energy savings

• Eliminates cost overruns/change orders

• Delivers turnkey result in defined schedule

• Meets/exceeds provisions of:– HB 251

– ASHRAE 90.1-2004; 62.1-2004; 55-2004

– Illuminated Engineering Society Standards & Practices (IESNA)

– Labs 21

– International Monitoring and Verification Protocol (IMVP)

Performance Contracting Process Steps

• Develop RFP (State of Ohio Attorney General Templates)

• Advertise and solicit proposals

• Evaluate proposals

• Select ESCO

• Finalize detailed engineering solutions

• Finalize contracts (State of Ohio Attorney General Templates)

• Obtain financing and finalize financing documents

• Close/fund transaction

• Install project in construction period

• Commence contract performance periods

• Provide ongoing audit/reporting/savings reconciliations

• Provide ongoing service (optional)

Value Proposition:

Performance Contracting• Satisfies HB 251 20% energy consumption/greenhouse gas reduction

• Provides menu of ECMs to achieve the highest ROI possible

• Enables co-authored project scope that meets institutional priorities

• Guarantees cost and savings

• Captures market opportunity for low-interest financing

• Reduces utility, operating and maintenance costs

• Addresses deferred maintenance

• Engages staff/students in technical/behavioral training

• Ensures long-term contract performance that is monitored/verified

• Promotes institutional outreach and engagement in “green” initiatives

• Enhances institution’s commitment to sustainability/environmental

stewardship

Tri-C Campus

KSU Stark CampusKSU Satellite Campuses

KSU Residence

Services

Client Phases

No. of

ECMs

Project

Savings($Millions)

Project

Cost($Millions)

Project

Sq. Ft.(Millions)

3 277 37 27 2.9

2 110 73 51 3.1

5 115 57 29 2.6

Totals 10 502 167 107 8.6

Leadership in Ohio

Higher Education Projects

CSU Campus

Redevelopment of E & G Facilities:

Public-Private Partnerships

Performance Contracting

July 12, 2011 Kelly Tisdale, CEM, LEED AP