Post on 13-Apr-2017
A Paradigm Shift in Funding
Energy Efficiency and
Renewable Energy Projects
Presented
By:
"An Energy Solutions Company"
PACE Financing
What is PACE?
• Non-Recourse financing program for
for energy efficiency & water
conservation projects
• Voluntary property improvement tax
tax assessment utilized for energy
efficiency improvement projects
• Based on one of the oldest property
improvement financing models in the
U.S.
What is PACE? • Legislation enacted by State of
Michigan (Public Act 270 of 2010)
• Adopted by local governments
including counties, cities, and
townships
• Provides long-term, fixed rate funding,
repaid as a property tax
• Savings must be greater than cost and
includes maintenance & end of life
replacement costs
Where is PACE? • Originated in California in 2009
• Adopted in 32 U.S. States and the
District of Columbia
• Has expanded into other countries
Where is PACE? • Enacted by Michigan in 2010
• First PACE District City of Southfield
• First project in Michigan completed in
2014 – MPSC Building Owned by
Saginaw Plaza Limited – HVAC & Solar
Why PACE?
Non Recourse
Property assumes debt, not property
owner
Transfers with property upon sale, does
not require payoff
Must be cash flow positive over
assessment term, covers 100% of costs
Projects > $250K require performance
guarantee based on assumptions
Does not affect property owners credit
or borrowing power
No up front capital required 100%
of all costs covered
Provides long-term, fixed rate financing
through assessment
Term lengths up to 20 yrs or more
Increases property value, real property
improvement not personal
Why PACE?
Can be utilized multiple times on same
property
Savings & ROI includes maintenance
and end of life replacement costs
Covers “real property” assets including
including items like electric vehicles
Assets must remain with the property if
if sold, can also be transferred
Why PACE?
Who Funds PACE?
Michigan PACE statutes allows PACE
projects to be financed through a
variety of sources
Private Equity
Self Funding
Traditional Funding
Bonds
Amount available for a PACE project is
dependent on several factors and can
range from 20% to 30% of the properties
FMV
1) Property Value
2) Mortgage LTV
3) Annual Energy Spend
4) % of Value by Lender
5) PACE District % of Value
How Much is Available?
Businesses in approved PACE Districts
For-profit and non-profit businesses
Government owned do not qualify
Business is in good standing
Business outlook is good
Property not leveraged (< 80% LTV)
Who Qualifies for PACE?
Projects > $250K
Smaller projects can be funded
Only used for energy efficiency projects
Don’t own it? Get permission!
Who Qualifies for PACE?
Projects That Qualify…….
Facility Upgrades
New Construction
Process Improvements
Refinancing of Prior Projects
Upgrade Facility, Replace
Process Equipment, Improve
Energy Efficiency
Reduce Energy Costs
Reduce Maintenance Costs
Improve Net Operating Expense
Incur No Out of Pocket Costs
Project Objectives
• Manufacturing Facility
• All Original Equipment
• $809K Total Project Cost
• 20 Year Assessment
• Includes Annual Energy & Inflation
Rate Adjustments
• Includes Maintenance and End of
Life Replacement Costs (M&L)
Proposal Overview
Replace Processing Equipment
Install LED Interior/Exterior
Lighting
Replace Heating System
Install Air Stratification Fans
Install Controls System
Project Scope of Work
Install Hi-Speed Entrance Doors
Install Rooftop Solar Array
Install Solar Skylights
Install VSD Compressed Air
System
Project Scope of Work
Proposal Assumptions
1) Cost of Energy ~ $0.132 Per Kwh
2) Includes Incentives
3) Cost of Capital 7.5% Fixed Rate
4) 20 Year Term
7) 2% Annual Energy Cost Increase
8) 5% Annual Inflation Rate
Proposal Assumptions
9) Includes Maintenance and End-of-Life
Replacement for PACE Term
10) Includes All Material and Labor
Annual Electrical Reduction 78%
Annual Gas Reduction 25%
Annual Cost (Current) $115,348
Annual Cost (Proposed) $31,905
Annual Savings $83,443
Annual Assessment Payment $78,204
Annual Net Savings $5,239
Proposal Summary
Lifetime Savings (20 Year) $1,668,876
Lifetime Cost (% of Savings) 94%
Lifetime ROI (20 Year) 7%
Proposal Summary
Annual Electrical Reduction 78%
Annual Cost (Current) $115,348
Annual Cost (Proposed) $31,905
Annual Savings $83,443
Annual Assessment Payment $78,204
Annual Net Savings $5,239
Annual Savings…
Proposal Summary
Annual Electrical Reduction 78%
Annual Cost (Current) $115,348
Annual Cost (Proposed) $31,905
Annual Savings $83,443
Annual Assessment Payment $78,204
Annual Net Savings $5,239
Is Greater Than Annual Cost……
Proposal Summary
Annual Electrical Reduction 78%
Annual Cost (Current) $115,348
Annual Cost (Proposed) $31,905
Annual Savings $83,443
Annual Assessment Payment $78,204
Annual Net Savings $5,239
Which Improves Cash Flow!
Proposal Summary