Joule Assets EuropeFinancing Energy Efficiency in Germany, France and Austria

Potential Benefits of Digitisation for Energy Efficiency Finance

SEI Forum Frankfurt, 05-12-2018

OUR STORYFrom the

US… …to Europe

Joule Assets launched in 2010 as a NY-based investment fundfor Energy Reduction Assets (ERA) – focusing on projects under$1 million.

Today Joule Assets Inc. deploys PV and clean energy withmunicipalities as clients through Joule Community Power, andhas launched an Energy Service Company (ESCO), JouleSmart.

Joule Assets Europe launched in 2016 with the SEAF H2020 project, to shape the EU EE market.

The SEAF project aimed to bridge the gap betweenfinance and sustainable energy projects across Europe,through the development of an online platform, eQuad.

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OUR MISSION“Our mission at Joule Assets Europe is to bridge the gap between finance and sustainable energy projects. We create themarket through our eQuad platform, which expedites the finance process for real projects on the ground, and we shapethe market through influencing policy at EU and local level, and our involvement in EU projects.”

Jessica Stromback, Chair and SVP, Joule Assets Europe

CREATING THE MARKET

SHAPING THE MARKET• Stakeholder engagement and outreach for wider industry

• Market shaping through EU project expertise

• Influencing policy through engagement at EU and national level, with a focus on supporting ESCO growth and

innovative financing mechanisms.

• Portfolio development and market creation for EE and DRES in Europe through platform

• Financial due diligence and risk assessment

• Contract development – from term sheet to master agreement

CREATING THE MARKET

Bridging the finance gap in energy efficiency through the eQuad platform

Bridging the Finance Gap • The SEAF Project was funded by the European Commission* • Budget: €1.700.000• Duration: 28 months

*This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 696023. The sole responsibility for the content of this document lies with the authors. It does not necessarily reflect the opinion of the European Union. Neither the EASME nor the European Commission are responsible for any use that may be made of the information contained therein

"The EU Commission estimates that “the mobilisation of an extra €177 billion from public and

private investment sources is needed annually from 2021 to 2030 to reach the 2030 climate

and energy targets.”*

• Fund managers: successfully finance only 5%-15% of all projects reviewed – representing a significant upfront cost

and reduction of profits

• Project developers: often self finance their projects or use bank loans due to perceived difficulties in

accessing appropriate finance

eQuad is active today in: Italy, UK, Ireland, Slovenia and Greece.

What if ALL viable projects successfully accessed finance?

*Assessing the European clean energy finance landscape, with implications for improved macro-energy modeling. European Commission, 2017

ES

DE

AT

IT

FR

UK

Germany> 1600 Active

ESCOs

Austria> 350 Energy

Auditors & ESCOs

Italy> 300 Registered

ESCOs

Spain> 100 ActiveESCOs

France> 350 ActiveESCOs

UK> 600 CertifiedEE Players

A project’s journey toward finance

We help ESCOs, engineering firms, and construction companies across Europe access appropriate project investment by providing third-party valuation, performance insurance, project certification, and due diligence that facilitate and expedites funding for energy efficiency projects.

The Journey:Project Developer

VALUATION INVESTOR-PROJECTHANDSHAKE

INSURANCEQUOTATION

STANDARDISATIONCONTRACTDEV.

SUPPORT

Contractor inputs projects and key documents into eQuad platform• The Full Portfolio should reach over €500k but not all contracts must be signed

Input Projects1

eQuad produces a project Proforma which an Investor can look at and understand and which is also visible to contractor and any colleagues on the platform.

Proforma2

Pre Due Diligence 3

Following financial review, the portfolio is sent to 1-4 investors who in principal should be interested in such a Portfolio of Projects or Project

Project sent to Investors4

How the Process Works:

Joule Assets performs first financial review on Full Portfolio

Creating the Market Place for Energy Efficiency

• The Investors usually return to us within 1 week with an initial Yes or No

Introduction or they then ask either for a call with you or for some further information such as a draft of the customer’s contract…

Investors Response, Yes or No5

Credit check of end clientLegal document check

Next Steps6

Assuming the meeting goes well and the required information is available the Investment committee will agree or not to finance and provide an offer.

This takes another 1-2 weeks until next meeting is scheduled

Second Meeting7

Creating the Market Place for Energy Efficiency

eQuad Investor Network

• Lowered project processing fees• Vetted, viable opportunities• Risk mitigation: Meet the fund’s financing requirements• Due diligence: Have had technical due diligence preformed by accredited ICP rep.• Insurance: Have the option of a insurance quotation for performance insurance • Standard Contracts: Can be structured according to the fund’s contractual requirements

Results:For Investors

Investor Journey

FUNDREQUIREMENTS

PROJECTINSURANCEQUOTATION

ICPDUE

DILIGENCE

KEYCONTRACTELEMENTS

Innovation in deal structure:• Umbrella contracts to bundle projects with equal capabilities • Clear risk mitigation strategies which fits their projects/profile• Performance risk mitigation through performance insurance• EPC contracts: off balance sheet and performance based• Innovative ad-hoc financing solutions• SPV structures: Align requirements between projects

Technical criteria: • Portfolio appropriate rates • Project appropriate duration • Partnership

ESCO Finance needsThe key to growth is not technical, it is contractual!

Main criteria:• Strong project pipeline to pay for upfront engagement• Credit worthiness of end-client• Credit worthiness of the ESCO• Low payback time (3-7 years depending on technology type)• Longer payback time may be accepted for larger projects with

higher returns (in the millions)• Robustness of the project design• Project investment is part of ESCO’s core growth strategy

Investor requirements

Case studies Before & after financing deal

eQuadDue Diligence

Performance Insurance

Finance offer of £5 million

7 days 10 days

PROJECT 1

PROJECT 2

PROJECT 3

PROJECT 4

PROJECT 5 Pipeline

£370k

Standardized investor-agreed LaaS agreements

Off balance sheet finance

LED supplier Product warranties

Case Study: Lighting-as-a-service finance

ESCO Company

Financing Process: lighting-as-a-service well understood and safe. Fund was interested and the negotiations were simple.

Criteria: we have £5 million to spend in 1 year – “you spend it for us on lights”. Contractor had clients to make this realistic.

Contracting Phase for finance: fund is large and new to energy efficiency, took over 5 months to complete 3 agreements with ESCO

RESULT 1: ESCO lost most of their clients – has had to start again. Contracting w/clients: Fund has spent 10-15k in legal fees on the first £40k RESULT 2: the client is confused, and the fund will now lose money on these

lighting deals.

Process

• Contract standardization matters! ESCO-client, ESCO-fund, Fund-Client• The Fund’s experience level matters• The ESCO: will use this as a launching pad for their business. Gain clients and

attract an equity investor in their company

Main Learnings

Case Study: Lighting-as-a-service finance

Conclusions:The way forward

• A lack of contract standardisation

• A lack of risk assessment standardisation

• A lack of access to growth capital for ESCOs

• A lack of SEA Developers’ robust project pipelines

• A lack of innovative financing structures across countries

Markets are different, taxes are different, tariffs are differentIssues with finance are unified

Many of these problems are beyond what eQuad was designed to do

CONCLUSIONS

Next development: support the market in a manner that creates the basis for tradable securities

Continue to improve technical usability of the eQuad platform Active support with due diligence process itself Funds risk assessment standardisation Cooperation with securities traders Closer cooperation with best of class funds

Standard ESCO presentation templates for private equity investors Growth of projects through improving ESCOs value propositions Funds Contract standardisation

Joule’s Vision Remainsto remove finance as a barrier to the growth of the green economy

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Thank you!

Benedetta Friso BellemoDirector of Sales

Joule Assets Europe

+33 (0) 7 66 89 43 92

bfrisobellemo@jouleassets.com