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Enhanced Use Lease Components, Terms and Conditions. Mr. Allan Curlee SAF/GCN 29 Jun 11. Contents. Energy EUL Deal Structure Project Types and Characteristics Terms and Conditions Air Force Real Estate Instruments Real Estate Instruments – Lease versus Easement

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Enhanced Use Lease Components, Terms and Conditions

Mr. Allan Curlee

SAF/GCN

29 Jun 11


Contents
Contents

  • Energy EUL Deal Structure

  • Project Types and Characteristics

  • Terms and Conditions

  • Air Force Real Estate Instruments

  • Real Estate Instruments – Lease versus Easement

  • Real Estate Execution Methodology

  • Energy EUL Projects

  • Summary


Energy eul deal structure
Energy EUL Deal Structure

  • Energy EULs

    • Assist in meeting AF asset management and energy goals

    • Diversify and optimize value of AF real property assets

    • Are long-term, 30 to 50 year, Public Private Partnerships (PPP)

    • Are driven by external market demand

      • State Renewable Portfolio Standards (RPS)

      • Unlike PPA, EUL project not limited to installation need; scalable to capture market demand

    • Are not Power Purchase Agreements (PPA) – commitment to procure energy

      • AF exploring development of Combined EUL / PPA; regulatory factors being addressed


Project types and characteristics
Project Types and Characteristics

  • Solar Photovoltaic (PV) & Concentrated Solar Power (CSP), Wind, Geothermal, Biomass, Waste-to-Energy (WTE) are all acceptable based on resource availability

  • Utility-scale and distributed generation both acceptable

    • State Renewable Portfolio Standards drive project type

  • Project phasing acceptable and encouraged

    • Long-term development partnerships based on single Request for Qualifications (RFQ)

    • Project phasing allows for rapid Phase I implementation; speed to market and cash flow

  • Community partnerships for biomass and WTE often required

    • Development costs require scale to bring down cost of generation

    • AF installation resources often insufficient alone

  • Utility-scale energy storage (long-term planning)

    • High-resource installations in key markets require to fully exploit



Air force real estate instruments
Air Force Real Estate Instruments

  • Project requirements can influence selected instrument (such as lenders and utility company requirements)

    • EULs are executed under 10 USC 2667 and require a lease

    • PPAs may use a lease or easement as required

Energy Project

Real Property Instrument

Permit

License

Easement

Lease

Disposal (Fee)

EUL or PPA

AF requires no interest in property; excess to mission needs

PPA

Not excess but not needed by mission for term of lease; grantee has exclusive use and possession

Not excess to mission needs; would not interfere with mission; grantee generally has non-exclusive use for specific purpose/use but no possessory rights

No interest in real property conveyed; personal to the licensee, revocable at will

Generally used for governmental tenants only; conveys no interest in real property


Real estate instruments lease versus easement
Real Estate InstrumentsLease versus Easement

  • Lease authorized under 10 USC 2667

    • Provides exclusive use & possession of property for set term

      • Common for commercial real estate, energy, banks, schools, and grazing and includes EUL projects

    • AF use of the property is not permitted during term of lease, except as specifically negotiated and incorporated into lease

  • Easement authorized under 10 USC 2668 and 40 USC 1314

    • Used to provide non-possessory, but potentially exclusive use of property for specific purpose and specific term

      • Common for roadways, rail lines, and utilities

      • AF or 3rd party use of property is permitted if non-exclusive but may not interfere with previously granted easements


Real estate execution methodology
Real Estate Execution Methodology

  • Potential renewable energy projects vetted to AF Renewable Energy Project Development (REPD) Subpanel for selection

    • Projects are structured to bring greatest benefit to AF and development partner

    • EUL projects designed to optimize value of non-excess real property

    • PPA projects designed to meet requirements for utility cost savings management of federal facilities

  • Selected projects follow real estate guiding principles

    • Identify project requirements for either EUL or PPA

    • Apply required real property interest needed consistent with requirements

      • Lease or easement


Energy eul projects
Energy EUL Projects

  • Edwards AFB Solar Photovoltaic (PV) Project, CA – Enhanced Use Lease

    • Provides renewable electricity to the California power grid

    • Located on 3,288 acres with anticipated 50 year lease term

    • Phase III - Lease under negotiations

  • Hill AFB Waste-to-Energy (WTE) Project, Utah – Enhanced Use Lease

    • Provides renewable electricity to the Utah power grid

    • Located on 13.7 acres with anticipated lease term of 50 years

    • Phase III - Lease under negotiations

  • Project Pipeline

    • Phase II (Project Acquisition) – 2 projects

    • Phase I (Project Definition) – 1 project

    • Phase 0 (Project Identification) – 3 opportunities (site visits conducted); 16 other opportunities being evaluated


Summary
Summary

  • AF interested in full spectrum of renewable energy project types to monetize non-excess assets, and in some cases to meet AF energy goals

  • Market demand determines EUL project scale and phased rollout of project

    • Flexibility is key to structuring deals; speed to market and cash flow being essential goals for the AF

  • AF has matured the EUL business model and commercial-like processes to implement deals

    • Current business development pipeline for energy EULs offers significant opportunity for the development community


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