Using Public Funds to Finance Energy Efficiency Projects Dan Clarkson Vice President Energy Efficiency Finance Corp.
Why Invest in Energy Efficiency? • Govt. facilities: save energy costs & meet deferred maintenance needs • Residential, commercial, industrial & non-profit facilities • Target EE measures that pay for themselves via energy cost savings • Policy rationale: • Local economic development; sustainable economy • Job growth in the trades -- Green Jobs • Reduce emissions; achieve climate goals • Energy security in face of volatile energy prices
Credit Enhancement Overview • Goals: pioneer new finance products, expand risk horizons, broaden access to finance, extend tenors, reduce rates • Risk sharing: instrumental to support Financial Institution (FI) energy efficiency (EE) & renewable energy (RE) lending • Credit enhancements can support a range of finance models: FI loan facilities, bond issues, utility on-bill financing, etc. • Credit enhancement structures include: • Loan Loss Reserve Funds • Debt Service Reserve Funds • Subordinated Debt Structures
Bellingham-Whatcom Community Energy Challenge Goal: How do we simplify the complex process of investing in energy efficiency for home and business owners?
Loan Loss Reserve Funds • “Portfolio approach” to credit structuring • Achieve significant leverage of public funds, e.g. ARRA and other grants • As a % of total loan portfolio principal = 2-10% • Cover first losses on a portfolio of EE/RE loans • EECBG & SEP funds can be used for LRFs
Loan Loss Reserves Leverage Commercial Finance Borrowers Municipalities Financial Institution Loss Reserve Fund Escrow Account $1,000,000 EECBGs & WA EECE Grant Loans Total Target Number of Loans: 900 Residential & 75 Small Commercial
Community Energy Challenge • Use City & County EECBGs and WA State SEP Credit Enhancement Grant for LRF and interest rate buydowns • RFP process conducted for FI Partner • Implementing Agreements with FI Partner: • LRF Agreement: account definitions, risk-sharing formula, event of loss, recoveries, etc. • Program Agreement: marketing, loan origination
Seattle Steam Company & MMFS: Energy Efficiency Project Development & Finance Program Customers Seattle City Light elec. savings incentives …….. Energy Services Agreement (ESA) for turnkey EE project development, implementation, services & financing Steam & ESA payments Long-term steam supply; green energy Turnkey project & services & equity Seattle Steam EE project payments; Escrow services agreement Wells Lock box acct MECS MMFS Equity & returns Sub-loan Loan & debt service Investor Senior Lender State DOC
Washington State Housing Finance Commission EE Finance Program Diagram USDOE Program Agreement WSHFC: SEF MMFS, Contractor ARRA SEP funds EECE Grant Agreement WA Dept of Commerce Marketing; project development; Turnkey EE projects & services Program Agreement Financing Agreements (deal-by-deal) Notes: 1. EECE Grant Agreement & Program Agreements executed at Program start. 2. Financing agreements done case-by-case. Stream-lined documentation developed with bond counsel 3. Grant funds deposited with Bond Purchaser for use as debt service reserve fund or subordinated 0% co-financing. John MacLean, EEFC, email@example.com • End-Users/ • Borrowers: • 501c3’s; • Multi-family housing Bond Purchaser DSRF
Tax-exempt Lease Purchase Financing for Energy Efficiency Projects in Local Government Facilities • Typically 10 year tenors at fixed rates in the 4% range currently; longer tenors possible • Lease-purchase can be entered into expeditiously; includes “non-appropriations” clause; voter bond approval not required • Eligible Borrowers: local governments and political sub-divisions; EE projects in publicly-owned facilities are eligible • Local governments can do individual transactions or participate in WA State Treasurer “LOCAL” pooled lease purchase finance program • Can be combined with ESCO project implementation; often used with the Dept. of General Administration’s Energy Service Performance Contracting program
Energy Efficiency Finance Corp. EEFC is a financial advisory firm that assists its clients to design and implement energy efficiency and renewable energy finance programs that: • Sustain funds over time • Leverage private capital • Innovate
Thank You Dan Clarkson 206.310.8733 firstname.lastname@example.org www.eefinance.net
Proposal Outline • Loan Terms • LRF Terms • Approach to Credit and Underwriting Guidelines • Loan Marketing, Origination and Administration • Qualifications & Experience, Officers and Staffing • Technical Assistance & Training Needs • Additional Statements & Materials