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Colorado PACE Financing Overview January 2016 Agenda ! Brief - - PowerPoint PPT Presentation
Colorado PACE Financing Overview January 2016 Agenda ! Brief - - PowerPoint PPT Presentation
Colorado PACE Financing Overview January 2016 Agenda ! Brief Company Background ! Evolution of Colorado PACE Program ! How PACE Works ! Why PACE is Transforming the Market for Energy Improvements ! FAQ About Microgrid ! Turnkey clean energy
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About Microgrid
! Turnkey clean energy services provider ! Single source for:
" Solar PV " Energy Efficiency " Energy Storage " Demand Response " and related services
! Focus on Commercial & Industrial sector ! Financed Approach – PACE, PPAs, Leasing
Company Data
Founded: 2009 HQ: St. Louis, MO Satellite Offices: Chicago, Los Angeles, Denver 45 Employees Over 300 projects completed in 20+ states
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Fortune 500 Nonprofit Military / Government Higher Education Hospitality
Sample'Client'list'
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Industrial K-12 Schools
Sample'Client'list'
Sports
Over 250 companies and groups as clients
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How PACE Works
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What is CPACE
CPACE = Commercial Property Assessed Clean Energy
PACE is an exciting an innovative new approach to commercial* energy improvement financing that is growing rapidly around the US. PACE provides a simple way for municipalities to help local property
- wners make energy improvements to their properties.
Energy improvements are funded through the County’s assessor
- ffice and repaid through a property tax assessment over a period of
up to 20 years. PACE is an off-balance sheet transaction that requires no capital expenditure and results in immediate positive cashflows and an increase in property value.
Over $1 Billion in PACE funding is projected for 2015, nationally
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Evolution of Colorado PACE Program
- Enabling legislation passed in 2008, expanded and amended in 2010,
2013, and 2014 approving statewide PACE district
- Board of Directors was appointed in September 2013
- Established program rules
- Draft and implement program framework
- Overseeing and managing PACE district
- Hire CPACE administrator (Sustainable Real Estate Solutions)
- Soft launch of program in December 2015
- Full launch with PR in Q1 of 2016
- Working to get all counties to opt-in in 2016
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PACE is a form of public financing
! Innovative approach to leveraging “Energy Equity” in your property; using energy savings to pay for energy projects ! PACE is modeled after methods to fund public benefits such as roads, sidewalks, and fire departments. ! Allows a property owner to choose to levy a “clean energy assessment” that is tied directly to their property and is repaid as part of the annual property tax bill. ! Private funding sources (private capital funds) are used for improvements, and are secured by a senior tax lien
- n the property. No government rebates or funding is
used to pay for projects. ! The PACE program is run by a contracted 3rd party, with program fees paid through each project financing.
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Wide variety of building and project types Proper&es(
Improvements(
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Eligible Building Sectors/Types
! New and existing construction projects ! Most buildings above 5+ unit rented/leased residential buildings are allowed in program ! Condo buildings not eligible (common areas may be possible) ! Commercial, industrial, non-profit, multifamily, educational, government*, and houses of worship are all eligible ! Property owner does not have to pay property taxes to be eligible
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Eligible Project Criteria
(
- Eligible(Projects((
– Located(on(eligible(real(property( – Owned(by(an(eligible(property(owner(( – Be(an(“Energy(Efficiency(Improvement”(((defined(to(include(water(saving(measures)( and/or(a(“Renewable(Energy(Improvement”( – Special(consideraCon(for(new(construcCon((pilot(projects)(((
- Applicable(Project(Requirements(
– Energy(savings:(project(must(generate(“uClity(cost(savings”( – Energy/Water(Audits:(ASHRAE(Level(1(required(/(Feasibility(Study(for(renewable( energy( – Inspec&on/Commissioning:(PostMcompleCon(verificaCon(is(required,(as(is(postM construcCon(commissioning(report(( – Data(Sharing:(project(required(to(provide(ongoing(access(to(uClity(usage(
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What Types of Projects Can Be Included
! HVAC Systems ! Retro Commissioning ! Lighting & Controls ! Solar PV ! Demand charge reduction measures ! Refrigeration Systems & Equipment ! Windows ! Fume Hoods ! Motors ! Upgraded Elevators/Escalators ! Upgraded Roofing/Insulation ! Many other energy improvements ! Water conservation measures ! Some non-energy capital improvements Non-energy Projects Also (in many cases)
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Confidential – Microgrid Energy
PACE Financing - Benefits
Other Benefits ! No payoff upon sale of property ! Tenant accessible ! No Personal Guarantee ! Marketing Benefits ! Combine multiple energy improvements ! Include non-energy improvements in some cases ! Cash incentives as Year 1 income
Key Benefits ! 100% financing ! Off Balance Sheet ! Broad range of credit accepted ! Long-term financing (to 20 yrs) ! Treated as Equity on new construction projects
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Underwriting Requirements (varies)
Underwriting the building/savings, not the credit of the owner
! Savings to Investment Ratio (SIR) > 1 (not required in Colorado) ! Loan To Value – < 30% of after improved value ! Investment Grade Solar production report or Energy Audit to verify savings projections ! Existing Loans Status & Lender Consent ! Term Length cannot exceed weighted average of lifecycles ! Total debt on property < 95% of value
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Sample PACE Project
Cut and paste cashflows
Financial Analysis is Provided by Microgrid and verified by PACE program
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Why PACE is reshaping the energy improvements market
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Confidential – Microgrid Energy
Overcoming Barriers
Barrier PACE Solution No Budget / Debt not desirable ! 100% financing, off balance sheet transaction Payback / IRR Hurdle ! No cash and no debt means no investment hurdle ! Immediate positive cashflows ! Longer term payback projects are viable Credit challenge Underwriting the building, not the credit of the owner Hard to get past low hanging fruit Higher cost, longer payback projects are cashflow positive immediately, with no investment required
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Confidential – Microgrid Energy
" Private market investors like
PACE because assessment liens are a proven, strong credit.
" Property owners see an
- pportunity to save money and
make their buildings more valuable.
" Existing mortgage lenders support projects
that increase the value of their collateral.
" Local governments like
PACE because it creates jobs and helps meet conservation goals.
" Contractors support PACE
because it opens up new sales opportunities
" Taxpayers like PACE
because the city takes on no liability and gets a boost in the local economy.
PACE is a Win for all Stakeholders
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PACE Will Have a Major Impact
Growing Fast ! Enabling legislation in 31 States, with some programs in operation, and many more in the works ! Private capital being leveraged now (vs public bond funds) ! Unlocking Energy Equity
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Confidential – Microgrid Energy
PACE is a Long Term Solution
Stable - PACE is not a government or utility incentive program, so it is largely immune to shifts in politics or regulatory policy. Higher Performance Possible - PACE can be continually tapped to reach higher and higher levels of energy savings. PACE works for whatever technologies are viable. Wide Applicability - PACE works for the vast majority of buildings, owners
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Confidential – Microgrid Energy