Challenges and Opportunities for High Energy Users

Transcription

1 Challenges and Opportunities for High Energy Users Dixie Chemical Company Inc. CHP Combined Heat and Power Conference and Trade Show Marriott Westchase, Houston, Texas October 15, 2012

2 2 Industrial/Societal Footprints

3 Overview of Dixie Chemical Company 65+ years manufacturing high performance specialty chemicals Family owned until 2006, now held by private equity Products for clean technology through synthetic and renewable materials Located on 50 acres in the Bayport Industrial Area Dixie employs around 200 people Dixie is committed to SOCMA ChemStewards SM Sustainability / Superior Energy Performance Safety of personnel and our community Product stewardship 3

4 Dixie Markets & Technology Dixie supports 300 customers in 30 countries and four Market Segments: Thermoset Materials Alkaline Paper Sizing Fuel and Lube Additives Life Sciences Core chemical technologies: Anhydride chemistry Epoxidation chemistry Propyleneimine chemistry Hydrogenation 4 Top three global producer in all products Leading or only producer for 80% of revenue

5 Product End Uses Anhydride ECA Filament-wound pipe Electrical composites DDSA Microwave composites Lube additives Flotation pipe Syntactic foams HHPA/MHHPA Automotive coatings LED Electronics Epoxy thermosets ASA/ODSA Paper sizing Gypsum wallboard sizing Diesel fuel/lube additives NMA Composite cooling fan blades Defense/aerospace composites LIFE SCIENCES Angina/heart treatment Retinitis/HIV treatment Poultry feed supplement 5

6 Guiding Statements on Sustainability Dixie s Loss Control & Sustainability policy: Continual improvement through robust integrated management systems Sustainability through triple bottom line strategies Innovation and investment to reduce our footprint Market growth and advantage in both synthetic and renewable chemistry 6

7 ISO & Superior Energy Performance Published in June 2011, the ISO Energy Management Standard established a framework for industrial plants, facilities, and organizations to manage energy. An ANSI-accredited body will certify our plant in two areas: 1. Energy Management System Conformance: ISO standard 2. Validated Energy Performance Improvement: Thirdparty measurement & verification that plant meets minimum SEP energy performance improvement of at least 5% over 3 year period. 7

8 Dixie s Energy Challenges Specialty chemical production is energy intensive Natural Gas 1 MM Btu / YEAR Electric 3,000 kw or 24 MM kwh / YEAR Energy is #2 cost behind raw materials Gas increase $1/MM Btu = $1MM hit to bottom line Electric supply-demand gap in TX (Buy v. Build $) Unreliable electric grid due to load - failures hurt! Storm risk to electric grid Capital competition, debt & hurdle rate Future CO2/NOx exposure (Caps, LCA) 8

9 Dixie s Energy Opportunities PACE Enabled Investments Combined Heat & Power Boiler (Plant A) Waste Heat Recovery Steam Generation Hot Oil Furnace Thermal Oxidizer Replace Steam Jet Ejectors w/ Liquid Ring Vacuum Replace High Pressure Steam w/ Hot Oil Variable Speed Cooling Water Towers Chilled water system improvements 9

10 Dixie s Business Case for PACE Aligns w/ Superior Energy Performance & ISO ISO management system defines projects PACE enables investment Reliability & resilience of our electric supply Improved global competiveness on mfg. cost Address capital competition, debt & hurdle rate NOx cap flexibility & credits Supports CO2 footprint initiatives 10

11 Energy Efficiency Financing: Why Texas Needs to Keep PACE for High Energy Users CHP 2012 COMBINED HEAT AND POWER Conference and Trade Show Marriott Westchase, Houston, Texas October 15,

12 What is PACE? Property Assessed Clean Energy (PACE) allows local government to enable a property owner to finance clean energy or energy efficiency improvements. The repayment obligation is reflected as an assessment on the property tax bill. The annual assessment must always be less than the annual energy savings of the project. 12

13 13 States that have Adopted PACE

14 Energy Consumption in the U.S. Industrial 32% Transportation 28% Residential Buildings 22% Commercial Buildings 18% 14 Sources: U.S. Dept of Energy (2009) Building Energy Data Book; World Resources Institute (2006) U.S. Greenhouse Gas Emissions Flowchart; U.S. Energy Information Administration (2008) 2003 CBECS Table B9; Marnay, C and M. Stadler et al. (2008) A Buildings Module for the Stochastic Energy Deployment System. LBNL

15 Texas vs. Nationwide Energy Consumption By Industry Texas 19% Remainder of U.S. 81% 15

16 A Message from the Electric Reliability Council of Texas (ERCOT) To ensure future electric reliability in the ERCOT region, we need to take immediate steps to address this issue on both the supply side and the demand side of the resource adequacy equation. Trip Doggett, CEO Electric Reliability Council of Texas May 22, 2012 For now, energy use or load will play a significant role in the near-term reliability equation. 16

17 Barriers to Energy Efficiency Projects Lack of capital budget Insufficient payback/roi Inability to finance Uncertainty of savings/roi Lack of technical expertise Landlord/tenant split incentive Buy-in from senior management 17

18 PACE Offers Solutions Barriers Scarce internal capital budget No access to, aversion to financing No investment-grade credit rating Lack of collateral assets that don t fall under first mortgage PACE Solutions No down payment and costs spread over time w/ savings Repayment security through senior lien position Backed by property, not by owner or equipment collateral Uncertain holding period PACE obligation transfers to the new owner upon sale Owner / tenant split incentives Skepticism savings/roi will be realized Qualifies as NNN pass-thru cost ESCO/contractor guarantees or third party insures performance 18

19 Basics on How PACE Works Provides capital to fund energy retrofit Contractor receives funds to do retrofit Pays special assessment on property tax bill Capital improvements that save energy costs Local Tax Entity Property Owner Contractor/ESCO Property owners in a cash flow positive position 19

20 Two Types of PACE Financing 20

21 Pooled Bond Model Capital Payment Service Coupon Capital Property Owner Payment Investors Bond Market Taxing Entity (Program Admin) or Direct Payment for Retrofit Contractor Primary and secondary bond market will develop where PACE bonds will be originated and traded 21 *Best suited for residential and light commercial properties.

22 Owner Arranged or Open Market Financing Model Payment Taxing Entity (Program Admin) Property Owner Payments assigned to Lender Payment Service or Direct Payment for Retrofit Lender ESCO / Contractor 22 *Best suited for large commercial and industrial buildings.

23 Other Aspects and Possible Enhancements to PACE Insure energy savings and repayment Lenders may elect to bundle PACE loans for secondary markets or retain high quality loans in their portfolios Include water conservation projects in PACE eligibility To join or learn more about PACE: Charlene Heydinger, Executive Director Keeping PACE in Texas San Jacinto Blvd, Suite 1900, Austin TX Website: KeepingPaceinTexas.org