Qualified Energy Conservation Bonds and Green Community Programs. VRA Infrastructure Financing Conference

Transcription

1 Qualified Energy Conservation Bonds and Green Community Programs VRA Infrastructure Financing Conference

2 WHO WE ARE Energy Management Technology Abundant Power is an energy management services company focused on providing transformative financial and technology solutions for the built environment ecosystem. Financial Solutions and Underwriting Building Science and Engineering CleanSource Capital is an affiliate established to provide design and administration of proprietary funds dedicated to energy efficiency financing.

3 WHO WE ARE: LEADERSHIP TEAM Great People Right Skills Deep Experience Shannon Smith CEO Founder of Abundant Power More than 20 years of investment and project finance experience. BA from Wheaton College & MBA from UVA Boards of EDF, NCSEA, AEE Greg Montgomery Managing Director Broad financial expertise : 25 years in investment banking and law. Licensed attorney, registered securities representative. JD/MBA from Tulane University & BA in Environmental Sciences from UVA Derek McGarry Chief Engineer More than 12 years of HVAC engineering, retrocommissioning and energy efficiency retrofit experience. BS in Cornell University in Mechanical Engineering. LEED Accredited Professional. Michael McHugh Manager, Business Development Experience in energy efficiency, real estate, construction and engineering Boards of USGBC & Green Resource Center BS from LSU in Construction Management. LEED Green Associate. Trey Davis Director of Analytics Extensive systems engineering background Adept user of Metrix software, able to conduct highly sophisticated analytics and tracking of energy performance. BA from Wake Forest University and BS from UNC Charlotte in Systems Engineering.

4 EXPERIENCE WITH ENERGY EFFICIENCY PROGRAMS To date, AP has designed and/or managed energy efficiency financing programs nationwide, enabling more than $300 million in energy efficiency implementation. Leveraged Revolving Loan Fund (RLF) AlabamaSAVES TM $65 MM Med/Large Commercial, Industrial, Non-profits AlbamaWISE TM Pilot program for residential retrofits Qualified Energy Conservation Bonds (QECB s) St. Louis County SAVES TM $10.3 MM Residential and Commercial South Carolina SAVES TM $25 MM Commercial, Industrial and Institutional Property Assessed Clean Energy (PACE) DC Green Forward $250 million Commercial & Industrial Energy Management Services Agreements (EMSA) EPx TM 12MM SF Commercial

5 SAVES PLATFORM SAVES (Sustainable and Verifiable Energy Savings) is Abundant Power s proprietary, energy financing platform for designing and administering programs: Credit and financial underwriting standards. Established origination and servicing standards. Energy underwriting protocols. Energy measurement and verification. CleanSource the Abundant affiliate established to expand SAVES into other jurisdictions using Qualified Energy Conservation Bonds. 13 Southeastern/Gulf states have $900MM in QECB allocations remaining.

6 QUALIFIED ENERGY CONSERVATION BONDS $3.2B in QECBs Authorized Across the 50 States in 2009 Subsidized financing of qualified conservation purposes ( QCPs ) Broad range of QCPs = energy efficiency, water conservation, and alternative transportation and fuels. Also Green Community Programs to fund QCPs within a sponsoring jurisdiction Direct pay subsidy from Treasury to offset interest Set at 70% of published qualified tax credit bond rate currently around 3.0% Subject to sequestration currently set at 7.3% Allocated to States based on population and sub-allocated to Cities/Counties >100k pop Scattering of allocations and sub-allocations across states and the local governments in sizes ranging from as little as $1M at local level to $30M at state level

7 QECBS: VIRGINIA ALLOCATION & SUBALLOCATIONS $80.6MM allocation - $35MM at the State level and $45MM sub-allocated to 16 local governments with populations >100k. >$4M >$3M >$2M <$2M

8 QECBS: CHALLENGES TO USE Yet Only $1B in QECBs Used to Date Why is This? Over $2B in QECB allocations and sub-allocations remain unused. Virginia has only used $3.7M of its original allocation. Several challenges exist in the use of QECBs. - Regulations relatively complex. - Borrower s indifferent due to relatively low rates of recent. - Private activity bonds limited to 30%. - Public buildings must certify a 20% or greater energy savings. - Difficultly in efficiently using small Suballocations to local jurisdictions

9 EXECUTIVE ORDER AUTHORIZING VA'S QECBS Virginia has re-authorized its QECBs in Executive Order No. 36 (2014) Executive Order No. 21 issued in 2010 sub-allocated $45M to 16 local jurisdictions with populations over 100k and retained $35M at state level. The Order expired at the end of 2013 with only $3.7M being used. Governor s Office just issued new Executive Order to re-authorize QECBs in Virginia. Re-authorize $45M in sub-allocations to same 16 original localities and $35M at state level. Original localities have specified time period either to declare intent to use (9 mos) or to actually use (12 mos) their sub-allocations or the sub-allocations revert to the State for its use. May waive their sub-allocations at any time. Energy Division Director at DMME is Allocation Director for QECBs. Allocation Director to establish programs for using allocations and re-allocations. Includes establishing a Green Community Program through RFP process.

10 QECB-FUNDED GREEN COMMUNITY PROGRAM 2012 IRS Notice clarifies use of Green Community Programs ( GCPs ) June 2012 IRS Notice clarifies what constitutes a green community program Guidance interpreted to allow for statewide green community programs where GCP: - Tied to policy at the statewide level governmental or utility sponsored supporting energy efficiency and energy savings. - Benefits buildings generally available to the public (i.e. governmental and institutional); or - Program generally available to the public (individuals and business) within certain guidelines (i.e. credit underwriting standards). Broad definition of Qualified Conservation Purposes (QCPs) with broad project types energy, water, alternative fuels. No private activity limitation GCP itself constitutes a qualified purpose so both public use and private use up to 100%. Public buildings funded through GCP not subject to 20% savings test required under direct issuances.

11 SC SAVES GREEN COMMUNITY PROGRAM South Carolina SAVES Green Community Program - state-wide program for subsidized funding of energy efficiency of public and private QCPs in South Carolina. Tied into the statewide policy of the South Carolina Energy Efficiency Act. $25MM reallocation of QECBs from SC Energy Office to SC Jobs-Economic Development Authority ( JEDA ) as conduit issuer on private placement basis. Loans/capital leases of $500k to $5M in size Effective interest rates % for public and % for private Not reliant on government credit State or SC SAVES Pipeline - $123.7MM Local each project underwritten and funded $39.3MM $43.0MM and stands on its own credit Funded first transaction - $2MM Randolph Trucking, LLC Pipeline of $123.7MM originated to date $23.0MM in closing by Q4/Q1 $26.3MM in active discussions EE Retro Sectors include $43.0MM in EE retrofits; CNG Lighting $15.9MM in CNG conversions; $22.6MM $22.6MM Other ECM in lighting retrofits; and $39.3MM in other QCPs.

12 SC SAVES GREEN COMMUNITY PROGRAM Eligible Properties: Governmental State agencies, counties, municipalities, school districts Institutional Universities, hospitals, non-profits Commercial/Industrial Select borrowers with strong credit Eligible Improvements: Energy efficiency measures with a payback of 15 years or less using proven, commercial technologies with strong vendor warranties (e.g. s: lighting and control upgrades; HVAC maintenance/replacement; chiller/boiler upfits; insulation; retro-commissioning; select distributed renewables generation) Alternative fuel conversions of facilities or fleets from diesel or gasoline to propane or natural gas and refueling infrastructure Contractors: Program will work with select energy savings contractors with demonstrated experience in energy efficiency contracting.

13 SC SAVES GREEN COMMUNITY PROGRAM Keeping it simple : - Lender funds transaction and assumes credit risk - Lender sets interest rate and terms that govern transaction, uses standard documents - Borrower pays lender directly and lender services loan - Conduit issues QECB note mirroring lender s documents - Conduit assigns QECB credit subsidy to benefit of borrower to offset interest to lender - Net benefit currently approximately 3.0% - Borrower s payments under lender s note credited to payments owing under QECB - One additional document (four party agreement) to lender s standard loan docs Funding Party (Lender) Payment of Principal and Interest on Funding Party's Note QECB Note Funding Party's Standard Note, Loan and Collateral Documentation Four-Party Loan and Note Purchase Agreement Credit Subsidy Conduit Issuer SAVES Loan SAVES, LLC Green Community Program (SPE) Borrower SAVES Loan U.S. Treasury Credit Subsidy assigned to Borrower CleanSource Capital, LLC (SAVES Program Administrator) Adminsitration Agreement

14 PROVEN ORIGINATION MODEL Relationships in optimum channels to originate a robust pipeline and drive funding ESCOs/ Contractors Utilities NGO s Governmental Entities Vendors/ Distributors/ Suppliers Engineers/ Professionals Associations Economic Development Authorities

15 VIRGINIA'S BENEFITS FROM USING ITS QECBS Virginia can expect both economic and environmental benefits from its QECBs Economic Benefits: - Scalable, economical financing program for efficient deployment of state level QECBS - Reducing business operating expenses through energy savings to maintain competitiveness. - Job creation through capital investing 20 direct jobs per $1MM invested and through energy savings 17 indirect jobs per $1MM saved. - A GCP can facilitate deployment of QECBs into Central and Western Virginia communities which do not have sufficient population to have received direct suballocations. Environmental Benefits: - Estimated energy savings of 1,500 MWh s per $1MM invested, so total of 30,000 MWh s of energy savings, which at $0.10/kWh is $3MM annually in savings. - Estimated reduction in GHG emissions of 1,000 MT s per $1MM invested, so total of 20,000 MT s annually in emissions reductions.

16 CONTACT For more information on the CleanSource SAVES platform, please contact: Greg Montgomery CleanSource Capital Managing Director