Utilities & O&M Service Tesco/EES Energy Joint Venture (Service & Payment Flows) EES TESCO Project Funding at Commissioning (£) Commitment Fees (£) Lease.

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Presentation transcript:

Utilities & O&M Service Tesco/EES Energy Joint Venture (Service & Payment Flows) EES TESCO Project Funding at Commissioning (£) Commitment Fees (£) Lease Payments (£) Dividends Utilities & O&M Baselines (£) O&M Services SPV Maintenance Contractors EES Project Cost Less Residual Value (£) Utilities (£) £ Operational Optimization Commissioned Projects Utilities Banks Fair Value for Assets (End of Lease Terms) O&M ContractorsBanks Asset Purchase Option (End of Lease Terms)

Tesco/EES Energy Joint Venture (Agreements) EESTESCO Master Agreement (Lease Line) Lease Agreements SPV Agreement > Equal Ownership/Control > Defined Distribution of Economic Value > 10 Year Term > Joint Resource Dedication > Clear Investment Criteria > Project Exclusivity at Specified Facilities > Defined Exclusivity Term SPV O&M Contractors EES Banks Utilities Agreement Lease Agreements Utilities Agreement Individual Project Development Agreements O&M Agreements > New Energy Assets > Lease Obligations > Project Development Resources O&M Agreement

Energy Outsourcing Partnership Structure Banks EES Funding (£) Tesco Lease Payments (£) Syndication (once asset pool funded) Utilities Agreement Energy Services Agreement Savings Payment* (£) Lease Agreements (at project completion) Completed Projects Asset Purchase Option (end of lease term) Lease Payments (£) * % of Difference Between Baseline Utilities/O&M Cost and Actual Utilities/O&M Cost Ongoing O&M Cost Optimisation Utilities Payment (£) Project Development Resources and Expertise

Energy Outsourcing Partnership Significant Terms 10 Year Term Identification of Project Sponsors (both parties) Commitment of Project Development Resources (both parties) Shared Savings Scope of Facilities & Equipment Types Clearly Defined Project Exclusivity for Energy Infrastructure Clear Investment Criteria & Project Approval Process Timeline & Objectives Regarding Levels of Investment/Savings Level of Lease Funding Commitment Commitment of EES O&M Cost Optimisation Expertise Energy Asset Maintenance Standards (if Tesco retains control of maintenance function)

Energy Outsourcing Partnership Benefits Innovative Energy Partnership with Leading Global Energy Company Reduction in Life Cycle Energy Costs Aligned Incentives Through Shared Risk & Savings Ability for Tesco to Maintain Control of Maintenance Function if Desired Commitment of EES Asset Management Expertise –Energy Design & Engineering –Project Management –On-going Operational Cost Optimisation Commitment of EES Risk Management Expertise –Utilities Cost –Project Cost –Maintenance Cost (planned & unplanned) –Funding During Construction –Residual Asset Value

Spectrum of Energy Outsourcing Structures Agreements Monthly Utilities Pmts. Shared Savings Pmts. From Projects* Joint Identification & Development of Projects Right to Procure Utilities Right to Procure Maintenance EES Tesco EES Tesco Guaranteed % Discount Off Baseline Utilities/Maintenance Cost Right to Implement Energy Capital Projects AdvantagesDisadvantages Reduced Life Cycle Energy Costs Aligned Incentives - Shared Savings & Risk Over Contract Term Greater Risk - No Guaranteed Savings AdvantagesDisadvantages Reduced Life Cycle Energy Costs Guaranteed Savings Immediately & Each Year of Contract Term Savings Above Guarantee Flow to EES Significant Organizational Approvals May Be Required To Provide EES Project Implementation Rights * % of Difference Between Baseline Utilities/O&M Cost and Actual Utilities/O&M Cost Completed Projects Shared Savings/RiskGuaranteed Savings/Risk Mitigation Agreements Monthly Utilities Pmts. Right to Procure Maintenance Completed Projects Right to Procure Utilities

Tesco/EES Energy Outsourcing Partnership Banks EES Master Agreement (Lease Line) Lease Agreements Tesco Lease Payments (£) Commitment Fees (£) Utilities Agreement Utilities Payment (£) Energy Asset Mgmt. Agreement Savings Payment* (£) Commitment Fees (£) Lease Agreements Commissioned Projects Asset Purchase Option (End of Lease Term) Lease Payments (£) Maintenance Standards * % of Difference Between Utilities and O&M Baseline and Actual Utilities and O&M Cost Operational Optimisation

Tesco/EES Energy Joint Venture (Income Statement)