h Town of Merrimac Performance Contracting Initiative Briefing for Pentucket Regional Schools March 21, 2013 Steven Weisman, Vice President Peregrine Energy Group, Inc., Owner’s Agent

Town and District lack resources to take on necessary energy infrastructure improvements Town wants to avoid CIP spending and tax increases Normal processes for capital project budgeting do not address problems in timely fashion Town and District want performance protection Why use performance contracting?

State of Massachusetts in state buildings MA regional schools: Blue Hill Regional Tech., Franklin Regional Tech., Greater New Bedford Voc. Tech., So. Middlesex Voc. Tech., Southeastern Regional Tech. MA cities and towns, including: North Andover, Lawrence, Georgetown, Lowell, Revere, Swampscott, Chelsea, Springfield, Melrose, Worcester, Greenfield, Sudbury, Somerville, Newton, Framingham, West Springfield, Sunderland, Reading, Hamilton, Fall River, Orange, Wakefield… Who is using performance contracts?

Strategy for infrastructure renewal and energy efficiency Ch. 25A allows an alternative to Ch. 149 bid/design/bid/build Allows a single contract for many projects in multiple buildings Guaranteed annual energy savings must exceed project costs Delivered by specialized energy services companies (ESCOs) Integrated engineering, design, purchasing, construction, and commissioning improves project quality Financing is arranged by Municipality ESCO paid at the completion of construction and commissioning Debt paid from energy savings retained in operating budget No increase in tax rates necessary to fund projects Performance contracting overview

Town and District agree on cost sharing approach Town authorizes project and secures financing ESCO paid as sub-projects completed / commissioned Financing repaid out of utility account using savings Guarantee: Energy saved meets or exceeds projections Actual savings analyzed and reconciled by ESCO annually against guarantee Savings verified by Peregrine as Owner’s Agent Project Funding / Savings Guarantee

Step One: Investment Grade Audit (“IGA”) agreement was executed by Town and Ameresco in 2011 Ameresco completed preliminary assessment of potential projects for Town’s consideration Town picked projects for detailed study Ameresco prepared study and proposal for Town Peregrine critiqued Ameresco proposal in detail Two Step Contracting Process

Step Two: Town decides whether to proceed to construction or end relationship and pay for the detailed study If Town wants to proceed  Finalizes Energy Services Agreement (ESA) scope, terms  Secures project financing (e.g., bond or lease)  Signs ESA with Ameresco Ameresco begins design/construction, collaborating with Town and Peregrine (as owner’s agent) Contracting Process [continued]