TowerWise.ca The Business Case for Energy Efficiency Projects in Condominiums Tim Stoate Associate Director, Mandate-related Finance

o Overview of the TowerWise program o TEEAC o Key learnings to take home o Why go green? o Evaluating the business case o Beyond payback: The case for going deep o Financing options o Resources o Contact info What we’ll be covering

With support provided by the Government of Ontario and the Government of Canada Key Partners

TowerWise Dramatically reducing GHG emissions in the high-rise residential sector o Education & Outreach o Research & Case Studies o Financial Tools o Policy Reform

Why go green? Reduce utility costs and improve cash flow Enhance building value Insure your building against rising energy costs Shrink your carbon footprint

Evaluate the business case! A good energy project should make sound financial sense for your building. Get help with your calculations at: /calculators Key financial measures to consider: o Payback The number of years it will take to earn back the capital invested in your upgrade o Internal Rate of Return (IRR) The average annual rate of return generated over the investment’s lifetime. o Net Present Value (NPV) The value of an organization will increase by the amount equal to the present value today of future cash flows o Increase In Building Value: Generated from increased savings = increased NOI divided by “Cap rate”

Example energy audit results

Cherry picking Results of implementing only short payback measures

Going deep Results of implementing all measures

Comparisons

FinancialNew LobbyEnergy Retrofit Investment$35,000$350,000 Rebate0$50,000 Cash Flow For Building years $50,000 x 10 = $500, year NPV($35,000)$100,000 plus Difference in NPV($135,000)$135,000 Do bothCombined NPV (Approx) $60,000 Energy retrofit vs. new lobby

Savings blended together = blended payback Example: Loan of $300,000/6 year payback Cash flow neutral for 6 years = loan payments equal savings – cash flow locked in to repay loan Free cash flow available after 6 years Blended Loans

Initially all savings blended together Contains 2 or more different maturities – i.e., 3 year loan and 6 year loan Short term paybacks reduce portion of loan in 3 years: i) Payments drop lower or step down over time ii) Cash flow frees up and can be used for other items Remaining loan is paid by savings from longer payback items – remain locked but neutral Step Loans

Track project impacts in terms of the volume of energy savings (e.g., kWh, litres, GJ, Btus) Compare volumes of energy savings to volumes forecast Why? If energy costs have gone up the dollars saved will be hidden Compare cost to old volume Understanding project results

If your retrofit reduces energy use by 20%, but energy prices go up by 10%, the $ value of your savings compared to the previous year appears to be cut by half Take another look -- your real savings have increased by 10%! If energy prices go down…they will always come back up!! Illustration of “hidden savings”

Energy efficiency pays for itself Go deep to maximize your savings Financing is available and can be cash flow neutral or even positive Energy savings can pay for other building improvements or help keep your condo fees under control! Key learnings to take home

Need Financial Advice? Call Me I’ll help you: Evaluate the business case for your retrofit Compare your financing options It’s easier than you think…

Questions? Tim Stoate – Associate Director Bryan Purcell - Program Manager, TowerWise