Berliner Energieagentur GmbH WP 2 training session EPC project development models Berlin, Dipl.Ing. Vollrad Kuhn, Berliner Energieagentur GmbH

Berliner Energieagentur GmbH EPC project development models Two different project development models: Single-stage procedure (e.g. Energy Saving Guarantee Contract from the Hesse guidelines, guidelines was elaborated from BE/legal experts for Hesse Environmental Ministry, published 2003) Two-stage procedure (e.g. Success Guarantee Contract from the dena guidelines, published from German Energy Agency dena for the Federal Ministry of Transport, Building and Urban Affairs 2003)

Berliner Energieagentur GmbH EPC project development models Main differences between both models Single-stage model: Bidder as potential contractor has to provide an energy saving guarantee already after performance of the energy rough analysis (including the 1st validation of building data, determination of energy and cost saving potential, concret energy efficiency measures) no separate project planning contract, no separate remunaration of the bidders planning costs for rough and fine analysis 2nd validation of building data / fine analysis is part of the preparation phase of project implementation phase

Berliner Energieagentur GmbH EPC project development models Main differences between both models two-stage model: Bidder as potential contractor has to provide also an energy saving guarantee after performance of the energy rough analysis (including the 1st validation of building data, determination of energy and cost saving potential, calculation of planning costs for fine analysis), but selected Contractor must verify the saving potential and specify his rough analysis results before the project implementation Stage 1: Contractor has obligation for fine analysis (detailed 2nd validation of potential energy and cost savings) on basis of separate project planning contract for fine analysis prior to conclusion of EPC contract (or planning contract is part of the whole EPC contract), he can adjust the building data sheets, saving measures separate remuneration of the contractors planning costs for fine analysis (if there is a confirmation with rough analysis, but decision against start of the stage 2 by client) Stage 2: implementation of energy eficiency measures/performances and success guarantee by the Contractor (if confirmation of rough analysis or seperate decision of the client)

Berliner Energieagentur GmbH EPC project development models Course of the negotiation procedure Phase I:request for submission of a tender and sending of the bidding documents two-stage model: requirements for fine analysis are content of the documents Phase II:negotiation of the tenders (1 – 2 negotiation rounds), negotiation closing Phase III:review, evaluation and award or cancellation of the negotiation procedure After award decision, contract conclusion start of project implementation by the Contractor Two-stage model: Contractor has to start with stage 1 (fine analysis), if the results confirm rough analysis, client can choose from two alternatives Order to start with stage 2, fine analysis costs are content of calculated basic remuneration for the EPC services Decision against implementation of stage 2 (due to fair reasons by the client), remuneration of contractors fine analysis costs by the client

Berliner Energieagentur GmbH Tasks of project development and implementation I Frame establishing  description / communication of the project  Checking the data situation Building selection / definition of targets  Energy costs for electricity, heat etc.  Using data (operating hours, numbers of pupils etc.)  Description of the sites/buildings Integration of decision maker / professional departments approval authorities step 0: step 1: Fixing of Energy cost-baseline System request Project preparation and -development

Berliner Energieagentur GmbH Call for tender  Announcement with giving kind of project development model, award procedure  Call for expression of interest / prequalification  Dispatch of request Rough analysis / laying of offer  Site-visits at the buildings  Validation of data  Determination of saving guarantee (and planning costs fine analysis) Presentation of model contract (single- ore two-stage model) assessment criterias step 2: step 3: Offer with saving guarantee catalogue with measurements, investment costs (planning costs and duration of fine analysis) Tasks of project development and implementation II competition

Berliner Energieagentur GmbH Checking the offer / negotiations  Condensing the competition step by step  Negotiations with max. 3 best bidders  Offer comparison with exactly assessment criterias and with own direction Contract signature  Approval by the authorities  Proof of the economy Benefit amount-analysis integrated technical-economical analysis ecological assessment step 4: step 5: Contract includes rights and responsibilities cooperation principles (stage 1: project planning contract, stage 2: performances and success guarantee) Tasks of project development and implementation III competition

Berliner Energieagentur GmbH Tasks of project development and implementation IV Energy saving-guarantee-contract / Project implementation (single-stage model) Preparation phase  Detailled planning and  realisation of the saving measures inspection  End of construction measurements by Contractor  Inspection by building owner Contractor is responsible for Planning, financing and construction in coordination with the building owner step 6: step 7: Building owner get property of the realised facilities

Berliner Energieagentur GmbH Tasks of project development and implementation IV Energy saving-guarantee-contract / fine analysis (two-stage model) Stage 1: fine analysis  Detailed validation of energy and cost savings  Verification of the rough analysis energy saving prognosis Comparison of the results, final decison of the building owner  Confirmation of rough analysis: order to start with stage 2  Confirmation of rough analysis: decision against start of stage 2 (due to fair reasons, e.g. changes in utilization)  Nonconfirmation: cancellation of project (or other decision by the building owner, if he is responsible for nonconform.) Contractor is responsible for Detailed calculation/estimation of economic saving potential of the planned efficiency measures including the investment costs step 6: step 7: Building owner get the ownership on the results If confirmation and decison against stage 2: remunaration of contractors planning costs

Berliner Energieagentur GmbH Tasks of project development and implementation V Energy saving-guarantee-contract / Project implementation (stage 2 of the two-stage model) Preparation phase  Detailled planning and  realisation of the saving measures (from fine analysis) inspection  End of construction measurements by Contractor  Inspection by building owner Contractor is responsible of Planning, financing and construction in coordination with the building owner step 8: step 9: Building owner get property of the realised facilities/plants

Berliner Energieagentur GmbH Tasks of project development and implementation V / VI Energy saving-guarantee-contract (both models) Main performance phase  Begin of the energy management and -controlling as well as  Implementation of user motivation Expiration of contractual time Contractor guaranteed consumption- and cost decrease operating safety step 8 (10): step 9 (11): Building owner get Responsibilty of operation Full advantage of saving

Berliner Energieagentur GmbH EPC project development models Comparison of advantages and disadvantages General: both models models have advantages and disadvantages two-stage model current opinion of ESCOs is that there are lower risks the model gives more opportunities for approximation regarding the project goals and solution approaches between potential client and bidder the planning costs for fine analysis are covered (remuneration in most cases) Contractor can try to give objective reasons if the results of fine analysis not confirm the rough analysis Single-stage model Bidder has to make an accurate validation of building energy data in the frame of rough analysis, that means higher risks (due to uncertainties for calculation of energy saving measures and saving guarantee at this early stage of project development) most of the bidders take security premiums in their calculations

Berliner Energieagentur GmbH EPC project development models Comparison of advantages and disadvantages (I) Single-stage procedureTwo-stage procedure applicationFor single buildings and building pools, but rather for not too complex buildings rather for complex buildings (e.g. large hospitals), estimation of energy saving potential is more difficult Duration, complexity Shorter, easierLonger, more complex Advanta- ges for the client Client get the promise of guarantees directly with the offer (final guarantees as result of contract negotiations) Client get better and more accurate building energy data and planning data for energy efficiency measures (content of fine analysis) Disadvan- tages for the ESCO Bidder has to make an accurate validation of building energy data in the frame of the rough analysis with high risks (large uncertainties for calculation of energy saving measures, saving guarantee) and without remuneration for his rough analysis costs Longer procedure, the ESCO can get the remuneration later

Berliner Energieagentur GmbH EPC project development models Comparison of advantages and disadvantages (II) Single-stage procedureTwo-stage procedure Advanta- ges for the ESCO Shorter procedure, the ESCO can get the remuneration faster after start of main phase of obligation to perform Lower risks for the ESCO; Contractor has a contractual claim to implement the energy saving measures or to get a remuneration for fine analysis (if there is a confirmation with rough analysis) Disadvan- tages for the client security premiums in the calculations of bidders; After Baseline adjustment in some cases (energy costs determined by the client have been changed) measures to compensate disadvantages to the contractor are necessary Client get the final confir-mation for the guarantees (promised by bidder with offer) not until fine analysis results (if there is a confir- mation with rough analysis), he has to pay for the fine analysis (confirmation of rough analysis, but decision against EPC by the client)

Berliner Energieagentur GmbH EPC project development models Thank you for your attention!