Practical Ways for Towns to Save Money with Clean Energy Projects Doreen Hamilton April 30, 2014

Honeywell Proprietary 2 Document control number Today’s Discussion What is Performance Contracting? Tolland’s Challenges and Goals New Complexities in the Energy Landscape The Town of Tolland and their Solutions Viable financing options

Honeywell Proprietary 3 Document control number What is Energy Performance Contracting (EPC)? Alternative funding mechanism to upgrade energy consuming building systems Make improvements now and pay for them out of future, guaranteed energy savings Public Act formally recognizes EPC as a viable means to achieve State’s energy goals

Honeywell Proprietary 4 Document control number Where has this been done? Town/Schools of Stafford, CT Town/Schools of Colchester, CT Town/Schools of Stratford, CT Middletown, CT Schools -2 phases Town/Schools of Monroe, CT Danbury, CT Schools – 4 phases Town/Schools of Tolland, CT “It works with the service upgrade vendor, Honeywell Building Solutions, guaranteeing energy and cost savings over a 15-year period and the efficiency fund providing an incentive payment of $790,000. “ “We financed in a smart fashion. It happened quickly. It is environmentally correct. We are saving energy, and the program pays for itself,” said the Mayor. “This was an easy decision. Other cities should do it.” Mayor John Harkins, Stratford, CT

Honeywell Proprietary 5 Document control number Tolland’s Challenges and Goals External Pressures – Rising Costs – Budget Pressure – Aging Infrastructure – Do more with less Goals –Decrease Energy Consumption –Green/Sustainability –Facility Renewal –Manage Costs

Honeywell Proprietary 6 Document control number Building a Team Consensus Building – Boards Formation of a Committee Outside Consultant or not Town & School Support Process Road map Procurement Process – RFP, RFQ or State – Request for Proposal – Request for Qualification – State Process

Honeywell Proprietary 7 Document control number Advanced Controls and Building Optimization Micro Grids & On-Site Generation Sustainability and Behavior Management Renewable Energy Today’s Energy Solution is More Complex Supply Strategies Demand Strategies Operational Challenges Deferred Maintenance Life Cycle Management Rising Energy Costs Energy Efficiency Finding the right solutions for you requires integrated strategies Energy Efficiency Incentives Financing Sustainability and Behavior Management Advanced Controls and Building Optimization Renewable Energy Microgrids & On-site Generation – CT Legislation Multiple Buildings

Honeywell Proprietary 8 Document control number Infrastructure Upgrade Options Emergency Equipment Repairs/Replacement Building Damage Life Safety Issues Environmental Compliance Security Emergency Equipment Repairs/Replacement Building Damage Life Safety Issues Environmental Compliance Security Unplanned Must Complete Regardless of Return Unplanned Must Complete Regardless of Return Must Do Projects New Program Launch New Facility Capital Equipment Planned Facility Renewal New Program Launch New Facility Capital Equipment Planned Facility Renewal Budgeted Compete for Capital Prioritized Projects Have Similar Business Risk Budgeted Compete for Capital Prioritized Projects Have Similar Business Risk Capital Investments Performance-Based Projects Reduce Risk Guarantee Savings - Efficiency Improvements - Productivity - Managed Asset Renewal Option to Include - “Must Do” & “Capital Projects” Reduce Risk Guarantee Savings - Efficiency Improvements - Productivity - Managed Asset Renewal Option to Include - “Must Do” & “Capital Projects” Can Be Independent of Capital Budgets Funded Through Energy & Operational Cost Avoidance and Third Party Sources Project Risk With Vendor Can Be Independent of Capital Budgets Funded Through Energy & Operational Cost Avoidance and Third Party Sources Project Risk With Vendor

Honeywell Proprietary 9 Document control number Town of Tolland energy conservation efforts Celtic Energy was selected as the Third Party Owner Representative Developed Request for Proposal – Honeywell selected Development of Investment Grade Audit % reviews Energy & Infrastructure Improvements Utility Incentive Review Legal Review Finance Bid/Review Final Board Approvals – School & Town Project $10.2M, 0% financing, incentives from NU $859,000, 20 year program, energy & operational savings of $573k annually Town of Tolland Process

Honeywell Proprietary 10 Document control number Tolland’s Solution

Honeywell Proprietary 11 Document control number Financing Options Financing Vehicles –Tax Exempt Lease –Power Purchase Agreement (PPA) –Utility sources –Bonds –PURA rate buy down Funding Sources –Energy and Operational Cost Avoidance –Energy Efficiency Grants –0% Financing –Incentives

Honeywell Proprietary 12 Document control number Questions