1. SUSTAINABLE ENERGY FUND John Costlow Just Live It

2. I N T HEIR H EAD How Many Here Have LED Bulbs in All Sockets at Home? How About CFL’s? How Many Here Arrive on Public Transportation? How About a Hybrid? Why Not 100%?

3. W HAT YOU ARE A SKING TodayTomorrow Give MeYou Will Save

4. W OULD Y OU D O I T ? If You Did Not Profit Would You Do It?

5. T ODAY ' S G OAL – DEMONSTRATE THAT YOUR PROJECT MAKES BETTER SENSE THAN COMPETING INVESTMENTS

6. F INANCIAL E VALUATIONS Simple Payback Net Present Value Internal Rate of Return Equivalent Uniform Annual Costs Life Cycle Costing

7. L IGHTING C OMPARISON Type Life Cost Color Temp Dimmable Lumens Rated Power Actual Power Light Emitting Diode 25,000 Hours $24.97 2700K Yes 800 Lm 12.5 Watts 12.8 Watts Incandescent 1500 Hours $1.97 0K Yes 830 Lm 60 Watts 63.3 Watts Compact Fluorescent 10,000 Hours $6.97 2700K No 900 Lm 14 Watts 15.7 Watts

8. EDC R ATES ApplicationResidential IF hours Annual949 Hours Universal Service Rider0.533¢/kWh ACT129 Rider0.242¢/kWh Smart Meter Rider0.005¢/kWh Distribution Rate3.364¢/kWh PPL Price to Compare6.935¢/kWh Energy + Distribution10.299¢/kWh Monthly Fee$8.75/month Retailer 4719 Hours 0¢/kWh 0.333¢/kWh 0.033¢/kWh $4.530/kW 6.387¢/kWh 6.387¢ plus $4.53/kW $14.00/month

9. S IMPLE P AYBACK Least complicated Favors projects with high initial savings Penalizes projects with a long service life Simple Payback = First Cost Annual Energy Savings

10. I NTERNAL RATE OF RETURN Does Investment Result in Wealth? Summation of Future Values Compares Investment to Income & Expenses Life of Project To present Value Used to determine Life Cycle Cost Net Present ValueInternal Rate of Return Complicated Requires Iterations Set NPV to Zero Minimum Value that makes investment worthwhile Solve for Discount Rate

11. L IFE C YCLE C OSTING Identification of All Costs Installation Maintenance Energy Fuel Escalation Inflation Interest on Investment Salvage value Copyright Sustainable Energy Fund 2008 Life Cycle Costing

12. L IGHTING C OMPARISON Type Life Cost Color Temp Dimmable Lumens Rated Power Actual Power Light Emitting Diode 25,000 Hours $24.97 2700K Yes 800 Lm 12.5 Watts 12.8 Watts Incandescent 1500 Hours $1.97 0K Yes 830 Lm 60 Watts 63.3 Watts Compact Fluorescent 10,000 Hours $6.97 2700K No 900 Lm 14 Watts 15.7 Watts

13. EDC R ATES ApplicationResidential IF hours Annual949 Hours Universal Service Rider0.533¢/kWh ACT129 Rider0.242¢/kWh Smart Meter Rider0.005¢/kWh Distribution Rate3.364¢/kWh PPL Price to Compare6.935¢/kWh Energy + Distribution10.299¢/kWh Monthly Fee$8.75/month Retailer 4719 Hours 0¢/kWh 0.333¢/kWh 0.033¢/kWh $4.530/kW 6.387¢/kWh 6.387¢ plus $4.53/kW $14.00/month

14. S IMPLE P AYBACK Least complicated Favors projects with high initial savings Penalizes projects with a long service life Simple Payback = First Cost Annual Energy Savings

15. R ESIDENTIAL L IGHTING C OMPARISON TypeIncandescent First Cost$1.97 Annual Power kWh60.071 Rate cents/kWh10.299 Annual Cost$6.187 Annual Savings$0 Simple Payback, years N/A Compact Fluorescent $6.97 14,899 10.299 $1.534 $4.653 1.5 Light Emitting Diode $24.97 12.147 10.299 $1.251 $4.946 5.06

16. C OMMERCIAL L IGHTING C OMPARISON TypeIncandescent First Cost$1.97 Annual Power kWh298.712 Rate cents/kWh6.387 Generation Cost$19.079 Annual Demand Charge 3.441 Annual Cost$22.520 Annual Savings$0 Simple Payback, years N/A Compact Fluorescent $6.97 74.088 6.387 $4.732 $0.853 $5.585 $4.653 0.49 Light Emitting Diode $24.97 12.147 6.387 $3.858 $0.696 $4.554 $4.946 1.39

17. T IME V ALUE OF MONEY PV = Present Value FV = Future Value t = time i = rate n = number of periods Formula

18. T IME V ALUE OF M ONEY TIME PRESENT VALUEFUTURE VALUE AMOUNT RECEIVED AMOUNT EXPENDED Simple Method

19. T IME V ALUE IF M ONEY Arrows point Away from time Axis Arrows pointing Up are Income Arrows pointing Down are Expense Arrows can be Summed in the Same Year Cash Flow Rules

20. P RESENT V ALUE OF FUTURE I NCOME Question What is the present value of a payment of $100 at 5% annual discount rate paid 1 year from now. Answer Formula Payment * Factor Substitution $100 * 0.9524 Answer $95.24 Example

21. P RESENT V ALUE OF F UTURE I NCOME Question What is the present value of a payment of $400 at 6% annual discount rate paid 4 year from now. 4 year at 6% would be factor of 0.7921 Answer Formula Payment * Factor Substitution $400 * 0.7921 Answer $316.84 Example

22. N ET P RESENT V ALUE Your Choice Add Future Values OR

23. T IME V ALUE OF M ONEY TIME PRESENT VALUEFUTURE VALUE AMOUNT RECEIVED AMOUNT EXPENDED ANNUAL SAVINGS Future Savings

24. P RESENT VALUE OF FUTURE SAVINGS STREAM Question What is the present value of a saving of $1400 a year for 5 years with a 4% annual discount rate. Answer Formula Sum(Payment * Factor) Substitution $1400*0.0.9615 +$1400*0.9246 +0.8890*$1400 +0.8227*$1400 +0.7835*$1400 Answer $5,081.85 Factors Year 1 = 0.0.9615 Year 2 = 0.9246 Year 3 = 0.8890 Year 4 = 0.8227 Year 5 = 0.7835

25. N ET P RESENT V ALUE Incandescent Light Calculation for 25,000 Hours TypeIncandescent First Cost$1.97 Annual Power kWh 298.712 Rate cents/kWh6.387 Generation Cost$19.079 Annual Demand Charge 3.441 Annual Cost$22.520 Annual Savings$0 TypeIncandescent Life hours1500 Annual Hours4719 Labor Cost/Bulb$4.00 Factors for 4% Year 1 = 0.9615 Year 2 = 0.9246 Year 3 = 0.8890 Year 4 = 0.8548 Year 5 = 0.8219 Year 6 = 0.7903

26. R ESIDENTIAL L IGHTING C OMPARISON Type First Cost Annual Power kWh Rate cents/kWh Annual Cost Annual Savings Simple Payback, years Light Emitting Diode $24.97 12.147 10.299 $1.251 $4.946 5.06 Incandescent Light Calculation for 25,000 Hours Factors for 4% Year 1 = 0.9615 Year 2 = 0.9246 Year 3 = 0.8890 Year 4 = 0.8548 Year 5 = 0.8219 Year 6 = 0.7903 TypeIncandescent Life hours25,000 Annual Hours4719 Labor Cost/Bulb $4.00

27. R ESIDENTIAL L IGHTING C OMPARISON TypeIncandescentCompact Fluorescent Light Emitting Diode Simple Payback, years N/A1.5 years10.1 years Life Cycle Cost$10.38$20.26$50.34 Cost per Hour0.6900.201 NPV

28. SUSTAINABLE ENERGY PURCHASE AGREEMENT

29. SEF Pays Contractor Contractor Installs Devices Energy Consumption is Reduced "NegaWatts" are created. Energy User Buys "NegaWatts" From SEF

30. S USTAINABLE E NERGY P URCHASE A GREEMENT No upfront investment Purchase Agreement Price of Negawatt-h less than current energy rates. Cash Flow Positive from Day 1 Immediate Payback Contractor Guarantee Performance Minimal M&V Benefits

31. S USTAINABLE E NERGY P URCHASE A GREEMENT ItemValue Contractor Payment$14,580 NegaWatts Created – kWh100,000 Utility Rate$0.075 Utility Bill Reduction$7,500 NegaWatt Rate$0.050 NegaWatt Invoice – SEF Payments$5,000 Net Savings – Energy User$2,500 Benefits

32. SEF FINANCING John Orsini Business Development Specialist

33. B ENEFITS OF SEF F INANCING 100% Financing Subordinate Lien Positions Interest Only Construction or Rebate Periods Terms Established to Seek Positive Cash Flow No Prepayment Penalty Understanding of Renewable Energy and Energy Efficiency Projects

34. E ARNING O PPORTUNITIES ESP’s can Earn Up To 0.5% of Loan Value

35. SEF F UNDING P RODUCTS Loan Lease, Capital Sustainable Energy Purchase Agreement “NegaWatt” Financial Products

36. F UNDING P RODUCTS Term Loans Possible upfront investment Fixed rate/term Fully-amortizing Full ownership

37. No upfront investment Benefits and drawbacks of Ownership Own Equipment at End of Lease Lease Considered Debt F UNDING P RODUCTS Capital Lease

38. F UNDING P RODUCTS If any one of four conditions exist, lease is a capital. Lease Life Exceeds 75% of Asset Life. Transfer of Ownership at End of Lease. If Asset can be Purchased at End of Term at “Bargain Price”. Present Value of Lease Payments Exceed 90% of Fair Market Value of Asset. Capital vs. Operating Lease

39. S USTAINABLE E NERGY P URCHASE A GREEMENT No Upfront Investment Purchase Agreement Avoided kWh’s = “Negawatt-hrs” Negawatt-hrs Purchased by Customer Operating Expense NegaWatt

40. PROJECT T YPES Building Envelope Measures Lighting Heating, Cooling, and Ventilation Geothermal Heat Pump Demand Reduction Industrial Methods Building Automation flue Gas Heat Recovery VFD’s Efficient Motors Energy Efficiency

41. PROJECT T YPES Solar PV Anaerobic Digesters Wind Micro-hydro Biogas Biomass CHP from Sustainable Feed Stocks Renewable Technologies

42. R EQUIRED D OCUMENTATION < $35,000 Complete Application. Financial Statement or Tax Returns for last Fiscal Year. Interim Statement Recent Quarter. Schedule of Business Debt. Copy Project Proposal. Personal guarantee FICO > 724 DSCR > 1.1:1 2 Years of Operation Positive Net Worth

43. R EQUIRED D OCUMENTATION > $35,000 Complete Application. Financial Statement or Tax Returns for last 3 Fiscal Years. Interim Statement Recent Quarter. Schedule of Business Debt. Copy Project Proposal. Personal guarantee FICO > 680 DSCR > 1.2:1 2 Years of Operation Leverage Ratio < 4.0X

44. T ERMS Minimum $10,000 Maximum Loan$1,000,000 Length 5 Years Amortization Length Up to 10 years Interest Only PeriodUp to 6 months Interest Rates $35,000 6.25% Origination Fee $35,000 1% or $350 Outside of Pennsylvania (Very limited) plus 1%

45. H OW TO C OMPLETE A PPLICATION

48. O NLINE C ALCULATOR

49. E XAMPLES Example #1 Contractor – Municipality LED Traffic Lights Borrow $10,012 3 year loan Include financing rebate Example #2 Veterinary Clinic Solar Thermal System Borrow $65,000 5 year loan Includes PA Sunshine and DEP Grants Example #3 Hospital Energy Efficiency Upgrade $2,099,457. SEF portion $892,269 8 Year Lease Multiple Party Deal Example #4 Public Library New Mechanical System Gas and Electricity Reduction $250,00 6 Years

50. C ONTACT I NFORMATION Business Development Specialist John Orsini 610-264-4440 jorsini@thesef.org PRI Analyst Scott DeStefon 610-264-4440 sdestefon@thesef.org