1. Innovations in Financing Efficiency New approaches and partnerships at NYSERDA Jeff Pitkin Treasurer, New York State Energy Research and Development Authority (NYSERDA)

2. Agenda About NYSERDA Green Jobs Green New York Act of 2009 Funding Program Guidelines Financing Approach Capital Markets Financing Approach Status Questions

3. About NYSERDA Public benefit corporation – 1975 Annual Budget $760M; 340 employees Programs – Innovative programs offering technical expertise and funding to increase energy efficiency, create clean-energy solutions, and save money – Financial incentives to encourage the development and operation of renewable generation facilities – Energy analysis and planning – Manage clean up of former nuclear fuel reprocessing facility (West Valley) – Manage Saratoga Technology + Energy Park (Malta) – Issue tax-exempt bonds for qualifying utility costs Learn more www.nyserda.org Mission Statement Advance innovative energy solutions in ways that improve New York’s economy and environment Vision Statement To serve as a catalyst – advancing energy innovation and technology, transforming New York’s economy, empowering people to choose clean and efficient energy as part of their everyday lives

4. Green Jobs Green New York Act of 2009 (enacted Oct 2009) The Act directs NYSERDA to: Establish a revolving loan fund to provide loans to finance energy efficiency retrofits for residential (up to $13,000), multifamily (program will limit to $500,000 per building), small commercial (<101 employees) and not-for-profit structures (up to $26,000); Pursue the feasibility of other innovative financing mechanisms; Issue competitive opportunities to solicit constituency-based organizations which can connect community members to the program; Establish standards for energy audits and energy retrofit contractors; Establish a schedule of fees for energy audits including a sliding scale (waived for residential applicants with income less than two times median county household income, prorated between two and four times, pay full fees if over four times); and Enter into contracts to provide employment and training services to support the program.

5. GJGNY Funding $112M from Regional Greenhouse Gas Initiative (RGGI) auction allowance proceeds Workforce Development$8,000,000 Outreach and Marketing$10,000,000 Energy Audits and Implementation Costs - Residential (1-4 family) - Multifamily - Small Commercial/NFP $12,596,000 $4,400,000 $10,400,000 $27,396,000 Financing: - Residential (1-4 family) - Multifamily - Small Commercial/NFP $26,692,533 $11,292,550 $13,274,917 $51,260,000 Program Administration & NYS Fee$9,744,000 Program Evaluation$5,600,000

6. Additional GJGNY Funding US DOE EECBG Retrofit Rampup(Better Buildings) Grant Total $40M award, largest in nation Partnership award – $21.4M NYC Financing Program (large commercial) – $18.6M NYSERDA - Statewide Finance Program (integrated with GJGNY) Grant allows use of 50% of NYSERDA funding ($9.3M) for loan loss/debt service reserve

7. Strategy: 3 Forms of Financing 1.PACE-type approach  On hold due to FHFA/OCC notices 2.On-bill recovery financing  Pilot program with National Grid in upstate gas market  Pursuing legislation to authorize statewide: on-meter tariff obligation; shutoff provisions for failure to pay 3.Direct loans

8. Program Guidelines Residential Based on existing Home Performance with ENERGY STAR® program Comprehensive energy audits and retrofits completed by BPI-accredited contractors 171 actively participating contractors Can finance cost effective prequalified measures – Total Savings to Investment Ratio (SIR) > 1 Extensive program QA/QC provides consumer safeguards – Independent review and approval of work scopes pre-implementation – Independent post-implementation inspection of 15% of projects – Dispute resolution process; contractor debarrment 2010: 6,123 completed retrofits; 35,784 since program inception – Expect significant increase with GJGNY CBO outreach and marketing Average retrofit cost: $7,700; average annual savings: $660

9. Program Guidelines Residential (Continued) Assisted Home Performance with ENERGY STAR® Program provides 50% cost subsidy to income-eligible participants (80% of State/Area Median Income) Previously, program offered consumers option of 10% incentive or program financing (5.99% unsecurred FNMA loan, subsidized) With implementation of GJGNY, consumers qualify for 10% incentive (SBC-eligible territories) or 50% AHPwES incentive, and the balance can be financed through loan offered through GJGNY program Contractors receive 5% incentive for comprehensive work scopes Consumers may also receive incentives available from utilities for certain measures, but all incentives must be used to reduce the amount financed

10. Program Guidelines Small Commercial/NFP Energy audits/studies delivered through existing network of Flexible Technical Assistance (FlexTech) contractors and Business Partner contractors. Two tiers: – Full walkthrough audit – examines all energy systmes – Technology/equipment specific audit Free audits for 10 employees or less or if energy demand less than 100kW Prequalified measures; custom measures can also be included with approval Installation of measures by certified contractors where third-party certifications exist; expanding pool of certified contractors

11. Program Guidelines Multifamily Administered through existing Multifamily Performance Program (MPP) Network of approved MPP Partner energy service contractors Implementation contractor and QA contractor provide oversight of MPP Partners Energy Audit develops Energy Reduction Plan Can finance cost-effective measures with SIR>1

12. Financing Approach Residential Financing launched November 15, 2010 Loans originated through participating financial institutions – Launched using single originator, Energy Finance Solutions - current FNMA loan originator – Open up to multiple lenders in 2011 Loans originated consistent with NYSERDA program loan underwriting standards Lender closes on loan and then loan purchased by NYSERDA using $51M RGGI program funds Lender paid $175 origination fee by NYSERDA; can charge additional fee to borrower if needed to cover costs, which can be financed Loan serviced by NYSERDA Master loan servicer, who monitors loan origination to ensure conformance with standards, and services the loans (including follow up on delinquencies)

13. Installers Property Owners Investors (Taxable bonds) Bond Trust Account NYSERDA GJGNY Loan Fund ($51M RGGI) Funding Flow Repayment Flow Project cost funded by owner Monthly Payment (P&I) Project Loan Amount Utility/ NYSERDA Incentives Fund Debt Service Reserve using DOE EECBG Better Buildings grant $9.3M Lenders Purchase loans conforming to NYSERDA loan underwriting standards Securitize and sell investments for loans issued Semi-annual P&I Energy audit subsidies Master Loan Servicer Monitors loan origination Performs collections on delinquent accounts

14. Loan Underwriting Standards Two Loan Tiers Tier1 loans: loans meet standards that can be financed in capital markets (FNMA standards) Tier2 loans: loans originated under alternate criteria (utility bill paying history) – Initially issued as revolving loan fund – Monitor loan performance – can be added to pool of loans financed through capital markets with ~2-3yrs of performance data

15. Residential Direct Loan Standards Tier1 Credit score 640 or higher (680 or higher if self- employed for 2yrs or more; 720 or higher if self- employed less than 2yrs) Debt-to-income ratio < 50% No bankruptcy within last 7 yrs No outstanding collections, judgments or tax liens > $2,500

16. Residential Direct Loan Standards Tier2 Utility bill payments must be current for two consecutive months during each of the last two years; No utility or mortgage payments more than 60 days late in the last two years; Debt-to-income ratio less than 50%; No bankruptcy, repossession, or foreclosure within the last seven years; No outstanding collections, judgments or tax liens greater than $2,500; and Current on mortgage payments for the last year

17. Capital Markets Financing Approach Aggregate loans and issue bonds using master trust structure Bonds supported by loan repayments and loan loss/debt service reserve ($9.3M from DOE EECBG Retrofit Rampup/Better Buildings grant) Proceeds used to fund additional program loans First issuance $25M (2011) - Rated security Subsequent issuances will increase scale Issue Qualified Energy Conservation Bonds

18. Qualified Energy Conservation Bond Structure QECB – tax subsidy bonds - ~70% federal interest subsidy Bond volume cap authorization under ARRA - $86.7M allocated to NYC; $95.4M to 38 large munis (varying amounts $600k-$7.8M); $20.1M State No expiration on cap, but ARRA authorized – legislation could affect if not used Specific eligible purposes – primarily public facility energy efficiency Green Community Program purpose allows proceeds to fund loans for energy efficiency – including private homes/facilities Lower QECB bond net interest cost allows lower loan interest rate to be passed on to borrowers State authorized $20.1M allocation to be used Several local governments (totaling $6.3M) have reallocated their allocation back to the State – current total bond cap of $26.4M Anticipate A rating; ~5.7% (300 bps/3% over Treasury) interest rate; ~12yr term; Net Interest Cost after federal subsidy ~2%

19. Loan Terms Unsecured loan 5,10,15 yr loan term – Term can’t exceed life of measures ½% interest rate reduction for automated payment – improves payment performance Interest Rate 3.99%/3.49% forloans supported by QECB bonds (up to $26.4M+) After QECB, expected rate of 5.99%/5.49%

20. Progress to Date (As of 12/31/2010, Since 11/15/2010 Launch) 341 applications for financing received – 209 (61%) approved – 132 (39%) denied 45% insufficient debt:income ratio 36% insufficient FICO score (some may re-qualify through Tier2) 19% other standards not met 15 loans closed – 9 purchased $80,000 25 loans approved and awaiting closing 209 loans 142 loans in process ~$1.9M

21. Financing Approach Small Commercial/NFP and Multifamily Loans originated through participating financial institutions Lender originates loan using its normal credit standards NYSERDA participates in loan by providing 50% of loan capital at no interest to lender Lender offers loan to borrower at 50% of normal interest rate Lender pays NYSERDA/Master Loan Servicer its prorata share of interest payments received NYSERDA and Lender share pro-rata on loan defaults Expected launch 1 st Qtr 2011

22. Questions Contact Information: Jeff Pitkin (518)862-1090 x3223 jjp@nyserda.org