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Using Public Funds to Finance Energy Efficiency Projects Dan Clarkson Vice President Energy Efficiency Finance Corp.

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Presentation on theme: "Using Public Funds to Finance Energy Efficiency Projects Dan Clarkson Vice President Energy Efficiency Finance Corp."— Presentation transcript:

1 Using Public Funds to Finance Energy Efficiency Projects Dan Clarkson Vice President Energy Efficiency Finance Corp.

2 Why Invest in Energy Efficiency? Govt. facilities: save energy costs & meet deferred maintenance needs Residential, commercial, industrial & non-profit facilities Target EE measures that pay for themselves via energy cost savings Policy rationale:  Local economic development; sustainable economy  Job growth in the trades -- Green Jobs  Reduce emissions; achieve climate goals  Energy security in face of volatile energy prices

3 Market Segment Loan ProductTypes of Financial Institutions (FIs) Residential Single Family loans, both secured and unsecured commercial banks credit unions specialized non-bank FIs & CDFI Multi-Family loans, both secured and unsecured tax-exempt bond debt possible for qualifying low-income housing ESCO commercial banks credit unions leasing companies bond purchasers Commercial Small  loan/lease are typical  commercial banks  credit unions Large (as well as industrial)  loan/lease  Energy Savings Performance Contracting (ESCO)  QECBs possible  Tax-exempt industrial development bonds for industry  commercial banks  credit unions  specialized EE FIs  contractors/ESCOs  private equity investors Institutional Government  tax-exempt bond  tax-exempt lease  ESCO  Tax-exempt & lease purchasers  capital markets transactions possible 501C (3)  tax-exempt bond  loan/lease  QECBs possible  Commercial banks  credit unions  bond purchasers  specialized EE FIs

4 Credit Enhancement Overview Goals: pioneer new finance products, expand risk horizons, broaden access to finance, extend tenors, reduce rates Risk sharing: instrumental to support Financial Institution (FI) energy efficiency (EE) & renewable energy (RE) lending Credit enhancements can support a range of finance models: FI loan facilities, bond issues, utility on-bill financing, etc. Credit enhancement structures include: – Loan Loss Reserve Funds – Debt Service Reserve Funds – Subordinated Debt Structures

5 Bellingham-Whatcom Community Energy Challenge Goal: How do we simplify the complex process of investing in energy efficiency for home and business owners?

6 Loan Loss Reserve Funds “Portfolio approach” to credit structuring Achieve significant leverage of public funds, e.g. ARRA and other grants As a % of total loan portfolio principal = 2-10% Cover first losses on a portfolio of EE/RE loans EECBG & SEP funds can be used for LRFs

7 Loan Loss Reserves Leverage Commercial Finance Escrow Account Loss Reserve Fund $1,000,000 EECBGs & WA EECE Grant Financial Institution Loans Borrowers Municipalities Total Target Number of Loans: 900 Residential & 75 Small Commercial

8 Community Energy Challenge Use City & County EECBGs and WA State SEP Credit Enhancement Grant for LRF and interest rate buydowns RFP process conducted for FI Partner Implementing Agreements with FI Partner: – LRF Agreement: account definitions, risk-sharing formula, event of loss, recoveries, etc. – Program Agreement: marketing, loan origination

9 …….. Customers MECS MMFS Turnkey project & services & equity Energy Services Agreement (ESA) for turnkey EE project development, implementation, services & financing Long-term steam supply; green energy Seattle Steam Steam & ESA payments EE project payments; Escrow services agreement Senior Lender Investor Loan & debt service Equity & returns Seattle Steam Company & MMFS: Energy Efficiency Project Development & Finance Program State DOC Sub- loan Seattle City Light elec. savings incentives Wells Lock box acct

10 Washington State Housing Finance Commission EE Finance Program Diagram USDOE WA Dept of Commerce ARRA SEP funds WSHFC: SEF MMFS, Contractor End-Users/ Borrowers: 501c3’s; Multi-family housing Bond Purchaser EECE Grant Agreement Marketing; project development; Turnkey EE projects & services Program Agreement Financing Agreements ( deal-by-deal) Program Agreement DSRF Notes: 1. EECE Grant Agreement & Program Agreements executed at Program start. 2. Financing agreements done case-by-case. Stream-lined documentation developed with bond counsel 3. Grant funds deposited with Bond Purchaser for use as debt service reserve fund or subordinated 0% co-financing. John MacLean, EEFC, jmaclean@eefinance.net

11 Tax-exempt Lease Purchase Financing for Energy Efficiency Projects in Local Government Facilities Typically 10 year tenors at fixed rates in the 4% range currently; longer tenors possible Lease-purchase can be entered into expeditiously; includes “non- appropriations” clause; voter bond approval not required Eligible Borrowers: local governments and political sub-divisions; EE projects in publicly-owned facilities are eligible Local governments can do individual transactions or participate in WA State Treasurer “LOCAL” pooled lease purchase finance program Can be combined with ESCO project implementation; often used with the Dept. of General Administration’s Energy Service Performance Contracting program

12 Energy Efficiency Finance Corp. EEFC is a financial advisory firm that assists its clients to design and implement energy efficiency and renewable energy finance programs that: Sustain funds over time Leverage private capital Innovate

13 Thank You Dan Clarkson 206.310.8733 dclarkson@eefinance.net www.eefinance.net

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19 Proposal Outline Loan Terms LRF Terms Approach to Credit and Underwriting Guidelines Loan Marketing, Origination and Administration Qualifications & Experience, Officers and Staffing Technical Assistance & Training Needs Additional Statements & Materials

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