GreenLight Lending

“Retrofitting a nation.”

August 2014

Commercial Buildings and Climate Change• 97% of climate experts agree that humans cause global warming.

[1]

• Commercial buildings account for 36% of all U.S. electricity consumption and cost more than $190 billion in energy costs every year. – They are also responsible for 18% of U.S. carbon dioxide emissions, a

primary greenhouse gas, and they consume more than 18%, or 18 quads, of U.S. primary energy—more than all of Canada's energy consumption [2]

• Commercial HVAC: According to a new report from Pacific Northwest National Lab, commercial building owners could save an average 38 percent on their heating and cooling bills just by installing a few new controls onto their HVAC systems.[3]

• Lighting: Energy-efficient lighting upgrades can reduce electricity consumption by up to 80 percent; lighting controls can reduce energy costs by 15 - 80 percent. [4]

The Commercial Renovation Market • “McGraw-Hill Construction expects continued growth in

major commercial renovation activity over the next five years, with $53 billion anticipated by 2014 for major projects, a large portion of which includes energy efficiency investments . . .”[5]

• The McGraw Hill Construction Report Booming Green Opportunities in U.S. Construction (2012) makes the following observations: – During the year 2015, the market for energy efficiency building

retrofit projects and renovations is projected to be $57.5 billion. [5]

– The decision makers who influence “green” and energy efficiency improvement decisions include Property Owners (96%), Property Managers (85%) and Tenants (50%). [5]

The Value of Energy Efficiency• “Evidence strongly shows that . . . energy

efficient green buildings are translating into greater value in the form of increased rental rates, higher sale prices, increased occupancy rates, lower operating expenses, higher net operating income, lower capitalization rates, and increased worker productivity. [5]

The Value of Energy EfficiencyAlthough value varies from market to market, sustainability’s impact can be significant in making a property more competitive and assisting in a more rapid lease-up.• Energy Star properties had a rental premium of 4.8%, or

$1.26 per square foot. [5]

• Energy Star properties had a 13.5% higher market value relative to non-Energy Star properties. [5]

• A sale price premium of 31% was reported for ENERGY STAR and 35% for LEED-certified offices. [5]

• ENERGY STAR calculates that a 10% decrease in energy use could lead to a 1.5% increase in net operating income. [6]

The Problems for Property Owners: Lack of Financing and Quantitative Evaluation

• Over 2/3 of proposed energy efficiency projects don’t get approved to move forward. [8]

• Lack of budget and uncertainties about the project savings are the most popular reasons for projects not getting approved. – For both Project Developers and Energy

Managers, lack of funds for investment was cited by 62% and 64%, respectively. [7]

The GreenLight Business Model• GreenLight Lending will provide peer-to-peer (P2P)

financing to commercial real estate owners who want to make energy efficient operational improvements to their buildings’ operational systems.

• GreenLight Lending will finance HVAC and lighting improvements.

• Unlike energy utilities and government agencies, GreenLight Lending will assess the clients’ contractor bids on building-specific HVAC and lighting improvement upgrade options and present the improvements that are most energy efficient and consistent with the client’s proposed budget through EnergyActio software. – The EnergyActio software is listed in the DOE Software Directory

and is used for reducing energy costs in commercial buildings.

The GreenLight LendingBusiness Model

• GreenLight Lending plans to generate revenue and sustain the venture by funding projects based on commercial property owners’ and investors’ willingness and desire to invest in energy efficiency.

• After the property owner agrees to a 1-3 year payment plan, GreenLight Lending will pay the clients’ contractors for the energy efficiency improvements.

• We will sell our loans to commercial property owners as restricted securities. We anticipate that our Notes will have rates of return between 5-15%. • We anticipate the average rate of return to be around 7%.

• The interest rate of each GreenLight loan (Green Note) will be based on the respective client’s credit score, credit history, and debt-to-income ratio.

• GLL will primarily distribute loans to commercial property owners with prime to super-prime credit ratings.

Green Notes

• Green Notes will be fixed-income investments that will generate monthly cash flow in the form of payments of principal and interest.

• Investors will have the option to choose to invest in many different Notes to diversify and benefit from more consistent performance.

• Notes will be graded A1 through G5 and carry an interest rate commensurate with their risks, so investors can build portfolios that fit their investment objectives.

Sample Note Scale (from LendingClub.com)

GreenLight Investors• Each Green Note will disclose the property owner’s

industry, location (just the state), credit score, and the impact of the proposed equipment improvements to GreenLight investors.

• GreenLight Lending will make money by charging property owners an origination fee and investors a service fee. The origination fees will be 5% of each project cost, and the size of the service fees will be 1% of what property owners pay to investors.

• GreenLight Lending will facilitate interest rates that are better for lenders and property owners than they would receive from most banks.

Potential GreenLight Lending Investors1. Individual investors (min. $70,000 gross annual income)2. Investor Networks

– United Nations Environment Programme Finance Initiative (UNEP FI)

– URGENT VC, LLC– SJF Ventures– The Investor Network on Climate Risk (INCR)– Morgan Stanley: Investing with Impact Platform– Chrysalix Energy Venture Capital– CalPERS– Google Capital– Domini Social Investments LLC– Skoll Global Threats Fund

3. Banks

All Parties Involved• Owner (GreenLight Lending): The parent company of the Special

Purpose Vehicle (SPV). The Owner keeps any profits accruing to the SPV after its operational expenses and debt payments to Lenders are covered.

• Borrower (GreenLight Lending SPV): The SPV is the Borrower in a project finance transaction. It takes out a loan to fund its operations and then repays the Lender with interest over time.

• Lender (Investors): The Lender provides up-front cash to the SPV and is repaid with principal and interest over time.

• Offtaker (Commercial Real Estate Property Owner): The Offtaker consumes the output produced by the project and pays the SPV for goods or services received.

• Contractor (Energy Efficient Equipment Contractors): The Contractor provides goods to the Offtaker with the money received from the Borrower.

All Parties Involved

All Parties InvolvedLet’s not forget…

• The biosphere• Future generations

EnergyActio™ Partnership

• Robert Roth, GreenLight Lending’s Energy & Business Development Advisor, is the co-developer of the Energy Efficiency Continuous Improvement™ process, and the supporting EnergyActio™ software platform. – He holds BS, MBA and Ph.D. degrees in communications

and business management. He also holds certificates and has instructed in business process management for the American Productivity and Quality Center (first administrator of the Malcolm Baldrige National Quality Award).

EnergyActio™ Software• The U.S. DOE listing describes EnergyActio as:

". . . a simple, inexpensive, software platform that enables facility manager/contractor collaborations to evaluate efficiency solutions based on real, building-specific conditions and real cost and benefit numbers. • EnergyActio™ is an online toolkit for:

– Performing building-specific, hands-on energy assessments – Capturing real cost and benefit estimates provided by local

contractors – Evaluating the cost and ROI for alternative efficiency solutions – Preparing one-click, professional reports and recommendations [5]

• EnergyActio™ software has been included in the U.S. Department of Energy’s (DOE’s) Energy Efficiency and Renewable Energy Software Guide.

EnergyActio™ Software• EnergyActio™ will collect all of our

clients’ contractor bids for energy efficient operational improvements, and present the option that is most efficient most consistent with our clients’ budget.

• “Using EnergyActio™ software, the applicant will create a report that:– quantifies energy consumption of

their building’s energy systems– identifies priority areas for

improvement, and – provides contractor’s project cost

and estimated energy cost savings estimates (e.g. return on investment) for the proposed project.”

-EnergyActio™ Energy Pie [5]

Mission and Vision• GreenLight Lending’s mission:– To create and sustain operational excellence in commercial

buildings by financing energy efficient operational improvements that make good financial sense through peer-to-peer lending.

• GreenLight Lending’s vision: – To make a substantial impact by enabling millions of owners of

commercial real estate properties small and large to invest in energy efficient operational equipment, giving them an innovative way to invest in a more sustainable planet, while also earning a nice return on their investments.

• GreenLight Lending will put the power in the hands of investors large and small, giving them a reliable, innovative platform through which invest in a more sustainable planet while also earning a nice return on their investments.

Example of the P2P Model: Lending Club • Lending Club’s borrowers obtain loans at terms they

find more attractive than those offered by their traditional bank or credit cards.

• Loans are funded by investors, circumventing the cost and complexity of traditional banking and cutting down intermediation costs.

• Lending Club, founded in 2006, is the country’s largest peer-to-peer platform, and saw loans jump from $800 million in 2012 to $2 billion last year (it transacted $790 million in loans last quarter alone). [9]

Multi-Billion Dollar Impact Industry

• The Rockefeller Foundation and Deutsche Bank estimate a $279 billion global market for energy efficiency investment, with $72 billion available in the commercial sector alone [10]

References1. ”Consensus: 97% of climate scientists agree:” http://climate.nasa.gov/scientific-consensus/2. “About the Commercial Buildings Integration Program:”

http://energy.gov/eere/buildings/about-commercial-buildings-integration-program3. ”HVAC Efficiency Controls Could Mean Significant Savings:”http

://energy.gov/articles/hvac-efficiency-controls-could-mean-significant-savings4. “Energy Efficient Lighting Explained:”https

://www.noesisenergy.com/site/sites/default/files/energy_efficient_lighting_explained_0.pdf5. “Cashing in On Energy Efficiency:”

http://nebula.wsimg.com/4d189f615c0a40cdcb0919a273ed2854?AccessKeyId=74483525A60B9B8C985F&disposition=0&alloworigin=1

6. “Commercial Real Estate: An Overview of Energy Use and Energy Efficiency Opportunities:” http://www.energystar.gov/ia/business/challenge/learn_more/CommercialRealEstate.pdf

7. “2014 Energy Efficiency Projects Survey:” https://www.noesisenergy.com/site/sites/default/files/2014-project-survey-results.pdf

8. “Project Financing Cheat Sheet:” https://www.noesisenergy.com/site/sites/default/files/finance-cheatsheetv3.pdf

9. “Earn Solid Returns:” https://www.lendingclub.com/public/steady-returns.action10. “Energy Efficiency is a Ripe Market for Small to Mid-Size Lenders:”

http://cleanenergyfinanceforum.com/2014/05/16/energy-efficiency-is-a-ripe-market-for-small-to-mid-size-lenders/