revolving loan programs - naseorevolving loan programs ct-deep energy savings performance...
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Revolving Loan Programs CT-DEEP Energy Savings Performance
Contracting Program for State AgenciesRevolving Working Capital Loan Fund
May 6th, 2015
NASEO 2015
Northeast Regional Meeting
Agenda
1.Quick overview RLFs
2.DEEP ESPC Program
3.Current & Pipeline Projects
4.Need for Working Capital
5.CT Green Bank WCLF
2
Quick overview RLFs
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• Internal to the Entity
• Oriented to a Specific Goal
• Easy to Administer (internal “underwriting”)
• Self-Replenishing / Sustainable
Capitalization• Federal, State or Institutional Funds
• Generally NOT a good idea to use borrowed funds
Key Features
• Application / Submission Process
• Underwriting Guidelines / Approval
• Transaction Administration
• Performance Reporting
Operation
RLF Benefits
▪ Flexible, affordable financing
▪ Excellent option for short term needs / repayment
“known”
▪ Good for situations where private capital is
unavailable or available with unattractive
conditions
▪ Can be “easy” to establish (in relative terms)
▪ Funds are at hand
4
RLF Drawbacks
▪ Could be expensive or time intensive to operate
(especially if you lack staff to administer)
▪ Poor choice for “longer term” needs
▪ Not good when private sources at reasonable
cost are “ready, willing and able” to step in
▪ Funds might not be available
5
Connecticut ESPC Program▪ Standardized ESPC Program for use by State agencies
▪ Required by Connecticut General Statutes 16a-37x.
▪ Intent is to help State agencies implement a portfolio of
comprehensive energy savings measures with no upfront capital.
▪ The costs of the energy retrofits are paid for by future savings from
future utility and maintenance budgets guaranteed by the QESPs.
▪ Program provides the following resources to support State projects:
– Assistance and support with education about the State ESPC program.
– A set of ESPC contract documents that have been pre-approved by the
Connecticut Attorney General's Office.
– A selection of fully vetted Qualified Energy Service Providers (QESPs*).
– Financing for the projects … State GO bonds … Green Bank bonds
▪ *The QESPs currently include 13 major energy service companies (ESCOs): Ameresco, ConEdison Solutions, Eaton Energy
Solutions, Energy Solutions Professionals, Energy Systems Group, Honeywell, Johnson Controls, NORESCO, Pepco Energy
Services, McKinstry, Schneider Electric, Siemens, and Trane.
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Project
Total
Project
Cost
Annual Debt
Service
(3.5%, 20 yr,
level
payments)
Avg
Cashflow
Savings
(Years 1-5)
20 yr
Cashflow
Savings
NPV 20 yr
Cashflow
Savings
CT Valley Hospital $33M $2.3M $562k $25M $17M
Dept of Motor
Vehicles$5M $365k $0 $1.5M $900k
Dept of Correction
(District 1)$45M $3.1M $0 $11M $6.6M
Total: $83M $5.75M $562k $37.5M $24.5M
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ESPC Program
Initial projects
Future ESPC ProjectsPreliminary estimate ~$125M project costs financed by ~$8M/yr savings
DOC – District 2 (Cheshire) and District 3
(York)~$3M/yr energy savings
Dept of Veteran’s Affairs (Rocky
Hill)~$700k/yr energy savings
CT Technical High Schools~$3M/yr energy savings
CT Military Department~$1.5M/yr energy savings
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ESPC Program Funding Challenges
▪ Critical need to fund preparatory costs to enable the
development of ESPC projects.
▪ A small percentage of the overall project costs, State agency
budgets are not structured to support them (particularly in
terms of timing flexibility)
▪ Examples of common preparatory costs:
• Investment Grade Energy Audits to be conducted by the ESPC
contractor
• Technical consulting services including a standardized project
development platform
• Metering and submetering services to establish energy baselines that will
be used to verify savings opportunities
• Consulting services to achieve compliance with State Historic
Preservation Office requirements
• Costs can be recouped when the project is financed
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CT Green Bank Working Capital Loan Fund▪ $1.8M fund seeded with funds repurposed from “failed” program
▪ Over time, expand to $5M to support $100M of expected projects
• DEEP-provided preparatory costs ($1.3 million) to the WCLF to the extent those
costs are recouped from the first three agency projects at the time of financing
• Directing utility incentives for state agency projects to the fund
• Adding potential future bond proceeds for the WCLF that are requested by DEEP
• Including additional funding through future CT Green Bank annual budget
processes including potential private capital leverage
• Issuance of RGGI proceeds
▪ DEEP determines allowable expenses and expense limits for the
agencies, coordinates vendor selection and pricing terms, submits
requests for funding to Green Bank
▪ Green Bank process the requests, confirms particulars & transfer
funds. Also provides monthly account statements to DEEP and
the recipient agencies to track the status and availability of funds
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CT Green Bank Working Capital Loan Fund (2)
▪ Loans from WCLF expected to be drawn and repaid
within 2 yrs
▪ Repayment from bond proceeds for project
▪ “Failed” projects repaid via agency appropriations
▪ Green Bank may (to the extent funds are available)
recoup interest expense (limited to 2% p.a.)
▪ Green Bank to report quarterly to DEEP (WCLF status)
▪ Final financial report upon conclusion of the Fund
11
RLF Recap
▪ Flexible, affordable financing
▪ Short term needs
▪ Repayment “known”
▪ Private capital is unavailable (not a good fit)
▪ “Easy” to establish
▪ Funds were at hand
12
Thank you!
Bert Hunter EVP & Chief Investment Officer Connecticut Green Bank T 860-257-2174 | C 203-918-0013 | F 860-563-4877 845 Brook Street, Rocky Hill, CT 06067
300 Main Street, Suite 400, Stamford, CT 06901 [email protected] ctgreenbank.com