Transcript Slide 1

Using Public Funds to
Finance Energy Efficiency Projects
Dan Clarkson
Vice President
Energy Efficiency Finance Corp.
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
Loan Product
Market
Segment
Residential
Single Family
Multi-Family
Commercial
Small
• loans, both secured and unsecured
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loans, both secured and unsecured
tax-exempt bond debt possible for
qualifying low-income housing
ESCO
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loan/lease are typical
Large (as well as 
ndustrial)
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Institutional
loan/lease
Energy Savings Performance
Contracting (ESCO)
QECBs possible
Tax-exempt industrial development
bonds for industry
Types of Financial Institutions (FIs)
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commercial banks
credit unions
specialized non-bank FIs & CDFI
commercial banks
credit unions
leasing companies
bond purchasers
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commercial banks
credit unions
commercial banks
credit unions
specialized EE FIs
contractors/ESCOs
private equity investors
Government
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tax-exempt bond
tax-exempt lease
ESCO
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Tax-exempt & lease purchasers
capital markets transactions
possible
501C (3)
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tax-exempt bond
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Commercial banks
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
Bellingham-Whatcom
Community Energy Challenge
Goal:
How do we simplify the complex process
of investing in energy efficiency for
home and business owners?
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
Loan Loss Reserves Leverage
Commercial Finance
Borrowers
Municipalities
$1,000,000
Financial Institution
Escrow
Account
Loss
Reserve
Fund
EECBGs &
WA EECE Grant
Loans
Total Target Number of Loans:
900 Residential & 75 Small Commercial
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
Seattle Steam Company & MMFS:
Energy Efficiency Project Development & Finance Program
Customers
Seattle
City Light
elec. savings
incentives
MMFS
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Energy Services
Agreement (ESA) for
turnkey EE project
development,
implementation, services
& financing
Turnkey
project &
services &
equity
Loan & debt
service
Senior
Lender
Steam &
ESA
payments
MECS
Subloan
State
DOC
Long-term steam
supply; green
energy
EE project
Wells
payments; Lock box
Escrow services
acct
agreement
Equity &
returns
Investor
Seattle
Steam
Washington State Housing Finance Commission
EE Finance Program Diagram
Program
Agreement
USDOE
ARRA SEP
funds
WSHFC:
EECE Grant
Agreement
WA Dept of
Commerce
Program
Agreement
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,
[email protected]
SEF
Financing
Agreements
(deal-by-deal)
Bond
Purchaser
DSRF
MMFS,
Contractor
Marketing; project
development; Turnkey
EE projects & services
End-Users/
Borrowers:
• 501c3’s;
• Multi-family
housing
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 “nonappropriations” 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
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
Thank You
Dan Clarkson
206.310.8733
[email protected]
www.eefinance.net
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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