Transcript ESCO Operating Model - 綠基會

ENERGY PERFORMANCE SERVICES
EPS
Fundamentals of Financing
Performance Contracting
Projects
Thomas Dreessen
Chief Executive Officer,EPS Capital Corp.
October 31, 2001
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Phone: 215-230-9871 Fax: 215-340-3972 Email: [email protected]
ENERGY PERFORMANCE SERVICES
EPS
Energy Services Company (“ESCO”)
• A Performance Contracting Company
that:
– develops and implements energy efficiency
projects “EEPs” on a turn-key basis
– risks its payments on the performance of
equipment and services implemented
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ENERGY PERFORMANCE SERVICES
EPS
“ESCO” GUARANTEE
• Customer’s current operating costs will
be reduced by an amount at least equal to
the debt service required to repay the
turnkey Construction Price for ESCO to
implement and finance EEPs.
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ENERGY PERFORMANCE SERVICES
EPS
ESCO Must Manage Risks
•
•
•
•
•
•
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Development
Construction
Technology
Cost Overruns
Operations & Maintenance
Performance (Savings)
ENERGY PERFORMANCE SERVICES
EPS
Development Risk
• ESCO provides the working capital to
develop a “paid from savings” project. If
no such project exists, no cost to
customer.
• ESCO must provide/arrange appropriate
long term project financing.
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ENERGY PERFORMANCE SERVICES
EPS
Development Barriers
• Identify “Qualified” Customers
- GOVERNMENT: Stable Financials;
Significant Procurement Barriers and No
Incentive
- INDUSTRY: Limited Procurement Barriers
and Good Incentive; Less Stable Financials
• Obtain “VIABLE” Project Financing
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ENERGY PERFORMANCE SERVICES
EPS
Project Financing Risk
• Identify Project Finance Strategy
• Create Viable Project Finance Strategy
• Obtain Commitment from Financing
Sources
• Finance from Savings of EEPs
• Close Contracts with Financing Sources
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ENERGY PERFORMANCE SERVICES
EPS
Implementation Risk
•
•
•
•
•
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Achieve Turnkey Price
Adhere to Design Specifications
Meet Completion Deadlines
Meet Commissioning Requirements
Comply With Regulatory and Legal
Issues
ENERGY PERFORMANCE SERVICES
EPS
Operating Risk
• Savings Guarantee to Customer that the
“turnkey” costs of implementing and
financing the EEPs will be paid-fromsavings.
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ENERGY PERFORMANCE SERVICES
EPS
Two Primary Structures
• Guaranteed Savings - 90%
• Shared Savings - 10%
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ENERGY PERFORMANCE SERVICES
EPS
Guaranteed Savings
“Market Risk”
CUSTOMER
Savings
Guarantee
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Fixed
Repayment
Schedule
ESCO
Lender/Investor
“Performance Risk”
“Credit Risk”
ENERGY PERFORMANCE SERVICES
EPS
Guaranteed Savings Illustration
Capital & Interest
Loss Covered by ESCO
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Revenues ESCO
Revenues Customer
End of Contract with ESCO
ENERGY PERFORMANCE SERVICES
EPS
Shared Savings
Customer
“ESCO”
Performance &
Credit Risk
Project Services
Savings Guarantee
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Lender/Investor
100% Funding
ENERGY PERFORMANCE SERVICES
EPS
Industrial Customer Case Study
•
•
•
•
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Paper Manufacturer in Asia
Locally owned and operated
Sells “Specialty Paper” products
No significant exports
ENERGY PERFORMANCE SERVICES
EPS
Project Summary
• Seven (7) Energy Efficiency Projects (EEPs)
• Construction Price
US$ 5,000,000
Annual Benefits:
• Annual Savings
US$ 1,765,000
• Annual Debt Service
US$ 1,145,000
• Net Annual Cash Flow US$ 620,000
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ENERGY PERFORMANCE SERVICES
EPS
Summary of EEPs
DESCRIPTION
Construction
Price
#1 Pocket Ventilation Pre-Heat
US$ 100,000
#2 Vacuum Pumps Power Reduction
696,000
#3 Refining Power Reduction
882,000
#4 Wastewater Aeration Power Reduction 110,000
#5 Pumping Power Reduction
196,000
#6 PM Steam/Condensate Optimization
696,000
#7 On-site Power Generation Upgrade
2,320,000
Total
$ 5,000,000
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Savings
Simple Payback
Years
US$ 45,000
253,000
267,000
33,000
65,000
312,000
790,000
$ 1,765,0002.8 Yrs.
2.2
2.8
3.3
3.3
3.0
2.2
2.9
Project 7 Year Cash Flow
INDUSTRIAL CASE STUDY ENERGY PROJECT
7 YEAR CASH FLOW
ENERGYP ERFORMANCESERVICES
31-Oct-01
(IN US$)
EPS
PROJECT FINANCING:
Enter "1" if no Depreciation/Taxes
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Total Construction Price
Construction Interest
14.0%
Finance Fees
1.0%
Total Funding Required
Construction Period - Months
12
Long Term Debt Terms:
Interest Rate:
12.0%
Years:
7.0
CASH FLOW:
YEAR >
PROJECT SAVINGS:
Energy
Operations & Maintenance
TOTAL GROSS SAVINGS
$ 5,000,000
350,000
54,040
$ 5,404,040
0
$
DEBT SERVICE (Principal+Interest)
INFLATION ASSUMPTIONS
Energy
Operations & Maintenance
1
2
3
4
5
6
3.0%
5.0%
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- $ 1,500,000 $ 1,545,000 $ 1,591,350 $ 1,639,091 $ 1,688,263 $ 1,738,911 $ 1,791,078 $ 11,493,693
265,000
278,250
292,163
306,771
322,109
338,215
355,125
2,157,632
1,765,000
1,823,250
1,883,513
1,945,861
2,010,372
2,077,126
2,146,204 13,651,326
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ESCO Share of Savings at: 50%
(1,144,753) (1,144,753)
(1,144,753)
(1,144,753)
(1,144,753)
(1,144,753)
(1,144,753)
(310,124)
(339,249)
(369,380)
(400,554)
(432,810)
(466,186)
(500,725)
OWNER CASH - ANNUAL
-
310,124
339,249
369,380
400,554
432,810
466,186
500,725
OWNER CASH - CUMULATIVE
-
310,124
649,372
1,018,752
1,419,306
1,852,116
2,318,302
2,819,027
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Total
(8,013,271)
(2,819,027)
2,819,027
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ENERGY PERFORMANCE SERVICES
EPS
Financing is Key ESCO Ingredient
• ESCO is a Service Company not a Bank
• ESCO cannot invest its Working Capital
to Develop & Implement EEPs unless
“Reliable” and “Commercially Viable”
Long-term Project Financing is Available
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ENERGY PERFORMANCE SERVICES
EPS
Project Financing Barriers
• Traditional Local Bank Lending not
applicable:
– Corporate Lending
– Rates too high
– Repayment Term too Short
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ENERGY PERFORMANCE SERVICES
EPS
Project Financing Barriers
• International “MDB” Lending not
applicable:
– Size of EEPs is Too Small
– Due Diligence too Cumbersome
– Require Hard Currency Repayment
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ENERGY PERFORMANCE SERVICES
EPS
Major Causes of Financing Barriers
• Not Due to Lack of Available Funding
• Inability of EEPs to Access Funding
• “Disconnect” with Traditional Methods:
– Traditional is Asset-Based Lending
– EEP is Project Cashflow-Based Lending
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ENERGY PERFORMANCE SERVICES
EPS
Major Causes of Financing Barriers
• No Lending Infrastructure for Complex
EEPs
• No immediate Solution because Energy
Efficiency Market is Not Developed
Enough to Motivate Local Banks to
Invest in Setting up EEP Lending
Infrastructure.
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ENERGY PERFORMANCE SERVICES
EPS
International Energy Efficiency
“Project” Financing Protocol
• “IEEPFP” is a Protocol that Becomes the
Guideline used by Local Banks in
International Markets to Finance Energy
Efficiency Projects “EEPs”.
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ENERGY PERFORMANCE SERVICES
EPS
“IEEPFP” Content
• Customer Lending Criteria & Analysis
• Customer Credit Information Needed
• Credit Review and Loan Approval
Procedures
• Standard Loan and Security Agreements
• Standard ESCO & Construction
Agreements
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ENERGY PERFORMANCE SERVICES
EPS
“IEEPFP” Content
• Training Manuals for Loan Officers
• Training Workshops with EEP Case
Studies
• Procedures for Evaluating EEPs
• Risk Assessment Guidelines for EEPs
• Investment Criteria for EEPs
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ENERGY PERFORMANCE SERVICES
EPS
Investment Criteria for EEPs
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•
•
•
•
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Creditworthy Customer
Enforceable & “Balanced” Contracts
Proper Licenses & Permits
Experienced ESCO/Contractor
Proven Commercial Technologies
ENERGY PERFORMANCE SERVICES
EPS
Investment Criteria for EEPs
• Acceptable Project Economics (Risk
Profile)
• Adequate Return to Lender & ESCO
• Compliance with Environmental
Regulations
• Must follow International Measurement
and Verification Protocol “IEMVP”.
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ENERGY PERFORMANCE SERVICES
EPS
Create an EEP Fund
• Funding from Ratepayer Fees:
–
–
–
–
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U.S. “System Benefit Charge”
Brazil through 1% ANEEL Fund
Thailand through the ECF ($ 250 Million)
India through Energy Conservation Act
ENERGY PERFORMANCE SERVICES
EPS
EEP Fund Profile
• Utilize ESCO “Guaranteed Savings”
Structure versus old “Shared Savings”
– Creates a Growth Model for the ESCO and
Energy Efficiency Industry
– Simplifies Requirements of Local Banks
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ENERGY PERFORMANCE SERVICES
EPS
EEP Fund Profile
• Utilize Funds to “Buy-Down” Interest
Rate to Below Market Rates
• Utilize Funds to Guarantee a Portion of
the Loan Losses to the Local Banks
• Have 10-Year Repayment Terms from
Local Banks Including One-Year
Moratorium
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ENERGY PERFORMANCE SERVICES
EPS
EEP Fund Profile
• Repay in Local Currency
• Managed by individuals who have
previous private sector project financing
experience
• Provide Fast Loan Approval - “IEEPFP”
• No Government intervention and
procedures
• Require use of IEMVP
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ENERGY PERFORMANCE SERVICES
EPS
Benefits of IEEPFP & Fund
• Establish Commercial Mechanism for the
Financing of EEPs in International
Markets
• Create Local In-Country Banking Staff
Trained in Project Financing of EEPs
• Eliminate Currency Devaluation Risks
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ENERGY PERFORMANCE SERVICES
EPS
Benefits of IEEPFP & Fund
• Provide Incentive to Implement EEPs
• Deliver Long Term Savings thru IEMVP
• Create Commercial Lending Sector for
EEPs
• Provide a Conducive ESCO Environment
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ENERGY PERFORMANCE SERVICES
EPS
Benefits of IEEPFP & Fund
• Provides a Method to Aggregate EEPs
• Provide a Reliable CO2 Reduction
Progam
• Create a Fund that Will Sustain over
Time
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