Financing Options for Total Campus Retrofits

December 8, 2010
Steve Hoiberg, Higher Education Marketing Manager, Siemens Industry Inc., Building Technologies Division Gene Rogero, Vice President, Public & Institutional Markets, Siemens Financial Services Lisa Schoonerman, Account Executive, Energy and Environmental Services, Siemens Industry Inc., Building Technologies Division Arah Schuur, Director, Energy Efficiency Building Retrofit Program, Clinton Climate Initiative Cheryl St. Pierre-Sleboda, Vice President for Finance and Administration, Anna Maria College

www.presidentsclimatecommitment.org

(c) 2007 Presidents Climate Commitment. All rights reserved.

Contents
Introduction
Arah Schuur, Clinton Climate Initiative

Siemens Financial Services in Higher Education

Gene Rogero, Vice President, Public and Institutional Markets, Siemens Financial Services

Case Study: Anna Maria College (AMC)

Cheryl St.Pierre-Sleboda, Vice President for Finance and Administration, Anna Maria College

Q&A

The ACUPCC and CCI

The Clinton Climate Initiative (CCI)

Mission: Make a difference in the fight against climate change in practical, measurable & significant ways: projects not targets, high impact, large scale, replicable Projects to demonstrate success
Work with schools on large-scale energy efficiency retrofits Deliver significant campus GHG reductions Champion leaders in sustainability

Develop replicable models

Test contracting and financing models that help schools overcome obstacles Work with industry partners to tailor existing and develop new solutions Push best practices into the marketplace to achieve scale

Role of CCI
CCI serves as a pro bono adviser, providing financial analysis and technical assistance to schools in designing and implementing a building retrofit project.
Facilitate project development and implementation Connect schools with implementation, financial and other partners Provide technical assistance Ensure that best practices are followed Provide access to supplier partners and product discounts Share best practice examples at each stage of project Measure and share results

CHAMPION ACTUAL REDUCTIONS IN GHG EMISSIONS

ACUPCC & CCI: Getting to Carbon Neutral

CCI and Second Nature partner to support GHG reduction programs in ACUPCC institutions:
2009: created a best practices toolkit for energy performance contracting (EPC) as a resource for signatories 2010: supporting campus energy efficiency projects with ACUPCC signatories 2011: working together on realistic, replicable tools and resources for signatories to finance sustainability

GOAL: Accelerate campus energy efficiency as a significant, measurable way to reduce carbon footprint

What is a Campus Retrofit?

WHITE OR GREEN ROOFS OPERATIONAL IMPROVEMENTS OUTDOOR LIGHTING EFFICIENCY SOLAR-CONTROL WINDOW FILMS EFFICIENT / RENEWABLE GENERATION

ENERGY EFFICIENT LIGHTING ENERGY EFFICIENT HEATING AND COOLING SYSTEMS INSULATION AND FENESTRATION

Benefits of Total Campus Retrofits

Deliver carbon and sustainability commitments
Existing buildings use an average of 25% more energy than new buildings LEED for Existing Buildings focuses on energy, water conservation Students are demanding green, LEED, high-performing space and new buildings are providing this

Capture wasted energy & money

There is excess energy and savings trapped in existing buildings, typically 20 50% Reduce energy use & lower operating expenses Energy efficiency retrofits offer low-risk, high-return investment Upgrade/renew aging infrastructure, address deferred maintenance Improve facility comfort & performance

DO THE PERFECT BMS systems Zero energy THING? Window film

Retrocommissioning

Change light bulbs Recladding Solar panels

Ice storage Geothermal conditioning Holistic repositioning Change behavior Get LEED certified Deep rejuvenation Continuous commissioning Focus on energy Replace chiller benchmark recommissioning White roof Green roof

DO SOMETHING! DO NOTHING

Getting Started on a Total Campus Retrofit

Find your champion and assemble your project team Assess your opportunities and your constraints Establish your goals: environmental, economic, academic, etc. Talk to other institutions and check out other projects

Call CCI!

Solutions for Higher Education

Financing Options for Energy Performance Contracting Projects

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Copyright Siemens AG 2008. All rights reserved. Siemens Financial Services

Introduction Financing Solutions for Energy Conservation Projects

Contents Traditional Sources of Capital Alternative Sources of Capital Pros & Cons for each Overview of tax exempt financing Benefits of tax exempt financing Structure of a Conduit Financing Contacting SFS

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Siemens Financial Services

Traditional Sources of Funding

Cash (Capital Budget) Bank Loans Bonds

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Pros & Cons of Traditional Funding

Cash Pro: Lowest overall cost. Con: Limited availability, reserved for other capital improvements Bank Loans Pro: Convenient, centralized source of Capital. Local interest. Con: Potentially limited availability. Limits ability to borrow in the future. Traditional Banks may be unfamiliar with EPC / collateral. Bonds Pro: Lower overall cost. Can be used to fund various Capital projects. Con: Limited availability, depending on the market. Lengthy, time-consuming process. Term may not match useful life of asset. May limit future borrowing.

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Alternative Sources of Funding

Federal Stimulus Funds (Dept of Education / Dept of Energy) State Revolving Funds Tax-Exempt (Conduit) Lease/ Purchase Financing Private-Placement Bonds Adjustable Rate Low-Floaters Operating Leases & PPAs

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Pros & Cons of Alternative Sources of Funding

Federal Stimulus Funds Pro: Lower overall cost. Con: Limited availability. Lengthy, time-consuming process. State Revolving Funds Pro: Lower overall cost. Some programs offered are specific to EPCtype projects. Con: Limited availability. Lengthy, time-consuming process. College may need to meet other requirements set-forth by the State. Private Placement Bonds Pro: Good alternative to traditional, public offering. Limited competition. Con: Average overall cost. Availability based upon lenders current credit underwriting requirements (borrower may need to obtain rating).
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Pros & Cons of Alternative Sources of Funding

Adjustable Rate Instruments Low Floaters Pro: Lower overall cost Con: Interest Rate Risk, Re-fi Risk Operating Leases / Power Purchase Agreements PPAs Pro: Off-Balance Sheet Financing. Shift in Asset Ownership Risk Con: Highest Cost of Ownership. Very limited availability specialized products. Lengthy, time-consuming process. Asset may never be owned college may become locked into transaction indefinitely.

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Characteristics of a Tax-Exempt Lease/ Purchase Financing

T-E Lease/Purchase Financing provides both the construction financing and permanent financing in a single structure Interest Rates are fixed, upfront. No upfront capital required Debt service doesnt start until project is completed / savings are being generated. Installment payment contract with nominal purchase option upon maturity ($1.00 buyout) Lessee has title to the equipment up front; Lender takes a security interest in the equipment only no other collateral is required Level or Escalated Payment Structures - to meet guaranteed energy savings / cash-flow requirements. Master Lease Agreement allows for multiple fundings (schedule) with the ability to add schedules for future phases, regardless of size. Ability to include legal fees, engineering costs and other related expenses in the total amount financed.

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Tax-Exempt Lease/Purchase Financing Benefits

Simplified Documentation Low Rates, commensurate with Bonds, Reduced timeframe (<4 weeks to close) Payments are structured to meet Annual Savings Amounts 100% financing of permitted costs Engineering and installation costs associated with the equipment Payments can be deferred during installation period interest accrued Reduced transaction costs (no underwriting or rating fees) Escrow funding Lock into interest rates today for the transaction, control disbursement, utilize anticipated escrow earnings up front

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Structure of Tax-Exempt Conduit Financing for 501(c)3 Colleges/Universities

Tax-Exempt Lease Agreement

Sub-Lease Agreement

Lender

Higher-Ed Authority or County Government

College / Univ.

Lease Payments

Siemens Building Technologies

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Contacting Siemens Financial Services

Gene Rogero Vice President, Public and Institutional Finance Siemens Financial Services, Inc. 1100 Riverside Drive Watkinsville, GA 30677 office: (706) 769-6864 gene.rogero@siemens.com

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Location: Paxton, Massachusetts Enrollment: 1,600 grad and undergrad Residential Population: 600 Campus: 198 acres Square Footage: 242,000 square feet; 63,000 under construction Age of Infrastructure: 1960s and 1970s Annual Operating Budget: $25M Endowment: $4M

Signatory

of Presidents climate commitment Previous experience with retrofits In need of a comprehensive solution Replace aging equipment Would work well with concurrent retrofit project No change orders Turnkey project

New lighting upgrade and controls Sealing building envelopes Water conservation Network management for heating controls Decreasing dependency on # 2 fuel oil Decreasing AMCs carbon footprint Upgrade of selected equipment Reduces some of the facilities capital action plan repairs Improved comfort levels in all buildings

One year warranty on all new installed equipment. Additional warranty on other new equipment i.e. bulbs, ballasts and lighting controls

Upgrading selected equipment. Lower maintenance calls on upgraded equipment. A cost savings to maintenance budget i.e. purchasing new lights, ballasts, and new electric motors

Selection

of company Financing decisions/challenges Selection of Facility Improvement Measures (FIMs)

Energy savings guarantee program All savings 100% realized by the college and not shared with Siemens Concept of budget neutral No up front costs Assist in baseline data for GHG inventory Quarterly data collection Local office and the Siemens name

Capital lease/purchase Tax exempt financing, Tax-exempt bonds can be sold in the capital markets or directly to bank or another financial institution. MassDevelopment - staff works with nonprofit organizations, both large and small, to provide financing solutions for real estate and equipment projects. 15 year versus 10 year Critical FIMs

1. Lighting Retrofits and lighting controls 2. Building Envelope 3. Water Conservation 4. Pipe Insulation 5. Network Energy Management 6. Domestic Hot Water Boiler Replacement in Madonna Hall 7. Domestic Hot Water Boiler Replacement in Fuller Activities Center 8. Domestic Hot Water Boiler Replacement in Miriam Hall 9. Premium Efficiency Motor Drive Upgrade Campus Center 10. Variable Frequency Drive Installation Campus Center 11. Energy Management System (limited) 12. Vending Machine Controls 13. Cooler Controls

1. Lighting Retrofits and lighting controls 2. Building Envelope 3. Water Conservation 4. Pipe Insulation 5. Network Energy Management 6. Domestic Hot Water Boiler Replacement in Madonna Hall 7. Premium Efficiency Motor Drive Upgrade 8. Variable Frequency Drive Installation 9. Vending Machine Controls 10. Cooler Controls

1. Lighting Retrofits and lighting controls 2. Building Envelope 3. Water Conservation 4. Pipe Insulation 5. Network Energy Management 6. Domestic Hot Water Boiler Replacement in Madonna Hall 7. Premium Efficiency Motor Drive Upgrade 8. Variable Frequency Drive Installation 9. Energy Management System (limited) 10. Vending Machine Controls 11. Cooler Controls

Q&A
Steve Hoiberg, Higher Education Marketing Manager, Siemens Industry Inc., Building Technologies Division, steve.hoiberg@siemens.com Gene Rogero, Vice President, Public & Institutional Markets, Siemens Financial Services, gene.rogero@siemens.com Lisa Schoonerman, Account Executive, Energy and Environmental Services, Siemens Industry Inc., Building Technologies Division, lisa.schoonerman@siemens.com Arah Schuur, Director, Energy Efficiency Building Retrofit Program, Clinton Climate Initiative, arah.schuur@clintonfoundation.org Cheryl St. Pierre-Sleboda, Vice President for Finance and Administration, Anna Maria College, csleboda@annamaria.edu
www.presidentsclimatecommitment.org

(c) 2007 Presidents Climate Commitment. All rights reserved.