Colorado PACE Financing Overview January 2016
Agenda ! Brief Company Background ! Evolution of Colorado PACE Program ! How PACE Works ! Why PACE is Transforming the Market for Energy Improvements ! FAQ
About Microgrid ! Turnkey clean energy services provider Company Data ! Single source for: Founded: 2009 " Solar PV HQ: St. Louis, MO " Energy Efficiency Satellite Offices: Chicago, Los " Energy Storage Angeles, Denver " Demand Response 45 Employees " and related services Over 300 projects completed in 20+ states ! Focus on Commercial & Industrial sector ! Financed Approach – PACE, PPAs, Leasing
Sample'Client'list' Fortune 500 Nonprofit Military / Government Higher Education Hospitality
Sample'Client'list' Industrial K-12 Schools Sports Over 250 companies and groups as clients
How PACE Works
What is CPACE CPACE = Commercial Property Assessed Clean Energy PACE is an exciting an innovative new approach to commercial* energy improvement financing that is growing rapidly around the US. Over $1 Billion PACE provides a simple way for municipalities to help local property in PACE owners make energy improvements to their properties. funding is projected for Energy improvements are funded through the County’s assessor 2015, office and repaid through a property tax assessment over a period of nationally up to 20 years. PACE is an off-balance sheet transaction that requires no capital expenditure and results in immediate positive cashflows and an increase in property value.
Evolution of Colorado PACE Program - Enabling legislation passed in 2008, expanded and amended in 2010, 2013, and 2014 approving statewide PACE district - Board of Directors was appointed in September 2013 - Established program rules - Draft and implement program framework - Overseeing and managing PACE district - Hire CPACE administrator (Sustainable Real Estate Solutions) - Soft launch of program in December 2015 - Full launch with PR in Q1 of 2016 - Working to get all counties to opt-in in 2016
PACE is a form of public financing ! Innovative approach to leveraging “Energy Equity” in your property; using energy savings to pay for energy projects ! PACE is modeled after methods to fund public benefits such as roads, sidewalks, and fire departments. ! Allows a property owner to choose to levy a “clean energy assessment” that is tied directly to their property and is repaid as part of the annual property tax bill. ! Private funding sources (private capital funds) are used for improvements, and are secured by a senior tax lien on the property. No government rebates or funding is used to pay for projects. ! The PACE program is run by a contracted 3 rd party, with program fees paid through each project financing.
Wide variety of building and project types Proper&es( Improvements(
Eligible Building Sectors/Types ! New and existing construction projects ! Most buildings above 5+ unit rented/leased residential buildings are allowed in program ! Condo buildings not eligible (common areas may be possible) ! Commercial, industrial, non-profit, multifamily, educational, government*, and houses of worship are all eligible ! Property owner does not have to pay property taxes to be eligible
Eligible Project Criteria ( Eligible(Projects(( • Located(on(eligible(real(property( – Owned(by(an(eligible(property(owner(( – Be(an(“Energy(Efficiency(Improvement”(((defined(to(include(water(saving(measures)( – and/or(a(“Renewable(Energy(Improvement”( Special(consideraCon(for(new(construcCon((pilot(projects)((( – Applicable(Project(Requirements( • Energy(savings:( project(must(generate(“uClity(cost(savings”( – Energy/Water(Audits:( ASHRAE(Level(1(required(/(Feasibility(Study(for(renewable( – energy( Inspec&on/Commissioning :(PostMcompleCon(verificaCon(is(required,(as(is(postM – construcCon(commissioning(report( ( Data(Sharing:( project(required(to(provide(ongoing(access(to(uClity(usage( –
What Types of Projects Can Be Included ! HVAC Systems ! Windows ! Retro Commissioning ! Fume Hoods ! Lighting & Controls ! Motors ! Solar PV ! Upgraded Elevators/Escalators ! Demand charge reduction measures ! Upgraded Roofing/Insulation ! Refrigeration Systems & Equipment ! Many other energy improvements ! Water conservation measures Non-energy Projects Also (in many cases) ! Some non-energy capital improvements
PACE Financing - Benefits Key Benefits Other Benefits ! 100% financing ! No payoff upon sale of property ! Tenant accessible ! Off Balance Sheet ! No Personal Guarantee ! Broad range of credit accepted ! Marketing Benefits ! Long-term financing (to 20 yrs) ! Combine multiple energy improvements ! Treated as Equity on new construction projects ! Include non-energy improvements in some cases ! Cash incentives as Year 1 income Confidential – Microgrid Energy
Underwriting Requirements (varies) Underwriting the building/savings, not the credit of the owner ! Savings to Investment Ratio (SIR) > 1 (not required in Colorado) ! Loan To Value – < 30% of after improved value ! Investment Grade Solar production report or Energy Audit to verify savings projections ! Existing Loans Status & Lender Consent ! Term Length cannot exceed weighted average of lifecycles ! Total debt on property < 95% of value
Sample PACE Project Cut and paste cashflows Financial Analysis is Provided by Microgrid and verified by PACE program
Why PACE is reshaping the energy improvements market
Overcoming Barriers Barrier PACE Solution No Budget / Debt not ! 100% financing, off balance sheet transaction desirable Payback / IRR Hurdle ! No cash and no debt means no investment hurdle ! Immediate positive cashflows ! Longer term payback projects are viable Credit challenge Underwriting the building, not the credit of the owner Hard to get past low Higher cost, longer payback projects are cashflow positive hanging fruit immediately, with no investment required Confidential – Microgrid Energy
PACE is a Win for all Stakeholders " Property owners see an " Private market investors like opportunity to save money and PACE because assessment make their buildings more liens are a proven, strong credit. valuable. " Existing mortgage " Contractors support PACE lenders support projects because it opens up new sales opportunities that increase the value of their collateral. " Local governments like " Taxpayers like PACE PACE because it creates because the city takes on no jobs and helps meet liability and gets a boost in the conservation goals. local economy. Confidential – Microgrid Energy
PACE Will Have a Major Impact Growing Fast ! Enabling legislation in 31 States, with some programs in operation, and many more in the works ! Private capital being leveraged now (vs public bond funds) ! Unlocking Energy Equity
PACE is a Long Term Solution Stable - PACE is not a government or utility incentive program, so it is largely immune to shifts in politics or regulatory policy. Higher Performance Possible - PACE can be continually tapped to reach higher and higher levels of energy savings. PACE works for whatever technologies are viable. Wide Applicability - PACE works for the vast majority of buildings, owners Confidential – Microgrid Energy
Contact Information Mat Elmore Senior Energy Consultant Microgrid Energy melmore@microgridenergy.com 503-333-5578 (cell) Office: Microgrid Energy 1536 Wynkoop St. Suite 437 Denver, CO 80202 Confidential – Microgrid Energy
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