Financing

Financing Options

Utilizing third-party financing to fund your building performance upgrades enables you to preserve capital for investments in core business activities, boost Net Operating Income, and create additional value. Structures such as PACE Financing and Energy Services Agreements solve the “split incentive” by enabling the payments to be classified as Operating Expenses, assigning the repayment obligation to the party that benefits from the energy savings. And because these structures offer a secure repayment stream to the investor, PACE PACE is an innovative bond financing mechanism that allows property owners to finance the entire upfront cost of energy efficiency improvements and repay the cost as a contractual assessment through the property tax bill.

PACE bonds are sold through a private placement on pre-arranged financing terms negotiated between the property owner and a PACE bond investor, who is committed to purchase the bond.

LABBC staff are available to coordinate the application process and work with first mortgage lenders to obtain their consent to PACE assessments. In many cases, it is expected that the first mortgage lender will determine that it is within their best interest
and ESAs In an Energy Services Agreement (ESA) or a Managed Utility Services Contract (MUSC), the services provider typically offers 100% financing, with end-user payments tied to monitored energy savings. A goal of this structure is for the end-user contract to be treated as an off-balance sheet obligation and payments as an operating expense.

In some variations, an EE finance company will assume payment of their customers’ energy bills and integrate financing costs for EE investments with the energy bill payments; in others, the EE finance company will charge their customers on a cost per avoided energy unit basis for measured and verified savings. In the latter scenario, the project equipment is typically owned by the EE finance company and the end-user is given a fair market value purchase option at the end of the contract term.
can fund longer-payback projects that don’t meet typical return requirements.

Sample Project Economics
Project cost  $1,000,000
Interest rate  7%
Term  20 years
 PACE Assessment  $110,000/year
 Energy Savings/NOI Increase  $150,000/year
 Excess savings  $40,000/year
 Value Increase (@ 7.5% cap rate)  $533,000

 

Directory of Capital Providers

 

PROVIDER/TYPE PACE ESA Lease Financing Unsecured Loan On-bill Financing (gas only)
Abundant Power
Clean Fund
Samas Capital
Structured Finance Associates
Wells Fargo
Xzerta Energy
So Cal Gas
Hannon Armstrong
National Development Council
Green City Finance
Metrus Energy
SCIEquity
Electric & Gas Industries Association (EGIA)
US Energy Affiliates