Green Per Square Foot

Introduction to project financing July 18th, 2014

A common reason that efficiency projects don’t get done is lack of available funds. Third-party financing is an option to fund your energy efficiency and renewable energy projects and increase return on investment. The following types of financing are most common for building retrofits.


Capital Lease

Similar to a loan, capital leases have fixed payments and typically require no down payment. Property owner typically assumes ownership of the equipment at the conclusion of the lease.


Operating Lease

Property owner rents equipment and at the end of the lease can either renew/renegotiate or return the equipment.


Managed / Energy Services Agreement (MESA / ESA)

  • Building owner enters into a long-term contract with a third-party
  • Third-party owns, manages, and maintains the installed efficiency equipment and is repaid through energy savings
  • Eliminates the owner’s upfront investment and replaces it with scheduled payments to finance company
  • Popular for public-sector projects

Property Assessed Clean Energy (PACE)

  • Property owner borrows from government-issued bond to pay for the efficiency retrofit project
  • Bond is repaid by building owner through long-term special assessments levied against the borrower’s property tax bills (up to 30 years)
  • May cover a wide range of project sizes (e.g., $2,000 to $2.5M)
  • Available in select local markets only

Power Purchase Agreement (PPA)

PPA provider owns and maintains generation equipment (e.g., solar panels) and the building owner agrees to purchase energy – typically at below-market rates.


Municipal Lease

Tax-exempt alternative to cash purchase or municipal bond available to municipal/government entities.


Capital Expenses (CAPEX)

Project funded through cash flow, reserves, capital raises, or reallocation of internal funds from the property owner


Commercial Loans (aka, Traditional Debt)

  • Secured and balance sheet debt financing through commercial banks, credit unions, and other types of lenders
  • Allows for flexible spending, yet building owner’s debt capacity is reduced; significant down payment is required
  • Additional options may be available through federal, state, and local governments

On-Bill Financing

  • Utility, state or other third-party funds efficiency project and collects repayment via utility bill
  • Borrower repays the loan over the short term (typically less than three years) through a supplemental charge on the utility bill
  • Available in select local markets only

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Efficient buildings – from insight to action.


 


Posted by in Property User Support, Solutions Provider Support