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City of Melbourne
Financing your retrofit
Scott Bocskay, Chief Executive
Sustainable Melbourne Fund
25 July 2012
– Wholly owned, independent trust established by Melbourne City Council in 2002 with an investment of $5 million - currently a $6.4 million fund
– Expertise in energy efficiency, renewable energy and project management and delivery
– We have two distinct roles
1. Through our investment program provide loans of up to $500,000 for up to 6 years; $8.1 million invested in energy generation, water savings and energy efficiency projects since inception
2. Administer environmental upgrade finance on behalf of the City of Melbourne
Sustainable Melbourne Fund
Council drivers
– To retrofit 2/3rds of the City of Melbourne’s commercial office
– 38% reduction in energy use in commercial buildings with 383 kilotonnes of CO2-e and five gigalitres annual savings
– Drives investment at an accelerated pace – $2 billion in retrofit activity
– Strengthens community through job creation – 8,000 new jobs
What is environmental upgrade finance?
How the process works
Key Features – ‘Super’ senior –senior to existing mortgages (do not interfere with existing creditors
rights) – Charge attached to property - Finance not registered on title, rather is a council
‘special rate or charge’ and remains with the property – multiple charges can exist – Tenant Pass Through – EUC’s are council statutory charge, can be passed through
under triple net leases by agreement – Local Government rights unfettered – The EUC’s are only payable to lenders upon
receipt – Voluntary – The EUC’s are voluntarily entered into by the parties to the EUA
Design Principles to Projects – Must deliver energy, greenhouse or water savings – “Nailed down”–charge and benefits to remain with building the improvements also
remain with the building – Recognise long flat tail of technology performance and encourage innovation – Real opportunity lay in working with tenants to deliver comprehensive projects and
new cash flows
Role of Sustainable Melbourne Fund
– Work in partnership with City of Melbourne to set up the project underwriting criteria, program guidelines and application processes of the environmental upgrade finance mechanism
– Third party administrator - Assess and process project applications on behalf of City of Melbourne
– Work with financiers to the program to make their products available to customers
– Fee for service model – user pays, as benefits accrue to building owner and occupiers
Environmental upgrade agreements - economics
Environmental upgrade agreement economics - Building Owner
EUA Total Initial Project Costs
Description Cost
Base Building Improvement measures $ 817,600
Tenant Improvement measures $ 499,827
Project fees $ 105,000
VEET Incentive -$ 59,979
Total Anticipated Cost $ 1,362,448
Building owner Benefit
Anticipated Annual EUC (10yr, 7.5% P&I) -$194,879.78
Anticipated receipts from tenants $ 195,222
Net cash position of Building owner $ 343
Providing Building Owners real benefit
DEBT Total Initial Project Costs
Description Cost
Base Building Improvement measures $ 817,600
Tenant Improvement measures $ -
Project fees $ 60,000
VEET Incentive $ -
Total Anticipated Cost (+/- 15%) $ 877,600
Building owner Benefit
Anticipated Annual debt Payment (3yrs, 8% P&I) -$330,010
Anticipated receipts from tenants $ -
Net cash position of Building owner -$ 330,010
Environmental upgrade agreement economics - Tenant
Providing tenants with an energy price hedge
Fixed cost
Variable costs
Environmental upgrade agreement economics - Tenant
Providing tenants with an energy price hedge
Year Ending 2012 2013 2014
Expenditure Pre retrofit EUC Payment to Owner $ - $ - $ -
TLP Energy Bills $ 393,108 $ 432,419 $ 475,660
Tenant outgoings $ 396,933 $ 436,627 $ 480,289
Total Expenditure $ 790,041 $ 869,045 $ 955,950
Expenditure post retrofit EUC Payment to Owner $ 195,222 $ 195,222 $ 195,222
TLP Energy Bills $ 309,435 $ 340,378 $ 374,416
Tenant outgoings $ 277,853 $ 305,639 $ 336,203
Total Expenditure $ 782,511 $ 841,239 $ 905,841
Net Position $ 7,531 $ 27,806 $ 50,109
460 Collins Street, Melbourne
– $400,000 project – Installation of high efficiency
chiller unit and building management system upgrade
– Aims to cut annual CO2-e emissions by approximately 170 tonnes
123 Queen Street, Melbourne
– $1.3 million project – Installation of trigeneration
system, occupancy sensors and double glazing
– Aims to cut annual CO2-e emissions by approximately 2500 tonnes
– First privately funded environmental upgrade agreement through the National Australia Bank (NAB)
Kings Business Park precinct, South Melbourne
– $3.4 million project – Installation of high efficiency
chiller units, cooling towers, lighting system upgrades, heating and air conditioning units and controls
– Aims to cut annual CO2-e emissions by approximately 2600 tonnes
Updated Victorian Legislation
– Bill passed to correct unintended consequences of drafting matters
– Enables property portfolio’s who’s debt is secured by multiple buildings to partake
– Came into effect at July 1st 2012
– Applies to a large amount of NLA within Melbourne
Thank You
Scott Bocskay, Chief Executive
Sustainable Melbourne Fund
[email protected] +61 3 9658 8666
www.sustainablemelbournefund.com.au