king’s strategic energy partners

King’s Strategic Energy Partners

KCH Strategic Energy Partners

Presentation to:

14th January 2014

Iain Franceiain.france@nhs.net

King’s Strategic Energy Partners

Questions

What’s the difference between and EPC and an ESCo? In an energy-performance contract, does the supplier have to provide the finance? We’ve been advised that ‘off-balance sheet’ transactions will no longer be allowed, and all transactions will have to be shown on the balance sheet. How do we get around this? In an energy-performance contract (EPC), does the supplier have to take over the operation and maintenance of the estate, or of the equipment supplied?

King’s Strategic Energy Partners

KCH Strategic Energy Partners

Mission: enable public-sector to undertake successful strategic estate-development projects, backed by guaranteed revenue savings

Method: lifecycle support - feasibility study, procurement, contracts, financial-modelling, funding, project-management, guarantee M&V

Experience: initiated over 2 dozen projects, capital value >£100m; ten years’ public-sector procurement

Structure: procurement framework owned by King’s; services delivered by Ecovate Group in collaboration with King’s

King’s Strategic Energy Partners

Principles and Methods

DEMAND SUPPLYTHEN

ROI (years)

Cost

XX

XX

XX

XX X

Strategic Approach:•Energy consumption•Energy supply•Student comfort•Backlog maintenance•Risk & resilience•Maintenance•Energy-security•Money

King’s Strategic Energy Partners

Holistic Approach to…

Cost

Time

PPM

Reactive maintenance

Energy

All revenue costs

Lighting Controls Heating

IT Fabric Cooling

TechnologiesThe Estate

-15%

-25%

-20%

-2%

+15%-10%

-20%

-18%

IGA 1

King’s Strategic Energy Partners

Process

Investment-Grade Audit

Project-Installation

Guarantee + Continuous Improvement

ProcurementFeasibility Study

6 months 6-18 months 1-20 years1-2 months1 month

Phased approach to manage changing estates:

Project 1 Guarantee 1

IGA 2 Project 2 Re-baseline

Etc.IGA 3

King’s Strategic Energy Partners

Case Study: University of SheffieldRequirement:•A more sustainable University / reduction in carbon footprint •Improved, long term quality, indoor climate and fitness for purpose •Reduction of operational / utility costs •Reduce corporate risk (legionella, risk of mechanical failures etc.)•Development of competency within estates team & University’s staff (“good housekeeping” etc.)

Project ResultsContract sum £3.8m

Summary of measures District heating optimisation, air-handling units, BMS, lighting, staff competency, behaviour-change

Backlog maintenance addressed £1.3m

Annual energy savings £480k

Annual reactive maintenance savings £250k p.a. (recycled)

Simple return on investment 5 years (inc. backlog)8 years (excl. backlog)

King’s Strategic Energy Partners

Case Study: Taunton NHSSituation:● Estate condition deteriorating due to long-term under-investment: backlog £6m● Corporate risk “significant”● Mandatory CO2 targets (34% by 2020; 80% by 2050)● Rising energy costs (£1.8m p.a.)● Carbon taxes (£108,000 p.a.)● New Surgical Wing

Project ResultsContract sum £7.2m

Number of measures 200

Backlog maintenance addressed £2.5m

Annual energy & CRC savings

£756k, rising with energy inflation43% carbon saving

Annual savings on reactive maintenance £74k p.a. (recycled)

Simple return on investment

6 years (inc. backlog)10 years (excl. backlog)

Net cash surplus 20 yrs £17m

King’s Strategic Energy Partners

Case Study: King’s NHSSituation:● Concerns re. patient comfort ● £4m energy consumption and rising● Backlog £10m, rising towards £25m over next 5 years● Planned building projects £90m

Project Results

Contract sum £7.9m

Immediate financial saving £3.1m (backlog)

Annual financial savings £427k - energy inflation 7%

Carbon savings 1,892 tCO2 = 9% (taking Trust to 24%)

Net cash surplus 20 yrs £7.0m

Measures including

CHP heat utilisation (improved CHP QA)BMS (Trend)Drives, pumpsHeat distributionPlate heat exchangers

King’s Strategic Energy Partners

Financial Illustration (borrowing)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

-600

-400

-200

0

200

400

600

800

1,000

1,200

Yearly Cash Costs

Yearly Costs

Time (years)

Cos

t / S

avin

g V

alue

(£00

0's)

Project capital cost £3.52mFunded via 12-year on-balance sheet capital borrowing @ 5.5% interest

King’s Strategic Energy Partners

Financial Illustration (borrowing)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

-600

-400

-200

0

200

400

600

800

1,000

1,200

Yearly Cash Costs and Savings

Yearly Costs

Yearly Savings

Time (years)

Cos

t / S

avin

g V

alue

(£00

0's)

Energy savings: 20% of £2.2m energy bill Year 1: £400k; rising to >£1m with 6% energy inflationCumulative energy saving £11m over 15 years

King’s Strategic Energy Partners

Financial Illustration (borrowing)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

-600

-400

-200

0

200

400

600

800

1,000

1,200

Yearly Costs, Savings and Net Savings

Yearly CostsYearly SavingsNet Savings

Time (years)

Cos

t / S

avin

g V

alue

(£00

0's)

Once capital borrowing repaid, most of the energy saving hits the bottom line

King’s Strategic Energy Partners

Financial Illustration (borrowing)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

-1,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Yearly Cash Costs and Savings and Cumulative Net Savings

Yearly Costs

Yearly Savings

Cumulative Net Savings

Time (years)

Cos

t / S

avin

g V

alue

(£00

0's)

Cumulative net cash saving after 15 years = £5.7m

King’s Strategic Energy Partners

Financial Illustration (Sheffield)

£3.8m capital project£480k annual saving, rising by 7% energy inflation

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

-5,000

-4,000

-3,000

-2,000

-1,000

0

1,000

2,000

Yearly Costs, Savings and Net Savings

Yearly Costs Yearly Savings

Net Savings

Time (years)

Cost

/ Sa

ving

Val

ue (£

000'

s)

King’s Strategic Energy Partners

Financial Illustration (Sheffield)

£3.8m capital project£480k annual saving, rising by 7% energy inflationIncluding saving of £1.3m backlog maintenance

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

-5,000

-4,000

-3,000

-2,000

-1,000

0

1,000

2,000

Yearly Costs, Savings and Net Savings

Yearly Costs Yearly Savings

Net Savings

Time (years)

Cost

/ Sa

ving

Val

ue (£

000'

s)

King’s Strategic Energy Partners

Financial Illustration (Sheffield)

£3.8m capital project£480k annual saving, rising by 7% energy inflationIncluding saving of £1.3m backlog maintenance

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

-6,000

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

Yearly Costs and Savings and Cumulative Net Savings

Yearly Costs Yearly Savings

Cumulative Net Savings

Time (years)

Cost

/ Sa

ving

Val

ue (£

000'

s)

King’s Strategic Energy Partners

Contracts and Financial Structures

Investment-Grade Audit

General Agreement of Co-operation between Contracting Authority ("CA") and ESCo

Project- Implementation Guarantee

Multiple options may be combined:•Government grants [e.g. SALIX, HEFCE]•Capital purchase•Capital borrowing [own bank / Ecovate source]•Shared-Savings Agreement•Operating Lease [off-balance sheet]•Operation & Maintenance Agreement [off-balance sheet]•Power-Purchase Agreement [off-balance sheet]•Special-Purpose Vehicle / Joint Venture •Government incentives [e.g. RHI, FIT]

King’s Strategic Energy Partners

Services Offered from King’s / Ecovate

Investment-Grade Audit

Project-Installation

Guarantee + Continuous Improvement

ProcurementFeasibility Study

StrategicTechnicalCommercialFinancialPresent to Board

Framework or OJEUSelect Preferred Bidder

based on capabilityContracts

Project-ManagementFinancial-ModellingFunding if requiredContracts

Project-Management

Monitoring & VerificationManage Continuous

Improvement

King’s Strategic Energy Partners

Have I Answered your Questions?

What’s the difference between and EPC and an ESCo? In an energy-performance contract, does the supplier have to provide the finance? We’ve been advised that ‘off-balance sheet’ transactions will no longer be allowed, and all transactions will have to be shown on the balance sheet. How do we get around this? In an energy-performance contract (EPC), does the supplier have to take over the operation and maintenance of the estate, or of the equipment supplied?

King’s Strategic Energy Partners

KCH Strategic Energy Partners

Iain France07854 540325

iain.france@nhs.net