hobsons bay - ocm appendix master a781185 · 2019. 5. 30. · we are an investor in innovative...

Hobsons Bay City Council 8 March 2016

Ordinary Council Meeting Agenda

Appendix 5

Environmental Upgrade Agreements (EUA)

This Activity received funding from the Department of Industry as part of the Energy Efficiency Information Grants

Program. The views expressed herein are not necessarily the views of the Commonwealth of Australia, and the

Commonwealth does not accept responsibility for any information or advice contained herein.

Scott Bocskay, CEO

21st January, 2016

Environmental

Upgrade Agreements

sustainablemelbournefund.com.au @SMFAus

Environmental

Upgrade

Agreements

Investments

Services for

Councils

We are an investor in innovative approaches to

achieve ‘sustainability’ outcomes since 2002

We are a third party administrator – enabling

Councils to offer cost effective programs for

EUAs

We work with customers to identify the

commercial opportunities in ‘sustainability’

through EUAs and direct investments

About Sustainable Melbourne Fund



How Does An EUA Work?


What Can Be Upgraded?

Solar panels

LED lighting

Chiller upgrade

Motion sensors

Double glazing

Weather proofing

EUAs can pay for any upgrades that improve energy, water or waste efficiency,

or increase renewable energy


WHY EUAs?

No requirement for additional upfront capital or

security to be provided to the financier

Reduced re-financing risk

Sharing of upgrade costs with tenants

More significant upgrades can be achieved

with no or minimal cash flow implications


How An EUA Works – The Economics

Lease EUA

Loan Amount $40,740 (ex GST) $45,474 (inc GST)

Interest Rate 9.3% 7.1%

Years of loan 7 10

Payments Per Year 12 4

Annual Payment (P & I) -$7,940 -$6,463

Annual Savings $0 $6,463

Project Simple Payback

(yrs)

N/A 7

Net Annual Cost -$7,940 $0

Cash – flow Benefit -$7,940 $0

NPV (pre tax) -$41,340 +$3,758

Tenant

Receipts =

100% of

savings

SMF Solar Finance 30kW Solar project on a commercial building


How An EUA Works – Tenants’ Benefits SMF Solar Finance 30kW Solar project on a commercial building

Tenant project NPV = $52,212


Why EUAs and Not Other Forms of Finance?

Cash?

• Capital budgets are allocated each year so savings are lost while waiting for budget

• Increases overall projects costs and reduces actual project performance

• Opportunity costs

• Split incentives

Loans?

• Balance Sheet implications

• Leverage ratios

• Collateral / security

• Opportunity costs

• Vacancy issues


Other finance? (such as PPAs or operating leases)

• Terms of exit clauses

• PPAs only do solar

• Take or pay

• On/off balance sheet

• Access requirements

• Vacancy issues

• Sale of property and discharge of finance




Applying For An EUA – The Process



Victorian Solar Opportunities by Council



1,073 Buildings

$155.5M Additional Investment

42.4MW Solar

662 Extra Jobs

Estimated EUA Opportunities in Hobsons Bay


Using SMF As Your Third Party Administrator

MUNICIPALITY BENEFITS

Commonality across municipalities

Communication, sales and support

No need to develop internal resources

Least cost, least risk with a proven track record

Industry approved



The Benefits For Your Council

Achieve sustainability objectives

Assist local businesses and landlords

Unlock private finance in your region

Stimulate local economic activity

Improve business profitability


Using SMF As Your Third Party Administrator

PROGRAM DELIVERY • SMF receives and processes applications

• Creates executable contract for the municipality (with documentation)

• Monitors contract performance

• Origination, communication and market education

SMF Third Party Administration services to establish and operate an EUA

program for local Government includes:

PROGRAM ESTABLISHMENT • SMF works with your rates department to establish and document

systems and processes for EUA administration using our current

program and template documentation

PROGRAM REPORTING • SMF provides quarterly reporting on program activities and

transactions


CONTRACT Mgr. / LEGAL • Review and approve templates provided

by SMF

PROPERTY SERVICES • Review and approve templates provided

by SMF

FINANCE/RATES • Set up process to remit quarterly

payments to lenders and SMF

MARKETING • Develop marketing strategy and assist

with development of marketing collateral

CONTRACT Mgr. / LEGAL • Review final EUA documentation

and contract prepared by SMF prior

to CEO signature

PROPERTY SERVICES • Confirm property exists in

municipality and is used for non

residential purposes

FINANCE/RATES • Levy Environmental Upgrade

Charge (EUC), issue EUC notices

and remit payments

MARKETING • Provide oversight on marketing

campaign

Setting Up Your EUA Program

LEGAL • Review legislation and advise

council on legalities of an EUA

EUA COUNCIL FREQUENTLY ASKED QUESTIONS

What is an Environmental Upgrade Agreement? An EUA is an agreement between a property owner, a bank and local government that facilitates a building upgrade to improve energy efficiency.

What type of properties can EUAs be used upon? Property that is rateable under the Victorian Local Government Act 1989 which is used for predominantly non-residential purposes.

How do Environmental Upgrade Agreements (EUAs) work? An Environmental Upgrade Agreement is similar to a normal loan; however, a council acts as the collection agent using their statutory powers to levy council rates.

What can be upgraded by an EUA? EUAs can pay for upgrades that improve energy, water, and waste efficiency or increase renewable energy.

Why EUAs and not other forms of finance? Environmental Upgrade Agreements can overcome the split-incentive to invest in projects that can deliver operational cost and environmental savings. Normal forms of finance like loans, cash, operating leases or even more innovative structures like Power Purchase Agreements (PPAs) fail to easily enable the costs and benefits of a project to be shared between the occupier and owner of a building. EUAs make this a simple task.

What are the benefits for my Council? The majority of commercial property is leased. EUAs enable projects to occur within these properties more easily. Where investment was previously hard without EUAs; EUAs can unlock local investment into our communities. This then enhances economic development activity for your municipality, accelerates building retrofit activity and helps you achieve your environmental targets sooner.

Is it compulsory for Councils to implement EUAs if legislation is passed? No. Each council decides independently if they choose to implement EUAs in their municipality.

What is council’s role in the EUA process? The council’s role is to levy the loan repayment using the council rates system and remit that payment to the lender. Council is only required to pay the lender once the monies have been received.

Will this affect rate capping restrictions? No. The EUA charge, called an Environmental Upgrade Charge (EUC) is a voluntary charge entered in to by a ratepayer and council, that is issued separately to current council rates.

What is council’s liability? The council is not liable for any unpaid Environmental Upgrade Charges. The council will only be liable to pay the bank once a repayment is collected by the council.

In the event that the building owner ceases a EUC repayment, it is the responsibility of the council to instigate their normal debt recovery procedures in accordance with council enforcement procedures and powers conferred under the local government Act. If the building owner becomes insolvent, unpaid EUCs will be considered equal to other rate charges and assume priority over other debt on the property.

What is the council’s responsibility in relation to the eligibility of the proposed environmental upgrade works? The EUA legislation permits a wide range of projects with environmental and sustainability benefits to be financed. Council can choose to develop its own internal systems, processes and documentation to ensure the proposed works meet the legislative requirements, or, this work can be outsourced out to a party with prior experience in this area such as Sustainable Melbourne Fund to undertake these obligations. Both the building owner and the lender are responsible to ensure the loan is approved and used in accordance with the legislation.

Who will assess the capacity of the borrower to pay the EUCs? Councils have no responsibility to check the building owner’s capacity to pay. This is the full responsibility of the lender; each lender has differing project and credit underwriting requirements.

What happens to the EUC if the property is sold? The outstanding charges can remain with the building and be transferred to the new building owner. Alternatively, the new owner can request that the vendor sell the property unencumbered by the charges and reach a commercial agreement with the purchaser.

What happens if the property becomes vacant? The building owner remains responsible for all loan repayments under the EUA to the council. Council is only required to pay the lender once the monies have been received.

May tenants complain to council about building owners passing on these new charges? Tenants must provide written consent to the charges being passed on by the building owner . The Local Government will have evidence of these consents prior to entering into any Environmental Upgrade Agreement. Any dispute between a landlord and tenant are matters to be dealt with through existing dispute resolution channels; a council need not become involved.

Contact Sustainable Melbourne Fund for more information on setting up EUAs in your municipality (03) 9658 8740 [email protected]

Environmental Upgrade Finance Fact Sheet

A City of Melbourne initiative

1200buildings.com.au

Find out more about financing a retrofit with environmental upgrade finance at sustainablemelbournefund.com.au/euf or call 1300 432 044

123 Queen Street

Fast factsBuilding owner Eighth Grange

Building address 113–123 Queen St, Melbourne

Head contractor Environmental Technology Solutions (ETS)

Energy and design consultant Rudds Consulting Engineers

Energy consultant Ecoretro

Project value $1.3 million

Year of construction1960

Gross floor area (GFA)18,493m2²

Net lettable area (NLA)16,240m2²

Number of floors15

Building useConference centre, hotel, hospitality, education and office

Number of tenants12

Summary

A new 380 kW trigeneration system will be installed to generate electricity, heating and cooling. Occupancy sensors and double glazing have been installed as part of the retrofit. It is expected that the upgrade will lift the building’s NABERS rating from two to four stars.

The 123 Queen Street agreement, signed between the City of Melbourne, National Australia Bank (NAB), Low Carbon Australia Limited and the building owner, is the first privately funded environmental upgrade agreement under the 1200 Buildings Program.

Annual savings

• $180,000 in energy bills • 2500 tonnes of CO

2-e

http://www.melbourne.vic.gov.au/1200buildings/Pages/Home.aspx

http://sustainablemelbournefund.com.au/

hobsons bay - ocm appendix master a781185 · 2019. 5. 30. · we are an investor in innovative...

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