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May 10, 2011

Procurement and Financing Options for Facility Improvements

Siemens Industry, Inc.

Building Technologies

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Building Operating Management (BOM) Magazine

The Funding Challenge

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Building Operating Management (BOM) Magazine

The Funding Challenge

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What is Performance Contracting

A legislative vehicle that allows public entities to improve their facilities, by using their energy and operational budgets to fund a project, with guaranteed results.

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Local Government Performance Contracting

(Illinois Compiled Statutes ; 50 ILCS 515) Local Government Energy Conservation Act City/county must issue a Request for Proposal (RFP) Selection is based on “greatest value to the City”, not lowest bid Maximum term is 20 years Majority vote by city/county board is required Architect/engineer review is required prior to signing contract City may use future capital expenditure dollars as savings to assist

with project funding Savings must meet or exceed all costs associated with the program Savings must be guaranteed

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A Practical Way to Address Funding Concerns

ImprovementsModernizationOptimization

Energy Management

Finance

Generate

SuccessGuarantee

SavingsEnergy Usage

OperationEnergy Supply

Throughout your building’s life, you face efficiency and environmental challenges

Aging infrastructure

Inefficient equipment and lighting

Increased energy use

Rising/volatile energy prices

Organization initiatives and mandates to reduce GHG emissions

Performance Contracting with guaranteed results:

– Make facility & infrastructure improvements

– Reduce energy use and associated expenses

– Your energy savings finance your improvements

– Have a positive environmental impact

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Performance Contracting Overview

Before PerformanceContract

During PerformanceContract

After PerformanceContract

Key Elements:

Savings are guaranteed

Savings pay for improvements

Money going to utility redirected back to you

Harvest savings now

Leverage low hanging fruit to fund other projects

Turnkey solution

Focus on your core business

Performance Contracting Economics

Utility Bill

UtilityBill

Payment

Savings

Savings

UtilityBill

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Performance Contracting Overview

Key Elements:

More efficient and accurate meter reading and billing

Savings pay for improvements

Unaccounted for usage redirected back to you

Harvest revenue now

Less rate increases to customers

Turnkey solution

Focus on your core business

Performance Contracting Economics

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Preliminary Audit• ESCO’s will provide a

comprehensive investment grade audit (IGA) with project recommendations, costs and savings

• County will review each proposal and select the comprehensive energy plan that provides the most innovation and project savings

• Upon selection the County can work with the ESCO on prioritizing the Energy Conservation Measures (ECMs).

Getting Started

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Performance Contracting - Financial Approach

Financing Tailored around project economics Competitive process or work with current financial provider Tax-exempt rates

Guarantee provisions Offer a guaranteed fixed project cost No change order policy for a given scope Energy savings guarantee Key Budget neutrality Savings must equal cost

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Measurement and Verification (M&T) – Annual Contract• Different M&V options can be used • Measure specific vs. utility bill• Proven savings calculations where appropriate• Simplest and most cost effective approach• The Municipality manages and controls their buildings

Debt Service – Loan Service• Extensive experience in providing financing• Tailored around project economics• Competitive process or work with current financial provider• Tax-exempt rates

What is the Cost

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Local Government Performance ContractingHelping our Nation’s Communities become Vibrant, Growing and Green

Becky Werra, LEED APAccount Executive312-215-2137Becky.Werra@Siemens.com