Energy Project Financing : Resources and Strategies for Success

Energy Project Financing : Resources and Strategies for Success

Energy Project Financing : Resources and Strategies for Success

475 Pages ·2008·3.64 MB ·English

Energy Project Financing : Resources and Strategies for Success

Energy Project Financing:


Resources and Strategies for Success This page intentionally left blank Energy Project Financing:


Resources and


Strategies for Success


Albert Thumann, P.E., C.E.M.


Eric A. Woodroof, Ph.D., C.E.M., CRM Library of Congress Cataloging-in-Publication Data


Thumann, Albert.


Energy project financing : resources and strategies for success / Albert


Thumann, Eric A. Woodroof.


p. cm.


Includes index.


ISBN 0-88173-597-3 (alk. paper) -- ISBN 0-88173-598-1 (electronic) -- ISBN


1-4200-8386-4 (distribution by taylor & fancis : alk. paper)


1.  Energy conservation--Finance. 2.  Industries--Energy conservation--


Finance.  I. Woodroof, Eric A. II. Title.


HD9502.A2T5187 2008


658.2’6--dc22


2008017540




Energy Project Financing : Resources and Strategies for Success / Albert Thumann,


Eric A. Woodroof.


©2009 by The Fairmont Press. All rights reserved. No part of this publication


may be reproduced or transmitted in any form or by any means, electronic or


mechanical, including photocopy, recording, or any information storage and


retrieval system, without permission in writing from the publisher.


Published by The Fairmont Press, Inc.


700 Indian Trail


Lilburn, GA 30047


tel: 770-925-9388; fax: 770-381-9865


http://www.fairmontpress.com


Distributed by Taylor & Francis Ltd.


6000 Broken Sound Parkway NW, Suite 300


Boca Raton, FL 33487, USA


E-mail: orders@crcpress.com


Distributed by Taylor & Francis Ltd.


23-25 Blades Court


Deodar Road


London SW15 2NU, UK


E-mail: uk.tandf@thomsonpublishingservices.co.uk


Printed in the United States of America


10 9 8 7 6 5 4 3 2 1


0-88173-597-3 (The Fairmont Press, Inc.)


1-4200-8386-4 (Taylor & Francis Ltd.)


While every effort is made to provide dependable information, the publisher,


authors, and editors cannot be held responsible for any errors or omissions.


iv Foreword


The landscape for implementing energy efficient projects is rapidly


changing. The need for energy project financing has never been greater.


The factors influencing energy project financing have been brought


about by legislation, oil prices surging past $120 a barrel, and the grow-


ing concern for global warming.


In December of 2007, the Energy Independence and Security Act


was passed into law. This act promotes energy savings performance


contracting in the federal government, and provides flexible financing


and training of federal contract officers. The Energy Policy Act of 2005


reauthorizes energy service performance contracting through September


30, 2016.


The purpose of this book is to provide the key success factors


for structuring a finance energy project and getting it approved by top


management. The goals of the authors are threefold: First, we want


to explore as many financing options as possible. Second, we want to


provide the tools to make a comprehensive financial analysis. Third,


we want to broaden the readers’ horizons with new trends in the


industry.


There are many correct ways to assemble and finance an energy


management project. The number of possibilities is only limited to one’s


creativity. So be flexible and keep searching until you find the “win-


win” deal for everyone.


Albert Thumann, PE, CEM


v This page intentionally left blank Table of Contents


Chapter 1  Background on the Need for


Financing Energy Projects ........................................................1


Chapter 2  Financing Energy Management Projects ...............................3


Chapter 3  Choosing the Right Financing for Your


Energy Efficiency and Green Projects


with E  S ® ...................................................................51


NERGY TAR


Chapter 4  Financing Energy Projects through


Performance Contracting ........................................................79


Chapter 5  The Power Purchase Agreement (PC for Solar) ................93


Chapter 6  Selling Projects to Financiers .................................................99


Chapter 7  Key Risk and Structuring Provisions for


Bankable Transactions ...........................................................103


Chapter 8  When Firms Publicize Energy Management


Projects, Their Stock Prices Go Up ....................................113


Chapter 9  Overcoming the Three Main Barriers to


Energy Efficiency or ”Green” Projects ..............................127


Chapter 10  Basics of Energy Project Financing .....................................139


Chapter 11  Codes, Standards, and Legislation ......................................145


Chapter 12  The Energy Audit ...................................................................159


Appendix A  Economic Analysis .................................................................195


Appendix B  International Performance Measurement


and Verification Protocol—Vol. I .........................................277


vii Appendix B  International Performance Measurement


and Verification Protocol—Vol. II ........................................395


Appendix C  Resources/Links .....................................................................457


Index ................................................................................................................459


viii Contributors


CHAPTER 1, 2, 6, 8, & 9


Eric A. Woodroof, Ph.D., CEM., CRM, shows clients how to


make more money and simultaneously help the environment. During


the past 15 years, he has helped over 250 organizations improve profits


with energy-environmental solutions. He has written over 25 profes-


sional journal publications and his work has appeared in hundreds of


articles. Dr. Woodroof is the chairman of the board for the Certified


Carbon Reduction Manager program and he has been a board member


of the Certified Energy Manager Program since 1999. Dr. Woodroof has


advised clients such as the U.S. Public Health Service, IBM, Pepsi, Ford,


GM, Verizon, Hertz, Visteon, JPMorgan-Chase, universities, airports,


utilities, cities and foreign governments. He is friends with many of the


top minds in energy, environment, finance, and marketing. He is also


a columnist for several industry magazines, a corporate trainer, and a


keynote speaker. Eric is the founder of ProfitableGreenSolutions.com


and can be reached at 888-563-7221.


CHAPTER 3


Neil Zobler, President of Catalyst Financial Group, Inc., has been


designing energy finance programs and arranged project-specific financ-


ing for demand side management (DSM) and renewable energy projects


since 1985. Catalyst, a specialist in energy and water conservation proj-


ects, has arranged financings for over $1 billion. Neil’s clients include


U.S. EPA ENERGY STAR, the Inter-American Development Bank, over


20 electric and gas utilities (including Con Edison Co. of NY, PG&E,


TVA), engineering companies and vendors, and hundreds of individual


companies and organizations. He speaks regularly for organizations


including the Government Finance Officers Association, the Association


of School Business Officials, National Association of State Energy Offi-


cers, Association of Government Leasing & Finance, and the Council of


ix


Energy Project Financing:


Resources and Strategies for Success This page intentionally left blank Energy Project Financing:


Resources and


Strategies for Success


Albert Thumann, P.E., C.E.M.


Eric A. Woodroof, Ph.D., C.E.M., CRM Library of Congress Cataloging-in-Publication Data


Thumann, Albert.


Energy project financing : resources and strategies for success / Albert


Thumann, Eric A. Woodroof.


p. cm.


Includes index.


ISBN 0-88173-597-3 (alk. paper) -- ISBN 0-88173-598-1 (electronic) -- ISBN


1-4200-8386-4 (distribution by taylor & fancis : alk. paper)


1.  Energy conservation--Finance. 2.  Industries--Energy conservation--


Finance.  I. Woodroof, Eric A. II. Title.


HD9502.A2T5187 2008


658.2’6--dc22


2008017540




Energy Project Financing : Resources and Strategies for Success / Albert Thumann,


Eric A. Woodroof.


©2009 by The Fairmont Press. All rights reserved. No part of this publication


may be reproduced or transmitted in any form or by any means, electronic or


mechanical, including photocopy, recording, or any information storage and


retrieval system, without permission in writing from the publisher.


Published by The Fairmont Press, Inc.


700 Indian Trail


Lilburn, GA 30047


tel: 770-925-9388; fax: 770-381-9865


http://www.fairmontpress.com


Distributed by Taylor & Francis Ltd.


6000 Broken Sound Parkway NW, Suite 300


Boca Raton, FL 33487, USA


E-mail: orders@crcpress.com


Distributed by Taylor & Francis Ltd.


23-25 Blades Court


Deodar Road


London SW15 2NU, UK


E-mail: uk.tandf@thomsonpublishingservices.co.uk


Printed in the United States of America


10 9 8 7 6 5 4 3 2 1


0-88173-597-3 (The Fairmont Press, Inc.)


1-4200-8386-4 (Taylor & Francis Ltd.)


While every effort is made to provide dependable information, the publisher,


authors, and editors cannot be held responsible for any errors or omissions.


iv Foreword


The landscape for implementing energy efficient projects is rapidly


changing. The need for energy project financing has never been greater.


The factors influencing energy project financing have been brought


about by legislation, oil prices surging past $120 a barrel, and the grow-


ing concern for global warming.


In December of 2007, the Energy Independence and Security Act


was passed into law. This act promotes energy savings performance


contracting in the federal government, and provides flexible financing


and training of federal contract officers. The Energy Policy Act of 2005


reauthorizes energy service performance contracting through September


30, 2016.


The purpose of this book is to provide the key success factors


for structuring a finance energy project and getting it approved by top


management. The goals of the authors are threefold: First, we want


to explore as many financing options as possible. Second, we want to


provide the tools to make a comprehensive financial analysis. Third,


we want to broaden the readers’ horizons with new trends in the


industry.


There are many correct ways to assemble and finance an energy


management project. The number of possibilities is only limited to one’s


creativity. So be flexible and keep searching until you find the “win-


win” deal for everyone.


Albert Thumann, PE, CEM


v This page intentionally left blank Table of Contents


Chapter 1  Background on the Need for


Financing Energy Projects ........................................................1


Chapter 2  Financing Energy Management Projects ...............................3


Chapter 3  Choosing the Right Financing for Your


Energy Efficiency and Green Projects


with E  S ® ...................................................................51


NERGY TAR


Chapter 4  Financing Energy Projects through


Performance Contracting ........................................................79


Chapter 5  The Power Purchase Agreement (PC for Solar) ................93


Chapter 6  Selling Projects to Financiers .................................................99


Chapter 7  Key Risk and Structuring Provisions for


Bankable Transactions ...........................................................103


Chapter 8  When Firms Publicize Energy Management


Projects, Their Stock Prices Go Up ....................................113


Chapter 9  Overcoming the Three Main Barriers to


Energy Efficiency or ”Green” Projects ..............................127


Chapter 10  Basics of Energy Project Financing .....................................139


Chapter 11  Codes, Standards, and Legislation ......................................145


Chapter 12  The Energy Audit ...................................................................159


Appendix A  Economic Analysis .................................................................195


Appendix B  International Performance Measurement


and Verification Protocol—Vol. I .........................................277


vii Appendix B  International Performance Measurement


and Verification Protocol—Vol. II ........................................395


Appendix C  Resources/Links .....................................................................457


Index ................................................................................................................459


viii Contributors


CHAPTER 1, 2, 6, 8, & 9


Eric A. Woodroof, Ph.D., CEM., CRM, shows clients how to


make more money and simultaneously help the environment. During


the past 15 years, he has helped over 250 organizations improve profits


with energy-environmental solutions. He has written over 25 profes-


sional journal publications and his work has appeared in hundreds of


articles. Dr. Woodroof is the chairman of the board for the Certified


Carbon Reduction Manager program and he has been a board member


of the Certified Energy Manager Program since 1999. Dr. Woodroof has


advised clients such as the U.S. Public Health Service, IBM, Pepsi, Ford,


GM, Verizon, Hertz, Visteon, JPMorgan-Chase, universities, airports,


utilities, cities and foreign governments. He is friends with many of the


top minds in energy, environment, finance, and marketing. He is also


a columnist for several industry magazines, a corporate trainer, and a


keynote speaker. Eric is the founder of ProfitableGreenSolutions.com


and can be reached at 888-563-7221.


CHAPTER 3


Neil Zobler, President of Catalyst Financial Group, Inc., has been


designing energy finance programs and arranged project-specific financ-


ing for demand side management (DSM) and renewable energy projects


since 1985. Catalyst, a specialist in energy and water conservation proj-


ects, has arranged financings for over $1 billion. Neil’s clients include


U.S. EPA ENERGY STAR, the Inter-American Development Bank, over


20 electric and gas utilities (including Con Edison Co. of NY, PG&E,


TVA), engineering companies and vendors, and hundreds of individual


companies and organizations. He speaks regularly for organizations


including the Government Finance Officers Association, the Association


of School Business Officials, National Association of State Energy Offi-


cers, Association of Government Leasing & Finance, and the Council of


ix


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