After working with you to select the most appropriate solution for your facility, NuGreen has the ability to finance the cost associated with the supply of the products and enter into a predetermined financing agreement. The business offers finance on a monthly, yearly basis or financing through a monthly service fee. All these approaches offer a fundamental Environmental Upgrade Finance methodology, which uses a payment approach to amortise the costs over a pre-agreed program period which result in you being able to realise your energy savings from day one.
Projects funded from capital expenditure or budgets payable at project completion
Projects funded from operational expenditure and can be amortised over a set term and paid monthly
Monthly payments are fixed, based on the cost of the equipment and the lease term
Environmental Upgrade Agreements is low cost finance provided through local councils
Energy Performance Contracts can offer guaranteed energy savings as part of the agreement
Power Purchase Agreements are a no capital cost up-front solution for PV solar
Grants usually provide a financial contribution toward a specific project
Capital Expenditure (CapEx)
Capital expenditures (CAPEX or capex) are expenditures creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing fixed asset with a useful life extending beyond the taxable year.
NuGreen Solutions can deliver energy efficiency solutions under a CapEx model where a client has the funding or a budget to undertake energy efficiency upgrades. The counterpart or CapEx is Operational Expenditure (OpEx).
Operational Expenditure (OpEx)
The use of fully financed solutions is not new, however, combining finance with long term Protection Plan Warranties can deliver beneficial, low risk outcomes.
In place of usual capital expenditure we can wrap this amount with our multi-year protection plan warranty and offer a fully financed solution amortised over a 5 year term. At the end of the term the ownership transfers to the customer.
By entering a financed arrangement for the solution the capital expenditure amount can be returned to the project budget and the assigned monthly finance fee is allocated to the facilities Operational Expenditure for ongoing payment.
Benefit to the customer:
- Zero upfront capital expenditure
- Return CapEx to project budget
- Use of latest technology
- Future proofed facility
- Zero maintenance for the protection plan warranty period
Staying up to date with new technology is important for all businesses, no matter what industry or vertical they are in. The challenge for many when it comes to getting the plant or equipment they need is covering the upfront costs that come with implementing energy efficiency projects.
With a lease, you’ll be paying for the use of your equipment so it’s easier to keep cash flowing. Monthly payments are fixed, based on the cost of the equipment and the lease term. There are no residual or additional payments to be made at the end of your term. At the end of your lease, you can choose to upgrade and sign a new lease for new equipment or pay an additional payment and the equipment ownership transfers to you.
Environmental Upgrade Agreements (EUA)
Environmental upgrade financing is the finance mechanism available under the 1200 Buildings program for environmental upgrades to buildings in the City of Melbourne. Environmental upgrades include the installation of energy efficiency improvements, renewable energy systems, and water conservation improvements.
This financing mechanism is underpinned by legislation under the City of Melbourne Act 2001. The mechanism allows Melbourne City Council, in partnership with Australian financial institutions, to enter into voluntary environmental upgrade agreements with building owners to finance environmental upgrades for non-residential buildings. Property owners are also able to pass part of the environmental upgrade charge to the building occupiers (tenants). In Victoria, the legislation requires that any such arrangement can only be made with the tenants consent. The objective of this requirement is to overcome the split incentive barrier so that the costs and benefits can be shared by the building owner and the occupiers.
Through the scheme, finance can be advanced by a financial institution for environmental upgrade works on a building. The financed amount is levied as a special charge by Melbourne City Council, an environmental upgrade charge, and the repayments will be collected by Melbourne City Council and paid to the financial institutions. This mechanism reduces the risk associated with lending for the financial institutions and provides finance at a rate lower than commercially available for property owners.
How does the process work?
The environmental upgrade finance process works as follows:
- You sign up to the 1200 Buildings program and submit an application to Sustainable Melbourne Fund
- Sustainable Melbourne Fund assesses your proposed environmental improvements for environmental upgrade finance eligibility
- You secure funding for retrofit works from an Australian financial institution
- The City of Melbourne declares an environmental upgrade charge on your building
- The financier advances you the upfront costs for your retrofit
- Your payments are collected through the Melbourne City Council rates system
- The City of Melbourne forwards the collected charges to the financier.
Energy Performance Contract (EPC)
Under the energy performance contracting model, an energy services company is hired to improve the energy efficiency of a building.
The key feature of energy performance contracting is that the energy services company guarantees the energy savings it will provide. They are paid from these savings for the term of the contract. If the savings are not achieved, the energy services company isn’t paid. Once the work is completed and the contract has ended, the full savings revert to the building owner.
The energy services company takes on a project management role and is responsible for hiring, managing and paying the third parties required to carry out the works (which may include engineers, installation contractors, commissioning agents and builders). This means the building owner deals directly with one party rather than several.
The implementation process for a typical energy performance contract is as follows:
Assess whether energy performance contracting is suited to the size and conditions of the building being retrofitted.
There is a threshold of economic viability which dictates that energy performance contracting is best suited to large projects.
If the building is suitable, expression of interest documentation is released and energy services companies interested in the job are identified.
A preferred supplier is selected from the proposals submitted by interested providers.
The preferred supplier will inspect the building thoroughly and prepare a detailed facility study.
This study will be used as the basis of the energy performance contract and will include the baseline energy consumption for the building.
The building owner is normally required to pay the costs of preparing the detailed facility study if, after being presented with it, they decide not to go ahead with the energy performance contract. This is sometimes referred to as a walk away fee.
If the building owner goes ahead with the energy performance contract, the cost of preparing the detailed facility study is usually rolled into the capital costs of the project.
The final contract is negotiated between the building owner and the energy services company.
This contract will state, among other things, the level of energy savings guaranteed by the energy services company, the fee structure for the project and the duration of the project. A typical energy performance contract period is four to ten years.
The energy services company will finalise its designs for the building, hire the sub-contractors required to carry out the works and prepare a detailed works specification and timetable.
The energy services company should consult with the building owner to ensure the timetable doesn’t interfere with critical periods of building operation and takes best advantage of planned holidays or periods of low occupancy.
The agreed works are carried out.
The systems are commissioned and training on their operation is provided to the building’s facility manager, tenants or other relevant staff.
The building is monitored for the remainder of the energy performance contract period and energy savings are verified and reported to all parties.
Payments are made based on these savings: by the building owner to the energy services company if savings are in line with those promised in the contract, or by the energy services company to the building owner if they fall below the guaranteed levels.
The party that carries out the monitoring and verification should be nominated in the energy performance contract. Monitoring and verification is usually carried out by the energy services company, though an independent third party can be used instead.
Maintenance is performed on the relevant systems for the life of the energy performance contract to ensure the guaranteed energy savings are delivered.
The energy performance contract will set out who is responsible for the various aspects of maintenance. Usually the building owner will be responsible for some aspects, and the energy services company will be responsible for others.
Note that an energy performance contract doesn’t have to apply to just one building – multiple buildings or facilities can be included. For more information, see the best practice guide to energy performance contracts.
On-site Photovoltaic (PV) Solar System – Power Purchase Agreement (PPA)
The development of NuGreen Solutions PPA styles of On-site PV solar gives the customer a 3rd option to implement PV solar on their project. This approach enables customers to generate ‘Green Power’ on-site; at a tariff less than grid based generated power. NuGreen PPA’s allow you to purchase power from the PV solar system without upfront capital expenditure. There are agreed payout times throughout the contract.
3 Styles of Project financing for solar
- Cash payment – CAPEX Payment
- Operating Lease – OPEX Payments. Allows for tax deductible payments.
- NuGreen PPA’s – Allows long term lock in of benefits. Option to own the PV solar system at the end. Payments are OPEX and tax deductible. Customers would still maintain their retail power bill but at lower levels.
Benefits to Customers
- Guaranteed ‘Green Power’ production at predictable costs
- Zero up front capital expenditure
- Immediate tariff savings from day one
- Displaces grid power at fluctuating costs
- Allows for future expansion into power storage under a similar model
Grants are non-repayable funds disbursed by one party (grant makers), often a government department, corporation, foundation or trust, to a recipient, often (but not always) a nonprofit entity, educational institution, business or an individual.
Most grants are made to fund a specific project and require some level of compliance and reporting and may require a co-contribution (ie. Dollar for Dollar).
NuGreen Solutions assist clients to understand and access available grants for undertaking energy audits, implementation projects or other environmental based projects.