1. King’s Strategic Energy Partners KCH Strategic Energy Partners Presentation to: 14 th January 2014 Iain France iain.france@nhs.net

2. 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?

3. 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

4. King’s Strategic Energy Partners Principles and Methods DEMANDSUPPLY THEN ROI (years) Cost XX X X X X X X X Strategic Approach: Energy consumption Energy supply Student comfort Backlog maintenance Risk & resilience Maintenance Energy-security Money

5. King’s Strategic Energy Partners Holistic Approach to… Cost Time PPM Reactive maintenance Energy All revenue costs LightingControlsHeating ITFabricCooling Technologies The Estate -15% -25% -20% -2% +15% -10% -20% -18%

6. IGA 1 King’s Strategic Energy Partners Process Investment- Grade Audit Project- Installation Guarantee + Continuous Improvement Procurement Feasibility Study 6 months 6-18 months1-20 years1-2 months1 month Phased approach to manage changing estates: Project 1Guarantee 1 IGA 2 Project 2Re-baseline Etc. IGA 3

7. King’s Strategic Energy Partners Case Study: University of Sheffield Requirement: 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 Results Contract 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)

8. King’s Strategic Energy Partners Case Study: Taunton NHS Situation: ● Estate condition deteriorating due to long-term under-investment: backlog £6m ● Corporate risk “significant” ● Mandatory CO 2 targets (34% by 2020; 80% by 2050) ● Rising energy costs (£1.8m p.a.) ● Carbon taxes (£108,000 p.a.) ● New Surgical Wing Project Results Contract sum£7.2m Number of measures200 Backlog maintenance addressed £2.5m Annual energy & CRC savings £756k, rising with energy inflation 43% 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

9. King’s Strategic Energy Partners Case Study: King’s NHS Situation: ● 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 savings1,892 tCO 2 = 9% (taking Trust to 24%) Net cash surplus 20 yrs£7.0m Measures including CHP heat utilisation (improved CHP QA) BMS (Trend) Drives, pumps Heat distribution Plate heat exchangers

10. King’s Strategic Energy Partners Financial Illustration (borrowing) Project capital cost £3.52m Funded via 12-year on-balance sheet capital borrowing @ 5.5% interest

11. King’s Strategic Energy Partners Financial Illustration (borrowing) Energy savings: 20% of £2.2m energy bill Year 1: £400k; rising to >£1m with 6% energy inflation Cumulative energy saving £11m over 15 years

12. King’s Strategic Energy Partners Financial Illustration (borrowing) Once capital borrowing repaid, most of the energy saving hits the bottom line

13. King’s Strategic Energy Partners Financial Illustration (borrowing) Cumulative net cash saving after 15 years = £5.7m

14. King’s Strategic Energy Partners Financial Illustration (Sheffield) £3.8m capital project £480k annual saving, rising by 7% energy inflation

15. King’s Strategic Energy Partners Financial Illustration (Sheffield) £3.8m capital project £480k annual saving, rising by 7% energy inflation Including saving of £1.3m backlog maintenance

16. King’s Strategic Energy Partners Financial Illustration (Sheffield) £3.8m capital project £480k annual saving, rising by 7% energy inflation Including saving of £1.3m backlog maintenance

17. 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]

18. King’s Strategic Energy Partners Services Offered from King’s / Ecovate Investment- Grade Audit Project- Installation Guarantee + Continuous Improvement Procurement Feasibility Study Strategic Technical Commercial Financial Present to Board Framework or OJEU Select Preferred Bidder based on capability Contracts Project-Management Financial-Modelling Funding if required Contracts Project-Management Monitoring & Verification Manage Continuous Improvement

19. 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?

20. King’s Strategic Energy Partners KCH Strategic Energy Partners Iain France 07854 540325 iain.france@nhs.net