1. Laura Richardson Executive Director The Jordan Institute NH C-PACE Program Overview: New Hampshire’s new market-driven energy solution for businesses May 13, 2015 - Local Energy Working Group

2. Our Supporters Anonymous Donor YOUR LOGO HERE Anonymous Donor

3. Who Are We? Non-Profit organization Reduce energy use in buildings Public policy and program design Founded in 1995 For-profit company, majority owned by The Jordan Institute Scale-up number of energy- efficient buildings Expand available EE services - projects in the field including energy-centric construction management 2013 Strategic Plan & Reorganization 2014+ Policy and Program Design 2015+ C-PACE Program Launch

4. Overview of this presentation 1.Defining C-PACE and our approach 2.Framing the need for C-PACE 3.How C-PACE works 4.Timeline 5.Our team 6.How volunteers can help

5. C-PACE Definition C-PACE = Property Assessed Clean Energy financing for Commercial buildings NH Statute is RSA 53-F, rewritten for 3 rd time in 2015; unanimous support from NH House and Senate Jordan Institute and partners are launching the NH C-PACE program, 2015

6. NH C-PACE Overview New Hampshire’s C-PACE Program ties PRIVATE INVESTMENT for EE/RE projects to PRIVATELY OWNED COMMERCIAL BUILDINGS through the conduit of MUNICIPAL TAX ASSESSMENTS (voluntary LIENS) thereby creating an innovative financing tool that provides powerful benefits not otherwise available

7. Jordan Institute’s Approach 1.Understand and respect motivators of stakeholders 2.Accept that public money will not solve this problem 3.Build a team that has a deep bench of experience 4.Build a program – from scratch and without any public funding – that will be open, accessible, transparent, easy to navigate, leverage other EE/RE programs, and have lasting impact 5.Encourage projects statewide – in large and small municipalities and in all corners of the state – by 2017 6.Focus on projects that are straightforward, especially to start – clear ownership, obvious project scope, patience with start-up bumps

8. Anticipated Outcomes of NH C-PACE 1.Reduce the amount of energy used in commercial buildings, associated greenhouse gas emissions, and outflow of energy dollars from the state. 2.Enable municipalities to encourage site-appropriate EE/RE projects in commercial buildings. 3.Building owners improve the operational costs, energy performance, resiliency, comfort, and occupancy of their assets. 4.Create a sustainable stream of EE/RE project work for EE/RE professionals – JOBS!! 5.Develop a new financing product for lenders and investors. 6.Normalize EE/RE projects so that they are not seen as philosophical pilot projects, but rather practical steps that make good economic sense.

9. The Talk: Cost – Cost – Cost 1.Energy rates are volatile 2.Capacity and availability are dynamic 3.Transition as big generators retire and others and infrastructure projects are under consideration to be built Users of energy do not have control over these issues. Improving the efficiency of buildings and using renewable sources can temper these challenges As more buildings become efficient, more capacity is available for others to use.

10. The Benefits of EE and RE 1.Reduce energy costs 2.Reduce fossil-fuel energy use 3.Reduce greenhouse gas emissions 4.Preserve finite resources 5.Shave peak electricity use 6.Local jobs, recirculate energy dollars 7.Economic development 8.Improve building stock

11. Core EE/RE Motivators for Businesses 1.Doesn’t interfere with core business efforts 2.Recover the investment 3.Improve the building’s value 4.Reduce maintenance costs 5.Improve occupancy rates 6.Reduce energy costs 7.Maintain warrantees 8.Integrate with other building upgrades and deferred maintenance 9.Improve occupant comfort; reduce complaints 10.Marketing and branding

12. Other EE/RE Motivators and Outcomes 11. Local economic development: recirculate $$$ and jobs 12. Improve Health: reduce energy- related asthma, cancers, allergies 13. Improve indoor air quality: VOCs, toxins, CO2, CO 14. Address national security and energy independence 15. Embrace Yankee frugality

13. More Motivators Improve the resiliency of buildings 16. Reduce Power outages: Buildings stay warmer in winter; pipes less likely to freeze Buildings stay cooler in summer; AC demand is reduced 17. Better withstand extreme weather events 18. Protect core business, inventory, operations

14. Priorities of Commercial Building Owners 1.Core business, assets and inventory, continuity of business 2.Positive cash flow 3.Full occupancy of buildings 4.Strong balance sheet – manageable debt 5.Flexibility to sell property with limited complications 6.Occupants who pay their rent 7.Occupants who do not complain 8.Good tenants who renew lease agreements 9.Low maintenance costs and easy maintenance tasks 10.Low/stable operational costs 11.Addressing deferred maintenance issues 12.Stable energy bills: electricity, heating, process, water 13.Being good neighbors and community members

15. Addressing energy upgrades from the perspective of commercial building owners 1.Often seen as a low priority or a luxury 2.Energy projects are addressed in emergency situations 3.Fast payback / Return on Investment 4.Capital projects reflected on balance sheet 5.May not improve the appraised value of the building in the short term 6.Building owners avoid loans whenever they can 7.Claim that occupants don’t demand EE/RE 8.No budget for capital projects – or energy projects 9.Wariness of promises made by the contractor community 10.Rebates and incentives change all the time 11.EE/RE projects often require significant up-front costs

16. “Old Way” – not motivating 1.Many Commercial Real Estate Building Owners flip their buildings every 5-7-10 years 2.Most loans are for 5-7 years 3.Most loans are repaid out of capital budgets 4.Most “low-hanging fruit” energy projects have payback periods of 3-5-7 years 5.That means building owners rarely get to experience the cost savings from the upgrades they undertook 6.Not many “comps” so appraisers and assessors rarely truly value those upgrades; therefore investment is not usually recaptured at time of sale 7.Historically, EE projects may not have met expectations

17. Building Owners Need Advocacy Information – where to start Competing priorities – core business or EE project? Who to trust? Uncle Jim? Salesman? Energy audit and benchmarking – how bad is the building? Where to access funding? Will the project actually perform the way it was designed?

18. Priorities of Lenders and Investors 1.Avoid risk or address risk through terms and conditions 2.Recoup the investment - on time and as proposed 3.Make a good return on the investment 4.Expand the customer base 5.Support projects that align philosophically 6.Add a new lending product to their offerings 7.Be a good neighbor 8.For banks: comply with the Community Reinvestment Act

19. Conventional energy projects have financial risks Most lenders are wary of financing comprehensive energy projects and need assurances to reduce risk. NH doesn’t license/certify construction professionals Building code compliance and energy code compliance is less than robust in many municipalities Building owners sell properties every 5-7 years Tenants move every 3-5-10 years Projects are rarely cash-positive Investors want to recover their money and want a good return

20. Market-driven ways to reduce risks : High interest rate Large down payment Short term of loan Don’t fund projects

21. Publicly funded ways to reduce risks : Grants and Rebates to reduce capital costs Interest Rate Buy Down Loan Loss Reserve

22. C-PACE is different from other “loans”: 1.Tied to the property, not the property owner 2.Non-accelerating payments, next owner makes subsequent payments - “Pay for the energy efficiency you use” 3.No down payment required 4.Can be off balance sheet – repayment as part of tax bill 5.Addresses split incentive between building owner and tenants -- building owner can “share” loan repayment (ie triple net lease) 6.Cash Positive from DAY ONE, Savings to Investment Ratio >1 7.Value added ensures a quality project – baseline benchmarking, commissioning, Monitoring & Verification 8.Longer term repayment, not 5-7 years, but up to 30 years 9.Encourages comprehensive projects, not just fast ROI 10.Financial & energy project vetting/oversight, improves trust 11.C-PACE lenders understand the reduced risk of these projects

23. C-PACE Standards Reduce Risk to Lenders C-PACE projects are tied to the property through a lien C-PACE projects have been vetted by impartial energy and finance professionals Projects must have a Savings to Investment Ratio >1, meaning that repayment of the project is LESS than the energy savings and that the project is CASH FLOW POSITIVE Quality Control Standards are part of every project pre-project benchmarking/energy audit commissioning during project monitoring and verification post project

24. NH C-PACE Quality Control Standards Energy Audit – ASHRAE Level II Building Commissioning Energy Monitoring and Verification Savings to Investment Ratio >1 Financial information about project owners and buildings Other requirements may apply

25. Investor Confidence Project by EDF Jordan Institute and Resilient Buildings Group selected as Allies Like a Good Housekeeping Seal ICP reduces transaction costs by assembling existing standards and practices into a consistent and transparent process that promotes an efficient market, while increasing confidence in energy efficiency as a demand- side resource and resulting cash flows for investors and building owners

26. No Public Funding in NH C-PACE Program Live Free or Die No public funding available to launch program or to finance projects No taxpayer funds No ratepayer funds No municipal bonding C-PACE is completely voluntary No mandates Driven by the Private Market

27. Fee Schedule for each project Jordan Institute receives no public funding to launch this program. We are designing this the NH way … with Fees Fees are non-refundable Fees can be applied to the project costs Savings to Investment Ratio must be >1 Fee Schedule is transparent and will be available soon

28. Anticipated Fees Fees: 1.Preliminary Application (very simple) will be FREE 2.Project Application and Project Management Fee 3.Energy Technical Review Fee 4.Financial Underwriting and Review Fee 5.Fee to cover costs incurred by Municipality 6.C-PACE Database Management License – Fee per project 7.Closing Costs on the project Approach: Recover costs to run the program and keep the financing reasonable

29. NH C-PACE Program Team Jordan Institute, Inc. – Program Administrator, day to day coordination, visibility, education, project management Sustainable Real Estate Solutions, Inc. – Data management, training, energy-project origination, development, management Resilient Buildings Group, Inc. – Energy Project Vetting, commissioning, M+V NH Community Development Finance Authority – Financial vetting, warehousing of smaller projects, energy-project repayment coordination Hannon Armstrong Sustainable Infrastructure Capital, Inc. – energy finance house is backstop to ensure that projects can get financing

30. Eliminate any perception of Conflict of Interest If Resilient Buildings Group or CDFA are working with a client who may participate in NH C-PACE, then SRS will step in to vet the project

31. “Unlimited” financing available for projects Private investors are very interested in this opportunity But… projects must adopt and follow program standards and protocols Junior lien position Reduced risk, instills confidence Quality control Energy and financial vetting benchmark, commissioning, M&V Consistency across projects, municipalities Improves lender competition which will lead to more competitive rates Must be in a C-PACE municipality Jordan Institute is coordinating efforts

32. NON-EXCLUSIVE Project Financing Large Energy-Project Finance House Will finance large projects and smaller aggregated projects Act as a default/back stop if other lenders not interested Traditional lenders, local banks, small-medium-large lenders are encouraged to participate Groups of private individuals Investment, retirement, and other funds Divest-Invest Groups NH Community Development Finance Authority Warehouse smaller projects and financing Individuals, institutions, Divest-Invest, etc.

33. NH Municipalities 1.Municipalities must adopt the statute to enable C-PACE in that jurisdiction 2.Average size of a NH municipality: 5,600 residents 3.Limited bandwidth to take on a new complex initiative 4.Technical energy, building-science, and financing expertise required for successful C-PACE projects 5.This program will only work in NH if there is program- design continuity across municipalities

34. Priorities of Municipalities and Officials 1.Manage growing list of urgent responsibilities under limited staffing and budget constraints 2.Provide access and transparency to residents, businesses, State and Federal officials, media, et cetera 3.Elections – Town Meeting – Planning Board – School Board – Select Board – Zoning Board – Assessments – Taxes – and more 4.Maintain municipal infrastructure: Roads – Schools – Town Offices – Emergency Services – Cemeteries – Libraries – more 5.Advocate for vulnerable citizenry: Elderly – Disabled – Sick – Low-income 6.Manage demands of high-maintenance citizenry 7.Balance needs and wants of various constituencies 8.Retain and woo businesses and residents 9.Plan for resiliency – economic, extreme weather, energy prices and energy projects, et cetera 10.Develop a reputation as a business-friendly community 11.Develop and implement sustainability goals 12.And others – the list seems to be endless

35. Benefits to the Municipality 1.Nominal payment to cover costs of being conduit for funding 2.Can market the program as a business-friendly benefit – economic development and community revitalization 3.Improved commercial buildings – more efficient, resilient, occupied 4.Occupied buildings = improved employment base = improved tax base 5.Vast majority of efforts handled by others 6.Lead economic development initiative 7.Consider this part of the municipality’s sustainability program 8.Provide an ongoing project for the Local Energy Committee

36. C-PACE Responsibilities of Municipality 1.Municipality must adopt “the program” – RSA 53-F 2.Municipality “should” designate administration of the program to Jordan Institute 3.Jordan Institute and Sustainable Real Estate Solutions will train tax collector and Registrar of Deeds (and others as necessary) about program and best practices 4.Municipality updates tax assessment software to allow for special C- PACE assessment 5.Register lien with County Registrar of Deeds 6.Send tax bills with special assessment to participating C-PACE borrower/s 7.Receive C-PACE repayment funds from borrower/s 8.Forward Assessment repayments to CDFA 9.Notify CDFA if Assessment has not been paid in full

37. NH and the National C-PACE Scene 31 states have adopted PACE financing tool PACE enabled states Early stage PACE program development Launched PACE programs PACE programs with funded projects To date, 305 projects funded, $105M, 1080 jobs Courtesy PACENow

38. C-PACE Building Types Can Include: Office buildings Hotels & convention centers Apartment buildings (5+ Units)* Manufacturing facilities Heated warehouses Agricultural buildings Retail: grocery, malls, big box, Mom & Pop Health clubs & athletic facilities Private Schools Non-profits BUT NOT PUBLICLY OWNED BUILDINGS NOT RESIDENTIAL * Some Restrictions Apply

39. C-PACE Projects Can Include: Comprehensive projects or individual energy measures Airsealing & Insulation - Walls, basements, crawlspaces, attics, roofs, piping, ducts Heating, Ventilation, AC Systems Biomass Heat — pellets or chips Ground-Source and Air-Source Heat Pumps Controls and heat distribution Lighting Solar – electric, hot water, hot air Combined heat and power Can include non-energy project work that is connected to the energy project, as long as the SIR>1 (ie roof replacement with solar project)

40. Ideal C-PACE Building Candidates: 1.Willing project owner & municipality 2.Project MUST have a Savings-to-Investment Ratio >1 3.Inefficient buildings and equipment 4.Existing construction 5.Fossil fuel heating, electric heating 6.Municipality has numerous “ideal” C-PACE buildings 7.Uncomplicated ownership 8.Early phase: Project costs >$250,000 9.Candidate for RE system ------  2015: City Council Municipalities  2016: City Council & Town Meeting Municipalities

41. C-PACE is not about the interest rate Although C-PACE rates will be competitive (~6%, your results may vary) C-PACE IS about: 1.Positive cash flow from Day One 2.No down-payment required 3.Sharing project costs/ repayment with tenants (split incentive) 4.Off balance sheet 5.Being able to sell the property without escalating payments 6.Address deferred maintenance

42. CT - C-PACE Case Study – Shagbark Lumber C-PACE Financing: $485,000 Energy Upgrade: 157 kW PV system Building Size: 35,950 Square Feet Incentives: ZREC (Zero-emissions RECs) C-PACE Financing: $485,000, 100% project cost Term: 10 years Annual Interest Rate: 5.0% Annual C-PACE Assessment: $61,325 Annual Energy Cost Savings: $61,325 Lifetime Energy Cost Savings: $1,215,205 Courtesy of www.cpace.com

43. CT - C-PACE Case Study – Bushnell Theater C-PACE Financing: $384,000 Energy Upgrade: Hot water heater, 3 high- efficiency boilers and replacement of a single, inefficient steam boiler Building Size: 95,000 SF; Year Built: 1919 Total Project Cost: $650,000 Incentives: $266,000 C-PACE Financing: $384,000; Term: 20 years Annual Interest Rate: 5% Annual C-PACE Assessment: $30,411 Annual Energy Cost Savings: $30,411 Lifetime Energy Cost Savings: $1,173,479 Courtesy of:

44. “Old Way” vs “New Way” 5-Year Cash Flow Case Study, Courtesy Energize CT and Sustainable Real Estate Solutions

45. SIR Calculation Example Case Study, Courtesy Energize CT and Sustainable Real Estate Solutions

46. SIR Calculation Example Case Study, Courtesy Energize CT and Sustainable Real Estate Solutions

47. How the money will move in NH C-PACE Investor Borrower/Building Owner Municipality Community Development Finance Authority Project financing - simplistic Investor lends $$$ to Building Owner Municipality attaches C-PACE Special Assessment to the property through the county Lender, Building Owner, Municipality, Existing Mortgage Holders, Jordan Institute, and CDFA agree to scope, term, _ other details of the project 2. 3. 1.

48. How the money will move in NH C-PACE Investor Borrower/Building Owner Municipality Community Development Finance Authority Project repayment Municipality sends C-PACE Special Assessment to Building Owner with tax bill Building Owner pays taxes, including C-PACE Special Assessment Municipality sends C-PACE Special Assessment to CDFA CDFA forwards Payment to Lender of Record CDFA reports back to Jordan Institute 1. 2. 3. 4. 5.

49. What happens in Default? Investor Borrower/Building Owner Municipality Community Development Finance Authority CDFA alerts Investor Investor reaches out to building owner and/or undertakes corrective action or foreclosure proceedings CDFA Reports to Jordan Institute Municipality alerts CDFA that C-PACE Special Assessment has not been paid 1. 2. 3. 4. 5. Next building owner makes late payments and resumes payment schedule

50. How C-PACE Projects Work Jordan Institute is administrator of the NH C-PACE program

51. Projects will be driven by EE/RE contractors and installers and building owners Manage expectations – not all projects will qualify Before encouraging C-PACE adoption by municipalities, we want to have at least 3 viable projects percolating Be sensitive to other priorities of building owners and their schedules… and that maybe their internal situation isn’t a match for C-PACE The C-PACE Project Pipeline

52. Ambassadors for the program Encourage contractors/installers to consider participating – be clear: vigorous oversight When viable projects are in pipeline, encourage municipalities to adopt the program Encourage buildings owners to consider the program But Remember: Not all projects or buildings or building owners or contractors will fit this model There are times when exuberance undermines efforts The Role of LECs and other volunteers

53. 2015 Overhaul to RSA53-F, awaiting Governor Hassan’s signature Program Launch, fundraising, visibility, team building program design and document development Select City Council Cities adopt C-PACE RFQ for Lenders/Investors; RFQ for Contractors/Installers Trainings – contractors/installers Projects get underway Roll out materials for Town Meeting Towns for 2016 2016 Town Meeting Towns adopt C-PACE More City Council Cities adopt C-PACE Trainings and Projects – ongoing 2017 Statewide adoption and projects Time Frame

54. Open Program Request for Qualifications coming soon Contractors and Installers – must be “qualified” AND “trained” in how the program works before being able to participate 3 rd parties encouraged to participate for quality- control oversight Lenders and Investors Preliminary Application for Projects coming soon RFQs will be rolling, no deadlines

55. Training and Education Small Group Environment Town Officials Tax Collectors Town Assessors County Registrar of Deeds Building Owners Contractors ESCOs Lenders

56. Visibility and Marketing Managing the message Managing expectations Case Studies Data collection & reporting Social media presence Materials available at www.JordanInstitute.org

57. Raising Funds to Launch the Program Foundation support Private donations Fundraising events www.jordaninstitute.org

58. Thank you! Laura Richardson, Executive Director The Jordan Institute lrichardson@jordaninstitute.org 603-226-1009, x204 6 Dixon Avenue, Suite 201 Concord, NH 03301