Energy Project Financing : Resources and Strategies for Success

142 Energy Project Financing: Resources and Strategies for Success

and local governments because of its low rates (below prime and com-

parable to GOB rates).

It is important to note that in all of the categories listed above, your

company will be obligated to make the loan or lease payments regard-

less of the performance of the energy-saving equipment or the ESCO.

You may have recourse for repairs under a separate energy services con-

tract with the ESCO, or through an equipment manufacturer’s warranty,

but the loan or lease payments have to be made on time every month.

The interest rate and terms of the loan or lease are almost exclusively

based on the credit quality of your organization. Figure 10-1 shows the

structure of a traditional commercial bank loan or equipment lease.

Figure 10-1. Commercial Bank Loan or Lease

PROJECT FINANCING/SHARED SAVINGS/

PERFORMANCE CONTRACTING

The United States government spends over $8 billion a year on its

utility bills. The Energy Independence and Security Act of 2007 requires

that total energy use in federal buildings (relative to the 2005 level) be

reduced 30% by 2015. Yet the government continues to suffer from de-

caying and outdated energy systems in many of its facilities that cannot

be repaired without the issuance of additional government debt. This

problem is not isolated solely to the government, as many institutions

and corporations find themselves facing budget cutbacks due to down-

sizing or increased competition.