Energy Project Financing : Resources and Strategies for Success

36 Energy Project Financing: Resources and Strategies for Success

this chapter: Taxable Income = Savings – Depreciation – ESCO Pay-

ments.

Summary of Tax Benefits

Table 2-12 summarizes the tax benefits of each financial arrange-

ment presented in this chapter.

Additional Options

Combinations of the basic financial arrangements can be created to

enhance the value of a project. A sample of the possible combinations

are described below.

* In some Performance Contracts, the Host can own the equipment

and the guarantee assures that the operational benefits are greater

than the finance payments. Alternatively, some performance con-

tracts can be viewed as “outsourcing,” where the contractor owns

the equipment and provides a “service” to the Host.

• Third party financiers often cooperate with performance contract-
  ing firms to implement EMPs.

Figure 2-13. Transactions for a Performance Contract.

Purchase

Amount

Equipment

Chilled Water

System Manufacturer

Bank/Fi-

nance Co.

Loan Payments

PizzaCo

Installs

Equipment,

Guarantees

Savings

ESCO

Payments

ESCO