26 HќќѠіђџȱ юћјђџ юџѐѕȱ2014 Continued from page 25. ęȱǰȱ¢ȱ¢ȱ and market rates at the time of funding. 6HFXULW\ Although each state may have ¢ȱěȱȱǰȱ in most cases, the lender will be pro- ȱ ȱȱęȱ¢ȱȱ- fected lien on the capital equipment. As an alternative, the project can be secured by the customer pledging unencumbered essential purpose facilities, such as its city hall building, ȱǰȱęȱǰȱǯȱ ȱ value of the pledge facilities should ȱȱȱȱȱȱȱę- ing amount. Private universities and not-for- ęȱȱȱȱȱ ȱ¢ȱȱȱę- ing with a combination of a revenue pledge and equipment collateral. ¢ȱȱęȱ ȱȱ secured by pledging an unencumbered essential purpose facility, but typically the security interest ȱȱ¢ȱęȱȱ ȬŗȱȦ ȱę¡ȱęǰȱȱǯȱ ȱ security interest may, in some cases where a weaker lessee and ESCO are involved, be coupled with a pledge or assignment of the ESCOs guarantee or with a payment and performance bond, which ensures the ability of the ESCO to complete the project and/or guarantee the energy savings. )LQDQFLQJ 7RROV State, municipal governments and public institutions of higher education typically utilize tax-exempt lease ȱȱȱęȱȱ to 100 percent of the project cost and ȱȱ¢ȱȱęȱȱŘŖȱ ¢ǯȱ ¡Ȭ¡ȱȱěȱ ȱ ¢ȱȱ¡ȱęǰȱ thus reducing interest expense and overall program cost. Capital leases: ȱęȱȱ structured as an annual appropriation lease or an abatement lease. The abatement lease can be utilized in Indiana or California only. The nonappropriation lease is used in all 50 U.S. states and territories and is the most common solution. ȱęDZȱPrivate uni- ǰȱȬȱęȱȱȱ higher education institutions typical- ¢ȱ£ȱȱęȱȱȱ lower rates in the tax-exempt market to reduce interest expense and overall program cost. 8QGHUZULWLQJ ȱȱȱ Ĵȱ ȱȱȱęȱ- tals of the lessee or borrower, ESCO expertise and balance sheet, collateral, project savings, size, term and pricing. 6XPPDU\ Federal and local governments continue to provide grants and incentives to encourage clients and inves- ȱȱęȱȱǰȱ ȱ creating clean energy jobs and reducing carbon emissions. ESCOs play a vital role in designing, engineering and installing ECMs to reduce energy consumption and lower utility bills. Frequently the ESCOs guarantee the savings for a portion or all of the project’s useful life for an annual M&V fee. The project savings typi- ¢ȱ¡ȱȱȱȱęȱ payments to create positive cash Ě ȱȱȱȬȱȱȱȱ ǯȱ ȱȱĚ ȱ¢ȱȱ ȱȦ ȱĴȱȱȱ repayment of the loan or capital lease. ȱ ȱȱȱęȱȱ¡ȱ to fund energy conservation projects. The most widely used in the MUSH market are the non-appropriation ¡Ȭ¡ȱȱȱȱę- ings, which provide the client with a ȱęȱȱȱȱȱ ȱȱĴȱȬ¡ȱ¢ǯȱ ȱ investor typically is secured by the installed equipment or unencumbered real property. Overall, the building energy efę¢ȱȱȱ¢ȱȱ for the client and the opportunity to have new equipment installed in older facilities still in use. The project ęȱěȱȱȱĴ- ȱȱęǰȱȱȱ ¢ǰȱȱęȱȱȱ Ĵȱ¢ǯȱ ȱǞŚȱȱȱǞŜȱ billion MUSH market is vibrant and growing, and continues to create clean energy jobs to reduce carbon emissions in the United States, offering something for all the market participants. $400,000 $500,000 $300,000 $200,000 $100,000 $0 Year 1 Total Program Savings Total Program Cost Annual Cash Flow Year 2 Year 3 Year 4 Year 5 Year 9 Year 10 Year 15
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