ESPC FINANCING

A financing mechanism must be identified early in the process to include borrowing capacity and terms available to support an ESPC Project. Some agencies may have limited capacity for funding available to support an ESPC Project while other agencies may have greater funding options. Identifying financing sources from the public and private sector will allow both the Government Unit and the ESCO to develop projects consistent with the Government Unit's business objectives and available funds. More favorable financing terms enhance the potential scope of work, the contract terms and can also reduce the overall cost of the project. The ESPC and financing is structured SO that the total savings are enough to cover for each financing payment period and all the contract sums due under the contract. Therefore, the project can be cash flow positive from the first day and the totality of the improvements is funded by the savings. In many cases, ESCOs do not finance projects. However, ESCOs guarantee that the projected savings will meet or exceed the finance payment. A number of financing companies are knowledgeable of the ESPC approach and seek out opportunities to provide financing. An ESCO selected for a project can help bring in a financing partner. 7 I Page Energy Savings Performance Contract Program Amended Regulation CHAPTER THREE: ESPC PROCESS OVERVIEW