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ENERGY STAR CASH FLOW OPPORTUNITY CALCULATORIntroduction

Released on 12/18/2002

document.xls/IntroAs the numbers that you will use in the calculator are your own estimates,

ENERGY STAR® does not guarantee that your project will generate the results presented herein. See full disclaimer.

Printed on 05/06/2023Page 1 of 17

CASH FLOW OPPORTUNITY CALCULATOR

Version 2.1 - 2012

Please send any comments to Katy Hatcher, ENERGY STAR National Manager [email protected].

Developed by The Cadmus Group, Inc. and Catalyst Financial Group, Inc., under contract with the U.S. EPA

IMPORTANT NOTICE: The macros imbedded in this spreadsheet must be enabled to use this calculator. To enable the macros using Microsoft Excel 2000, 2002, or 2003, please click on Tools > Macro > Security Level and select the "medium" (recommended) or "low" security level (not recommended as this "low" macro security option enables macros without giving you the option to enable/disable the macros). If you are using Microsoft Excel 2007, click Developer > Macros and select “Disable all macros with notification” option. Note that you will need to close all Excel applications after enabling the macros and reopen this worksheet. You must enable macros if and when prompted by the program upon opening. CAUTION: Macros in other spreadsheets may carry harmful programming codes. Do not enable macros from sources you do not trust.

This spreadsheet is designed to work with Microsoft Excel 97 or later versions for Windows OS. It may not work properly with earlier versions. It is best viewed with 1024x768 pixels or higher resolution.

DISCLAIMER: ENERGY STAR® does not guarantee that your project will generate the results presented herein. An investment grade audit performed by a qualified engineering organization is required to determine the actual size of your savings opportunity.

mailto:[email protected]?subject=CFO%20Calculator%20Question

ENERGY STAR CASH FLOW OPPORTUNITY CALCULATOR Instructions

document.xls/Instructions ENERGY STAR® does not guarantee that your project will generate the results presented herein. See full disclaimer.

Printed on 05/06/2023 19:56:45Page 2 of 17

ENERGY STAR CASH FLOW OPPORTUNITY CALCULATOR v2.1INSTRUCTIONS

HOW TO USE THIS WORKSHEETThe purpose of this spreadsheet is to help decision-makers quantify the costs of delaying an energy efficiency project by addressing three critical questions:

- How much new energy efficiency equipment can be purchased from the anticipated savings?- Should this equipment purchase be financed now or is it better to wait and use cash from a future budget?- Is money being lost by waiting for a lower interest rate?

The Cash Flow Opportunity Calculator spreadsheet is easy to use, intuitive, and follows the logic outlined above. It consists of 6 worksheets, including four data tabs, an instructions tab, and a summary report tab. Each data tab addresses a specific calculation, the results of which are used in subsequent worksheets. Note that the data entry tabs can be used independently, should you wish to use only one of the four calculations. A description of each of the data and summary report tabs follows:

“Data Entry” Tab—The purpose of this tab is to estimate the amount of energy waste (or potential savings) buried in your utility bills. This amount is calculated in dollars rather than kWh or therms. This amount becomes the cornerstone of the subsequent spreadsheet calculations. You will need to know the amount of your current “energy spend” (utility bills). This tool can be personalized to identify the project(s) being analyzed by entering your organization’s name and specifying the projects being evaluated.

Because energy is measured in different ways by different organizations, this tab presents a variety of profiles found in the “Type of Analysis” window (ROW 5) in an effort to offer a selection of profiles that best suits your organization. On the “Type of Analysis” window, choose the description that best fits your project. The “User Generated Categories” is a simple generic option that provides two category ROWs and the ability to create any labels you wish that best describe the projects (i.e., individual addresses or groups of properties). The “Benchmark Results from EPA's Portfolio Manager” option allows you to input the data directly from ENERGY STAR’s Portfolio Manager. “Green Building Categories” uses the categories directly from LEED® EB. “Water or Wastewater Treatment Plants” allows you to input data based on million gallons per day, and “By Efficiency Project Type” is technology-driven (Lighting, Heating and Cooling, Retro-commissioning, etc.) and “Manufacturing Facility” allows you to input data based on production, such as pounds of product. In all instances, you can overwrite the category names to best describe your project.

Estimate the percentage of the energy savings that will be realized by the energy efficiency project to be applied against your utility bills. These savings can be leveraged by financing the project; this number becomes the “source of repayment” and is used in the next tab.

“Investment Values” Tab—This tab is like a ¨reverse financial calculator.¨ It uses the savings estimate from the Data Entry Tab to calculate the amount of equipment and services that could be installed and paid for using only your current and future energy savings.

“Cash Flow” Tab—Here you compare the cash flow consequences of two decision points: (1) installing the energy project now and using future energy savings to cover the financing costs versus (2) postponing the installation until funds become available in a future budget. Whichever decision generates the larger Net Present Value is generally accepted to be the better financial decision. The results of this comparison are often counter-intuitive.

“Interest Rates” Tab—The financing that offers the lowest interest rate is not always the best deal. The lowest rate offering may not be immediately available (typically the case with most bonds and revolving loan funds). This tab allows you to compare two different interest rate offerings by adding the impact of the cost of delaying the installation (lost savings opportunity) caused by waiting for the lower interest rate financing. This helps calculate how long you should wait for a lower interest rate offering before the lower interest rate becomes the more expensive financing option.

“Summary” Tab—This tab generates a report that includes all of the information covered in the data tabs. If you are interested in showing only one tab's results, you can use the Excel’s “Print” function to print any one page of interest rather than printing the entire report. For more sheet specific instructions, please click the Help button on each tab to open the Help section under each page.

ADDITIONAL INFORMATIONENERGY STAR Portfolio ManagerEPA developed Portfolio Manager to help businesses continually track and compare energy use for all facility types, which is critical to successful energy management. Portfolio Manager also provides a comparative 1-to-100 rating of energy use for the following facility types:

Bank/Financial InstitutionsCourthouses Hospitals (acute care and children’s) Hotels and Motels House of WorshipK-12 Schools Medical Offices Offices Residence Halls/Dormitories Retail Stores Supermarkets Warehouses (refrigerated and non-refrigerated)Wastewater Treatment Plants To find out more about Portfolio Manager, please visit www.energystar.gov/benchmark. If you would like to find out if your buildings are eligible for benchmarking, please visithttp://www.energystar.gov/index.cfm?c=eligibility.bus_portfoliomanager_eligibility

If you have already benchmarked your buildings, aggregate your data from the EPA ENERGY STAR benchmarking tool into quartiles and enter them into this Cash Flow Opportunity Calculator. (Enter total square feet and total utility expenditures for each quartile in the Data Entry worksheet.) Internet PresentationsYou can view one of our self-guided Internet presentations to learn more about this topic. Please visithttp://www.energystar.gov/index.cfm?c=business.bus_internet_presentations for more information. IMPORTANT NOTICE & CONTACT INFORMATIONThis calculator, like all of the ENERGY STAR program's products and services, is available as a public service. EPA makes no representations of its accuracy, only of its intention. Should you have any comments, we kindly request that you notify: Katy Hatcher, ENERGY STAR National Manager, at [email protected].




















































DETAILED INSTRUCTIONS

Section 1—Data Entry TabThis tab is where you enter basic information about your organization. The objective is to estimate the potential annual energy savings based on a simple evaluation of your organization’s profile. Note that yellow CELLs require data/information, which you provide, while blue CELLs contain formulas, which cannot be overwritten.1) Enter the name of your organization in CELL D42) In ROW 5, choose between five alternative approaches to enter the organization’s data based on which scenario best describes the nature of your project. You will notice that the table will show between 2 and 5 rows of data entry points, depending on the approach you choose.

User Generated Categories—This simple approach gives organizations a general picture about their energy use and potential savings. You can enter specific property addresses or group properties together. If you are unsure how to group your properties, you might start by thinking of them in two categories: “more energy efficient” versus “less energy efficient”. After all, it is usually easier to save energy in the less energy-efficient properties.

Using Benchmark Results from ENERGY STAR—This is a good approach for ENERGY STAR partners using EPA’s benchmarking tool, Portfolio Manager. This approach breaks the data into four quatiles in terms of energy consumption: the bottom quartile is high energy consumers (ratings of 24 or below), the third group is below average (ratings between 25 and 49), the second group is above average (ratings between 50 and 74), and the top group (ratings of 75 or above) consists of the best performing buildings. The quartile-based method is a more detailed approach as it requires organizations to enter four sets of data instead of the two sets in the “User Generated Categories” approach. If you have benchmarked your buildings, use this tab to enter the results into the corresponding quartiles. If you have not completed the benchmarking exercise, you can enter your best guess for square footage and cost per square foot for each quartile.

Green Building Categories (LEED EB)—Energy efficiency and indoor air quality are critical components of green building projects, and they are required by the U.S. Green Building Council (USGBC) to obtain Leadership in Energy and Environmental Design (LEED®) certification. One ongoing concern is how to pay for green improvements. Energy and water savings (and others) may be captured from current operating budgets and used to pay for the needed equipment. This approach gives you the opportunity to enter data in the familiar LEED categories: Sustainable Sites, Water Efficiency, Energy & Atmosphere, Materials & Resources, and Indoor Environmental Quality.

Water or Wastewater Treatment Plants—Water and Wastewater facilities measure energy consumption in different ways, the most common being Million Gallons per Day (MGD) for process facilities and cost per square foot for administrative buildings.

Energy Efficiency Project Type—This option allows you to input the data and projected savings based on the type of technology being installed. The sample categories include Retrocommissioning, Lighting, Supplemental Loads, Air Distribution Systems, and Heating and Cooling (see the ENERGY STAR Building Upgrade Manual for more details on these categories, downloadable from http://www.energystar.gov/index.cfm?c=business.bus_upgrade_manual). Manufacturing Facility— Manufacturers often use energy intensity metrics based on a unit of production to track energy use. Common metrics include: BTU/pound of production, BTU/part, kWh/finished product. This option allows you to use a production-based energy intensity metric for either the entire facility or a process line for which the project is being implemented.

All category names in the Types of Analysis can be overwritten to reflect the project you are analyzing. 3) In ROW 6, Values, enter the total annual energy costs along with other supporting data (i.e., square feet, million of gallons per day, etc.) for each of your groups.

Energy unit costs (Column “F”) will automatically be calculated. If you do not know your organization’s details, you may populate the data fields with sample values by clicking on the “Sample Values” menu. “User Defined Values” option is prepared for you to enter your own values and are highlighted in yellow. You can overwrite the sample data with actual data at any time.

The “Savings Target” is your best estimate of typical savings. Many organizations find that 10-20 percent savings can be obtained through behavioral modifications and consider 20 to 35 percent as a realistic overall target for most energy efficiency projects. Enter your best guess; remember that these target amounts can be easily changed later to reflect alternative estimates.

In all cases, enter your organization’s total energy costs (Electricity, Natural Gas, Steam, Chilled Water, Fuel Oil [No.1, No.2, No.5, and/orNo.6], Coal [anthracite], Coal [bituminous], Coke, Diesel [No.2], Propane, Liquid Propane, Kerosene, Wood, and Other) by category. When possible enter the square feet under management by category (this may not be always appropriate, for example LEED: EB O&M categories may not be conducive to measuring in square feet and water/wastewater facilities measure in million gallons per day).

You can personalize all of the approaches in this program by creating your own category names, which may be helpful when presenting the Cash Flow Opportunity Calculator results to others. For example, personalized labels can reflect facility groups (i.e., “North Campus” or “Beach Properties”), addresses (i.e., “123 Main Street” or “5 Broadway”), or any labels that work for your organization. These names will appear in the reports generated by the program. Simply overwrite the names shown in the Column labeled “Category Name” (Column “C”).

To switch between approaches, use the drop down menu labeled “Select Data Source” (CELL C5). You may populate this model with the sample values by clicking on the “Sample Values” menu. Yellow cells indicate that data entry is required; these cells will change to white after data have been entered. Blue cells are protected and can only be changed by modifying the input data. CAUTION: Any user-entered data will be lost when selecting the sample values. Section 2—Investment Values TabROWs 5 and 6 pull forward the summary details you entered on the earlier “Data Entry Tab”.This worksheet operates like a “reverse financial calculator” and will help you estimate the amount of equipment that could be financed with the future energy savings.1. In the line “Assuming an interest rate of” (CELL F10), enter the interest rate you think will reflect the cost of financing your project. The actual rate will depend on whether the financing is tax-exempt or taxable, your organization’s credit rating, dollar amount, and term of the transaction.

2. In the line “Assuming a term of” (CELL F11), enter the financing term that you think will be acceptable to your organization and a lender. Typically this will be determined by the useful economic life of the equipment installed. The financing term should be longer than the simple payback of the equipment to generate a positive cash flow.

3. In the “Savings used to pay energy investments” CELL F12, enter the percentage of the savings you would be willing to commit to cover the cost of financing these energy efficiency improvements. If you are working with an Energy Services and Products Provider, you may be able to obtain a guarantee that these savings will be realized, allowing you to use a higher percentage of the projected savings. The percentage you choose depends on the type of equipment installed, the savings realized, political environment, etc. Most organizations use between 85 percent and 95 percent.

Push the green “Calculate” button to determine the amount of money that is buried in your utility bill, based on the estimates stated above, which then appears in green (CELL E15). Bear in mind that an investment grade audit done by a qualified engineering company will be required to determine the actual size of your opportunity. The cost of this audit can normally be included in the financing and recovered through the savings.

The project’s simple payback is also shown at the bottom of the worksheet.NOTE: The "Use Sample Values" button will reset the calculator to the sample values in CELLs F10 through F12. Now that you know how much equipment may be acquired with your existing operating and capital budgets, the next step involves timing. Section 3—Cash Flow TabThis spreadsheet helps quantify your decision on whether it is a better to “pay as you go” and wait until funds are available in future budgets or “pay as you use” by financing an energy efficiency project immediately using a third-party lender and capture the savings sooner.

It is true that interest payments can be avoided altogether by including these energy projects in future capital or operating budgets. However, there is a cost of delay to be considered when postponing these projects. This spreadsheet provides a discounted cash flow analysis to help determine the better business decision: (a) deferring the installation until a future budget or (b) financing the installation today. Often, the energy efficiency savings lost in one year exceed the total amount of the financing costs throughout the entire financing period. Data Carried Forward From Earlier WorksheetsIn the top left section, the “Project cost” (CELL G4), “Interest rate” (CELL G7), and “Financing term” (CELL G 8) are imported from the prior “Investment Values” worksheet. The “Simple payback” of the equipment to be installed (the time it takes to recover the project cost from savings, including financing costs) is also carried forward and entered into CELLs G5 (years) and G6 (months). These numbers can be overwritten if you wish. New Data EntryIn the line “Year(s) postponed” (CELL G9), enter the number of years the project will be delayed if you have to wait and include it in a future budget; for example, if the project will be included in next year’s budget, use the number “1.” In the “Project cost increase due to postponement” (CELL G10), enter the percent you believe the project costs will increase (labor and material costs, lost rebates, etc.) caused by delaying the project In the line “Estimated energy cost increases in Year 2” (CELL G11), enter the percent you believe your energy costs will increase next year (Year 2).In the line “Annual increase in energy costs after Year 2” (CELL G12), enter the estimated amount your energy costs will increase after next year (Year 2), in percent. In the line “Estimated energy savings in first year (Year 1)” (CELL G13), enter the percent of the savings you will be able to capture during the first year. The amount of the savings will vary based on the installation time needed to complete the project.You can modify all these numbers by overwriting them or start from scratch by clicking on the "Sample Values” button at the top of the page. Comparison Tables (Option A—Fast Track Financing vs. Option B—Waiting for Cash)The tables starting at ROW 18 represent the cash flow consequences of the two choices: Option A—installing today using financing, or Option B—deferring the installation until funding becomes available in a future year’s budget. The calculator allows up to 26 years of cash flows to be discounted back to their Net Present Values for each of these options (CELLs G13 and K13), using the Interest Rate stated in CELL G7 as the discount rate for both options. Cash flows are limited to the finance term plus one year.

The results of these Net Present Value calculations are found on ROW 15. Whichever option generates the greatest present value dollars is considered the better financial decision.

The graph at the top right is a visual representation of the cash flow impact of deferring the installation versus financing it now. It graphically reflects the impact of writing a big check and slowly “fill in the hole” with the savings over time versus using third-party financing immediately to level out the project’s cash flow.

This spreadsheet is a good sensitivity analysis tool because it allows you to make “what if” calculations by changing the paybacks, interest rates, and terms to ensure that your financed energy efficiency project always generates positive cash flow. It also is useful when structuring your financing should the energy savings be insufficient to cover the repayment of the entire project. We urge you to start with the maximum financing term your organization finds acceptable and then experiment with the average simple paybacks to leverage the energy savings fully. Slow and fast payback projects should be blended to obtain this average number. Section 4—Interest Rates TabIf the prior calculation confirmed that it is a better decision to finance and install now rather than wait for the availability of funds in a future budget, the next most frequently asked question is: Should we wait for a lower interest rate (like a bond or a subsidized loan program) or finance it now at a slightly higher rate that is readily available? Instinct suggests that financing with the lower interest rate is the best alternative. However, to determine which finance offering represents the “better deal,” additional considerations need to be addressed:

Are there any additional fees or closing costs associated with each financing alternative? For example, bonds require extensive (and expensive) legal opinions, insurance, etc. For public sector organizations, tax-exempt lease-purchase agreements have few additional costs, but the interest rate may appear to be a little higher.

Alternative financing may be immediately available. Floating a bond typically is a slow process.

In addition, public sector General Obligation bonds are considered debt (a capital budget event) and typically require voter approval. Some alternative financing choices may be treated as non-capital budget events (i.e., tax-exempt lease-purchase agreements and performance contracts). Asking the voters to approve any expenditure (including profitable ones) may add both real and political costs to the decision.

Opportunity Costs. By definition, delays in installing energy efficiency projects mean that the utility bills are higher than need be. Once paid to the utility, these dollars, which could be used to pay for the financing costs, are lost forever.

The question becomes: At what point is paying a higher interest rate a better financial decision than waiting for a lower-cost financing? The “Interest Rates” worksheet helps quantify this question by factoring in the energy opportunity costs.

Readily available financing means that the project can be installed immediately. The longer you wait, the more energy efficiency dollars are being lost. Holding out for a lower interest rate often proves to be a more expensive decision than financing immediately at a higher rate.

Data PointsThe following data points are pulled forward from earlier worksheets:“Interest rate of immediate financing” (CELL G4), “Cost of the equipment” (CELL G6), “Simple payback” (CELLS G7 and G8), “Potential annual savings” (CELL G9), “Term of the financing” (CELL G10)These amounts can be overwritten. Entering DataEnter the “Interest rate of the lower financing” in CELL G5 (lower than the number entered in CELL G4.). The "Lower rate interest savings" (CELL G11) calculates the present value benefit of entering into one interest rate financing versus another. Assuming equal borrowing terms and starting dates, it computes how much money the lower interest rate financing will save over the higher interest rate. Because the energy opportunity losses will accrue every month the installation is delayed, a "Break-Even Point" can be calculated by dividing the present value benefit of the lower interest rate by the dollars lost every month the installation is delayed. The Break-Even Point (CELL G12) is expressed in months and confirms how long one can wait before the lower interest rate costs more in real dollars. Once past the break-even point, the lower interest rate becomes the more expensive alternative. Note the cost of waiting for one year (CELL M17) and compare this to the original project cost (CELL G6). These opportunity losses may represent a substantial percentage of the project cost (CELL G14). Section 5 -- Summary TabThis calculator automatically prepares a report containing all the salient spreadsheet data. Click the "Print" button to print a copy of this report.
















































































































































































































ENERGY STAR CASH FLOW OPPORTUNITY CALCULATORData Entry

document.xls / Data Entry Printed on 05/06/2023 19:56:46Page 12 of 17

###

User Generated Categories - DATA ENTRY TABLE###

Name Enter Organization Name Here ###

Select type of analysis User Generated Categories

User Generated Categories SF $/SF Savings target (%)

Enter Category Name Here 0 $0 $0.00 0.00 $0

Enter Category Name Here 0 $0 $0.00 0.00 $0

Total SF $/SF

0 $0 $0.00 0.00% $0

Annual energy costs ($) - all fuel

typesPotential annual

savings

Total energy costs ($) - all fuel

typesWeighted savings

target (%)Total potential

annual savings ($)

ENERGY STAR® does not guarantee that your project will generate the results presented herein. An investment grade audit performed by a qualified engineering organization is required to determine the actual size of your savings opportunity.

Values

C4

Organization Name The name you enter here will appear on the Summary Report generated at the end of this exercise.

C5

Type of Analysis: Choose from a variety of options that best fit the parameters of your project (ENERGY STAR, LEED, Retrofit technology, etc.).

C6

Values: Choose “Sample” values to fill in the blanks with generic data. “User Defined Values” will clear any data entered and allow you to use your own information

C7

Evaluation Categories: Enter labels/names to describe the project facilities being evaluated or the measures being installed. These labels will appear on your reports.

C8

Evaluation Categories: Enter labels/names to describe the project facilities being evaluated or the measures being installed. These labels will appear on your reports.

H12

Total Potential Annual Savings: The point of this exercise (tab) is to produce this estimate of total savings, which is used to cover the financing costs and is the basis of the next series of calculations.

ENERGY STAR CASH FLOW OPPORTUNITY CALCULATORInvestment Values

document.xls/Investment ValuesAs the numbers that you will use in the calculator are your own estimates,



INVESTMENT OPPORTUNITY

Potential Annual Savings = Cash Flow Opportunity

TotalsAnnual energy costs $0 $0 $0 $0 $0 $0 ###

Potential annual savings $0 $0 $0 $0 $0 $0 ###

What Can $0.00 of Annual Savings Buy?

Assuming an interest rate of 0.00 %

Assuming a term of 0 Year(s) ###

Savings used to pay energy/retrofit investments 0.0 %

Additional funds such as rebates, etc. (if available) $0

$0

Project Cost $0

$0.000

Simple Payback0 Year(s)

0 Month(s)

Enter Category Name Here

Enter Category Name Here

Taken from operating funds, these savings could finance energy/retrofit projects equal to

without increasing today's capital and operating budgets.(Note: Savings calculated on a monthly basis).

%110 of funds taken from operating funds entered automatically as an example.

Consider blending short- and long-term projects to maximize

use of the savings.

Important Notice

I6

Potential Annual Savings: You can change the savings amount here, If you would like to bring the value from Data Entry page, click the sample values button on this page. Note that this action will change the values entered below to their default values.

B10

Assuming an Interest Rate of: This is the interest rate that you think you will be able to obtain to finance your project. Hint: After entering an estimated term and savings percentage, see how changing the interest rate affects the total transaction.

B11

Assuming a Financing Term of: Pick a financing term (number of years) that you think will be available and acceptable for this project. Only whole years (integers) can be used.

B12

Percent of Savings Used to Pay for Investments: Enter the percentage of the savings that you wish to use to cover the financing costs. If your service provider is guarantying the savings, you can use 100%.

B19

Simple Payback: This is calculated by dividing the total project cost by the estimated savings. It includes the financing costs (repayment of interest).

ENERGY STAR CASH FLOW OPPORTUNITY CALCULATORCash Flow Projection

document.xls/Cash FlowAs the numbers that you will use in the calculator are your own estimates,



COST OF DELAY and CASH FLOW ANALYSIS

Project cost 0 $

Simple payback0 years

0 month(s)

Interest rate 0.00 %

Financing term 0 years

Year(s) postponed 0 years

Project cost increase due to postponement 0.00 %

Estimated energy cost change in year 2 0.00 %

Annual change in energy costs after year 2 0.00 %

Estimated energy savings in year 1 0.00 %

$0 $0

Option A (Fast Track Financing) Option B (Waiting for Cash)

Year Savings Cumulative Cash Flow Savings Project Cost Cumulative Cash Flow

1 $0 $0 $0 $0 $0 $0 $0 $0

These cash flow calculations are on a pretax basis.For purposes of this calculation, all cash flows are being discounted at the interest rate indicated in cell G7 - financing paid monthly in arrears.

Net Present Value of Option A (Fast Track Financing)

Net Present Value of Option B (Waiting for Cash)

Project Cost including financing

Annual Cash Flow

Annual Cash Flow

Important Notice

1 2$0

$1

$1 Cumulative Cash Flow Impact Comparison

Option A Option B Year

C4

Project Cost: The project cost will be pulled forward from the Investment Values Tab. You can change this amount should you wish to use this calculation without having to enter data from earlier tabs.

C5

Simple Payback: Simple payback is pulled forward from the Investment Values Tab. You can change this to see how the product mix affects the financing.

C7

Interest Rate: Interest rate is pulled forward from the Investment Values Tab. You can change this to see how the interest rate affects the financing.

C8

Financing Term: Financing term (number of years) is pulled forward from the Investment Values Tab. You can change this to see how the financing term affects the project.

C9

Year(s) Postponed: If you chose not to finance the project and prefer to wait until funds become available in a future budget, enter the number of years you will have to wait.

C10

Project Cost Increase: Postponing a project usually results in higher material and labor costs. Enter the percentage you estimate the project cost will change due to the delay.

C11

Estimated Cost Increase in Year 2: Many utilities have announced electricity and natural gas prices for next year. Enter the percentage increase expected for next year. This will take negative numbers if prices in your area are projected to decrease.

C12

Annual Increase After Year 2: While next year’s projected pricing changes may be known, the expected changes during the remaining years of the financing term may differ. Enter your best guess.

C13

Estimated Energy Savings in Year 1: Programmed installation delays may result in the project capturing partial year’s energy savings during the first year. Enter the percentage of the first year’s savings you expect to capture based on your construction schedule.

ENERGY STAR CASH FLOW OPPORTUNITY CALCULATORCost of Delay

document.xls/Interest RatesAs the numbers that you will use in the calculator are your own estimates,


Printed on 05/06/2023Page 15 of 17

COST OF DELAY - Comparative Interest Rate AnalysisMonthly

pmt w/better rate

Interest rate of higher financing 0.00 % Month ###

Interest rate of a lower financing 0.00 % $0 Difference between cost of immediate financing and cost of lower financing in present value dollars

Cost of the equipment $0 1 $0 $0 $0 ###

Simple payback0 year(s) 2 $0 $0 $0Working Tables0 month(s) 3 $0 $0 $0 ###

Potential annual savings $0 4 $0 $0 $0 ###

Term of financing 0 year(s) 5 $0 $0 $0

Lower interest rate savings* $0 6 $0 $0 $0

Amount lost in utility bills $0 /month 7 $0 $0 $0 ###

Break-Even Point 0.0 month(s) 8 $0 $0 $0

9 $0 $0 $0

10 $0 $0 $0 years

11 $0 $0 $0 months

12 $0 $0 $0 Month

######

Lower Interest rate savings balance at

beginning of month

Amount lost in monthly utility

bills

Lower Interest rate savings

balance at end of month

rate

*Lower Interest Rate Savings number is calculated by taking the NPV of the difference between the two monthly payments (immediate versus lower financing rates), discounted at the lower interest rate.

Important Notice

B4

Interest Rate Higher Financing: Interest rate is pulled forward from the Cash Flow tab and is assumed to be the current offer. However, you can enter your own number.

B5

Interest Rate Lower Financing: Enter the interest rate that you feel represents the “better deal.” Naturally, this rate should be lower than the immediate offering rate.

B6

Cost of the Equipment: Cost is pulled forward from the Cash Flow tab. However, you can enter your own number.

B7

Simple Payback: Simple payback is pulled forward from the Cash Flow tab. However, you can enter your own number.

B9

Potential Annual Savings: This is the amount of the savings realized during the first year of the installation and reflects 100% of the potential savings.

B10

Term of Financing: Financing term (number of years) is pulled forward from the Cash Flow tab. However, you can enter your own number.

B11

Lower Interest Rate Savings: This calculation presumes that both financings can be funded on the same date. It compares the two monthly payments and calculates the benefit of the lower interest rate in NPV dollars. It discounts the difference using the lower interest rate.

B12

Amount Lost in Utility Bills: This is the potential annual savings divided by 12 months.

B13

Break-even Point: This tells you how many months you can wait to secure the lower interest rate offer before the higher interest rate becomes the “better deal” (on a cash flow basis). See the table on the right to see the details of how this is calculated.

M17

Compare "Cost of Energy Efficient Equipment" With The Cost If You Wait For A Year!

ENERGY STAR CASH FLOW OPPORTUNITY CALCULATORSummary of Results

document.xls/SummaryAs the numbers that you will use in the calculator are your own estimates,



CASH FLOW OPPORTUNITY CALCULATORVersion 2.1 - 2012

SUMMARY OF FINANCIAL CALCULATIONS: User Generated Categories

Name: Enter Organization Name Here

Selected Scenario: User Generated Categories

1. How much new energy efficiency equipment can be purchased from the anticipated savings?2. Should this equipment purchase be financed now or is it better to wait and use cash from a future budget?3. Is money being lost by waiting for a lower interest rate?

1. How much energy efficiency equipment can be purchased?This section reflects the cost per square foot by building category, as follows:

SF $/SF

0 0 $0 $0.00 0.0 $0

0 0 $0 $0.00 0.0 $0

0

0

0 0 $0 $0.00 0.0 $0

Total SF $/SF

Total $0 0.00% $0

2. Finance now or wait to include in a future budget?

(a) The project costs will increase due to increased labor and material costs by: 0.0%

(b) Energy costs will increase next year by: 0.0%

(c) Energy costs will increase an average thereafter and throughout the financing period by: 0.0%

(d) The project will capture the first year energy savings due to estimated construction delays by: 0.0%

Results on this summary page are brought from different worksheets. If you have modified some of the calculated results manually, the results presented in this report may not be consistent.

This information has been generated by an Excel® spreadsheet developed by ENERGY STAR® called the Cash Flow Opportunity Calculator. The purpose of the calculator is to help address three critical questions about installing energy efficiency projects:

Annual energy costs ($) - all

fuel typesSavings target

(%)Potential annual

savings

Total energy costs ($) - all

fuel types

Weighted savings target

(%)

Total potential annual savings

($)

Redirecting funds from the existing utility budget by the “Savings Target” number, will free up about $0.00 per year, which then can be used to finance the energy efficiency projects.

Our estimates indicate that, by using 0% of estimated savings and assuming financing costs of 0% (interest) over 0 years, the energy dollars saved can pay for: $0.00 worth of equipment, with a simple payback of 0 years and 0 month(s). Note that these funds are from existing operating (utility) budgets and not from the capital budget.

Installing the equipment today means that the savings begin to accrue immediately. As long as the financing costs are lower than the energy savings, positive cash flow will be created.

When funds are not readily available, a frequently asked question is whether the energy saving project should be installed immediately and financed (“pay-as-we-use” philosophy), or if would it be a better decision to wait until the funds become available in a future budget (“pay-as-we-go” philosophy). Naturally, if we wait until money is budgeted, interest payments can be avoided altogether, but we lose the savings during this waiting period. To evaluate this decision, we use a discounted net-present-value analysis of the cash flows resulting from these two decision points using the financing terms and interest rate stated above, along with the following assumptions:

ENERGY STAR CASH FLOW OPPORTUNITY CALCULATORSummary of Results

document.xls/SummaryAs the numbers that you will use in the calculator are your own estimates,



Savings Project Cost including financing Annual Cash Flow Cumulative Cash Flow1 $0 $0 $0 $0

The results show the following: ### If the project is financed immediately (Option A), the net present value of the project after 0 years is: $0

If the installation is deferred for 0 year(s) (Option B), the net present value of the project after 0 years is: $0

3. Waiting for a better interest rate

Energy efficiency projects can help prove the statement that “time is money."

For example, we are offered a 0% financing, which is immediately available. If we wait, we may be able to obtain financing at 0%.

Important Notice:

Please send any comments to Katy Hatcher, ENERGY STAR National Manager [email protected].

The cash flows when financing the project are estimated as follows:

When comparing financing options, the speed with which the funds become available has a direct impact on the cash flows of the project. Naturally, the longer it takes to access the funding, the more opportunity losses (unnecessary payments to the utility companies) will be incurred.

This calculation quantifies the financial benefit of the lower interest rate in Present Value dollars and then divides this benefit by the monthly opportunity losses. The result is the number of months one can wait before the lower interest rate costs more real, Present Value dollars (the “Break-Even Point”). Once you pass the break-even point, the lower interest rate option becomes the more expensive transaction.

The net present value benefit of this lower rate (calculation is based on the obtaining funding for either financing on the same date) would be equal to approximately $0.00. Because our project has a simple payback of 0 years and 0 months, we can wait no longer than 0.00 months, before the lower interest rate financing costs more dollars (in other words, the higher interest rate financing provides more cash!).

This graph reflects the cumulative cash flow impact of financing the project now (Option A), versus waiting until the funding is available in a future budget (Option B).

This spreadsheet is a first step in estimating your energy efficiency opportunity and will help you determine whether or not pursuing these savings is a good business decision. It is an “estimator” and is not intended to provide exact, to the penny calculations. Our algorithms have been tested and will generate accurate estimates, as long as the data entered are accurate. An investment grade audit done by a qualified engineering company will be required to determine the actual size of your opportunity. The cost of this audit can normally be included in the financing and recovered through the savings. Higher level audits may be provided by qualified Service and Product Providers, or in some cases, your state energy office.

1 2$0

$1

$1 Cumulative Cash Flow Impact Comparison

Option A Option B Year

Year

Date post:	29-Mar-2018
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