Energy & Facility Renewal Solutions for Post Secondary Education Facilities Funding Site...

Energy & Facility Renewal Solutions forPost Secondary Education FacilitiesFunding Site Improvements Through Energy Efficiency

Luis RodriguesDarryl HillMay 30, 2007

Honeywell Proprietary

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120,000 employees in nearly 100 countries

Proud 122 year heritage

$1.4B in sales in Canada

A Fortune 100 company$31.4B in sales

4,900 employees in CanadaDavid M. Cote

Chairman and CEO

“We are building a world that’s safer and more secure, more comfortable and energy efficient, more

innovative and productive. We are Honeywell”

IntroductionCorporate Overview

Over 75 years in Canada


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Today’s Agenda

Introduction

Challenges

Performance Contracting

Program Development

Implementation

Additional Considerations

The Owner’s Perspective

Summary

Question and Answer


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Faculty/student safety and securityAging facilities and

deferred maintenance

Conflicting priorities for available capital

Rising operating costs

Productivity concerns

Escalating energy costs, volatility and energy security

Environmental policies

Growing Challenges and Concerns

Attracting faculty and students

Reduced levels for investment in new

infrastructure

“World class” learning experience


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An Effective Solution The Power of Performance Based Contracting

A comprehensive

“self-funded” program

whereby the equipment

and technology installed to

modernize buildings and

facilities is paid by

guaranteed energy and

operational savings

Why is Performance Based Contracting an effective solution?

Before Program - Escalating Costs

2005 2007 2009 2011 2013 2015

Savings Pay for Site Enhancements

After Retrofit


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An Effective SolutionThe Power of Performance Based Contracting

Solutions to Short-term & Long-term Challenges

Fixing Existing ProblemsUnplanned repairsBuilding damage

Life safety concernsEnvironmental issuesSecurity challenges

Capital ImprovementsCapital cost avoidanceEquipment upgrades

Deferred maintenance Facility renewal

BudgetingProcess

Unplanned / short-term immediate resolution required

Planned / long-term capital budgeted expenditures

Guaranteed savings Improve efficiency Enhance productivity Manage asset renewal

Performance Based Contracting & ImprovementsOutside of Existing Budgeting Process

10 - 15 year program where the service provider assumes the risk


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An Effective Solution The Power of Performance Based Contracting

Other Benefits to Performance Contracting

• Proactively address facilities renewal & deferred maintenance

• Enabler to implement the multi-year capital plan • Enhance learning environment through better

facilities• Redirect savings towards education priorities• Address environmental stewardship goals• Create a sustainable savings program

Fixing Existing Problems Capital Improvements


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A Comprehensive Solution

Lighting systemsMechanical & Central Plant

Building envelope

Ventilation and air quality improvements

Infrastructure improvements

Capital cost avoidance

opportunities

Productivity enhancements

Security

Environmental compliance concerns

Energy awareness programs

Renewable energy initiatives

Longer term programs provide additional opportunities to

enhance results


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Develop List of Develop List of Key Partnering Key Partnering RequirementsRequirements

Step 1

Step 2

Prepare RFQPrepare RFQDocumentDocument(Request for Qualification)

Step 3

Select Select Evaluation Evaluation

TeamTeam(Key Stakeholders)

Step 4

Solicit Solicit Responses & Responses & Presentations Presentations

Select PartnerSelect Partner(Based on Highest

Overall Value)

Step 5

Selecting the Right PartnerKey to a Successful Long-Term Program


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Define Program Criteria

Needs Assessment

Technical & operational goals

Financial objectives

Contractual requirements

Administrative processes

Decision and approval processes

Form “Joint Requirements Team”

Step 1

How the Process WorksDisciplined Program Development is an Absolute


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Documents criteria “mutually agreed” to be met

Commits each party to move forward and begin the solution development stage

Provides a “no risk” platform to the customer should criteria not be met

Commitment to Proceed

CreateLetter of Intent

Step 2Form “Joint Requirements Team”

Step 1



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Step 3

Program Development


Step 1


Identify energy & deferred maintenance opportunities

Review capital plans Define support service

requirements Identify opportunities

for grants and rebates Prepare

communications & awareness plan

Finalize contract document

Arrange financing

Final Solution



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How the Process WorksThe Contract & Financing

Performance Contract Defines responsibilities of both parties

Establishes baseline measurement performance and savings measurement and verification plan

Annual savings reconciliation process

Designed to guarantee “self funding” mechanism through entire program period

Program Financing

Arrange most suitable approach

Internal vs. external options (banks, other lending institutions or through service provider)

Strategize various cash-flow models, consider existing operating and capital budgets

Consider the impact of available grants, utility rebates, and other funding sources


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During Project Construction

Bank AdvancesFunds

During Performance Period

Structured so guaranteed savings stream funds payment obligation

Client pays service providerbased on progress draws

Loan paymentregardless of actual savings

GuaranteedSavings

How the Process WorksTypical Contract & Financing Approach


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0.0

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0.9

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0

Building Energy Performance Index (BEPI) ekWh/ft2

Fa

cil

ity

Co

nd

itio

n I

nd

ex

(F

CI)

How the Process WorksEnergy Intensity vs. Facility Condition

Using Energy Efficiency Index alone would focus on a different retrofit measure group

Using Facility Condition Index alone to plan capital renewal and address deferred maintenance

Cross-validating condition and efficiency provides a priority to best address facilities


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How the Process Works

Step 4

Program Execution

Step 3

Program Development


Step 1



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Project Management is CriticalAttention to Detail Paramount in an Occupied Education Facility

Pre-project Post-projectDuring the Project

Provide an ongoing Quality Assurance Program

Help you assess the ongoing impacts/outcomes

Provide valuable post-project training for your teams

Experienced project managers help you better

anticipate issues

Seasoned planners with proven software

provide reliable project milestones

Know-how to implement projects in an

occupied facility

Reliably meet project deadlines via project management systems

Buying power reduces costs within your

own processes


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Additional Considerations


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Taking the Risk Out of Major Site ImprovementsAllowing Facility Staff to Take Ownership

• Training of front-line staff to upgrade their skills

• Orientation to goals and new technology

• Relevant content from different areas

– Customized programs by the service provider

– Training at supplier’s facilities

– Government training programs (NRCan)

Staff Training

Training is critical to help your maintenance staff to better manage change and ongoing facility management


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• Warranty response

• Emergency 24 X 7 response

• Equipment maintenance– Comprehensive agreements vs inspection services

• Enhanced technical services

• Emerging technologies briefings

• Energy monitoring services

• Regulatory consulting

Support Services

Taking the Risk Out of Major Site ImprovementsSupplement Facility Staff - if Required

A program tailored to meet the facility’s particular needs is important


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Proactive Internal & External EducationCommunication is Critical in Post Secondary Facilities

Public Relations - External

Employee Communication - Internal

Provides information to faculty and students

Alleviates feelings of uncertainty

Communicates implementation progress and milestones

Ongoing conservation awareness maximizes results

Positive messages to the community Responsible program to address cost control, facilities renewal and environmental stewardship


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The Owner’s Perspective


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The Owner’s PerspectiveConfederation College

Why the College Chose the Program

• Utility costs were growing faster than any other cost– In 1997 costs were $1.99/ft2, Ontario average was $1.36

• Deferred maintenance costs were about $9M• Looked to the program to provide:

– Alternative, guaranteed funding from utility savings– Reduce deferred maintenance– Environmental program cornerstone

-5.00

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

50.00

%

Admin Maintenance Caretaking Utilities Grounds Security Enineering

DISTRIBUTION OF SYSTEM INCREASE FOR 1996/97 TO 2002/03

From 19 Colleges reporting each year

% Cost increase 1997 to 2003

% Cost increase 1997 to 2003

Utility costs increase 50%

Utility costs increase 50%


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Results


• Utility reduction 2001-2005:

Electricity use Reduction (kWHr/yr)

Natural Gas use Reduction (m3/yr)

Electric to gas conversion

Pollutant Environmental Effect Reduction to DateCarbon Dioxide Greenhouse gas/global warming 14,910,640 kgNitrogen Oxide Acid rain and smog 27,382 kgSulphur Dioxide Acid rain 52,734 kg

• GHG and pollutant reduction:


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The Bottom Line


• 2005-06 costs: $1.83/sf vs Ontario College average of $2.16/sf

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,800,000

$2,000,000

$2,200,000

$2,400,000

$2,600,000

$2,800,000

$3,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Co

st

Pre Retrofit Utility Costs Actual Escalation Actual Utility Costs plus Loan Payment

Actual Utility Costs with 2008 & forward estimated Projected Utility Costs

$4M Positive Cash Flow + $2M Deferred Maintenance reduction


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The Owner’s PerspectiveMemorial University of Newfoundland and Labrador

• Continuing to build on the phase 1 success story

• Reduce and control escalating utility costs

• Improve operational efficiencies

• Address deferred maintenance issues and capital renewal

• Proactive environmental stewardship– Including promoting stewardship beyond just their facilities

• The guarantee & “self funded” value proposition

Why Memorial Chose the Program

Excellent buy-in from all levels within the University


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• Will reduce utility and operational costs by $1.6M annually and address capital renewal

• Environmental benefits– Cost neutral conversion from “bunker C” #6 oil to cleaner burning

#2 oil

– Reduce green house gas emissions by 7,310 tons

• Implemented a comprehensive communications strategy– Students incorporated in the program

Results

The Owner’s PerspectiveMemorial University of Newfoundland and Labrador

Significant improvements and benefits to Memorial


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Atlantic Canada Community CollegesCurrent Activity

New Brunswick Community College

Nova Scotia Community College Working with Daniel Kelly to identify and develop self

funded facility renewal program

Conducted site visits and utility analysis for Nova Scotia campuses

Participated in the APCCC college greening forum

Potential pilot project at the Moncton Campus that will involve the students

Working with Stephen Ethier to develop the Energy Management and System Technology program curriculum

College of the North Atlantic

Holland CollegeNo current activity

Completed successful EPC/Facility renewal programs at four campuses including Gander, Burin, Clarenville, Baie Verte


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Summary

Significant Benefits for Post Secondary Education Facilities

Reduce energy consumption and costRedirection of energy spend to fund improvements

Address deferred maintenance and facility renewalImproved facilities for students and faculty

Environmental stewardshipConserving resources for the future

Guaranteed outcomesResponsible initiative for facilities

Performance Contracting is provenInnovative but proven results across Canada


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Question & Answer

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