https://filebox.bilfinger.com
Energy Efficiency & Financing
26th February 2014 Jeff Smith MBA, MBIFM, MIPFMA
Chief Executive Officer Bilfinger Ireland Group
Phone +353 1 215-7000 Mobile +353 87 0957511
Bilfinger Ireland Group - Company presentation | November 2013
Key Figures Bilfinger 2012
November 2012: corporate bond issued for the first time – volume of €500 million • Term: seven years until 2019 • 2.375 per cent coupon • Very good response from investors – more than ten times over-subscribed
€ million Output volume 8,635 Orders received 8,348 Order backlog 7,422 EBITA 466 Net profit 275 Employees (at year-end) 66,826
BBB+ / investment-grade rating with stable outlook
Bilfinger Ireland Group- Company presentation | Q1 2014
• Bilfinger is market leader for industrial services in the European process industry.
• Bilfinger is one of the most important service providers in the energy generating industry.
• Bilfinger has vast expertise in building construction and management.
• Bilfinger implements intelligent mobility and energy projects worldwide.
• Bilfinger implements and operates privately financed transport and social infrastructure projects.
Globally competent
DBOF
Design
Build
Operate
Finance
Bilfinger’s team present today
HSG Zander - Company presentation | September 2011 Seite 6
Bilfinger Entities Bilfinger HSG – Property & Facility Management Bilfinger LTM - Turnkey Contractor/Integrator Industrial Piping and Process, the Boiler Pressure Vessels, the Skids and Modules Bilfinger Tebodin - Global multidisciplinary consulting and engineering firm
Bilfinger Collaborative Partners
Device Smart - Multi-Vendor
Control under a Single Interface
Eiregen Technologies Ltd Wind Energy Project Developers
Inenco Nifes - Experts in energy
procurement and performance, offering a complete energy
solution
Bilfinger Ireland Group- Company presentation | Q1 2014
ESCo & EPC
page 7
“We will leave a steam engine free of charge to you. We will install these and will take over for five years the customer service. We guarantee you that the coal for the machine costs less, than you must spend at present at fodder on the horses, which do the same work. And everything that we require of you, is that you give us a third of the money, which you save.”
[James Watt, 1736-1819]
Bilfinger Ireland Group- Company presentation | Q1 2014
What is an ESCo EPC
page 8
An ESCO is a company that offers energy services which may include implementing energy-efficiency projects (and also renewable energy projects) and in many case on a turn-key basis. The three main characteristics of an ESCO are: 1. ESCOs guarantee energy savings and/or provision of the same level of energy
service at lower cost. A performance guarantee can take several forms. It can revolve around the actual flow of energy savings from a project, can stipulate that the energy savings will be sufficient to repay monthly debt service costs, or that the same level of energy service is provided for less money.
2. The remuneration of ESCOs is directly tied to the energy savings achieved; 3. ESCOs can finance, or assist in arranging financing for the operation of an energy
system by providing a savings guarantee.
Bilfinger Ireland Group- Company presentation | Q1 2014
Overview of Legislative Framework
page 9
Energy Related Directives
!
Obligatory
!
Recommended
!
Energy Efficiency Directive (EED) (2012/27/EU)!
20% EU energy savings target. Outlined in National Energy Efficiency Action Plan to 2020 (NEEAP)!
!
Renewable Energy Supply (RES) (2009/28/EC) !
! 16% National Target (minimum) Outlined in National Renewable Energy Action Plan (NREAP)!
Energy Performance of Building (EPBD) Recast Directive (2010/31/EU) !
Outlined in ‘Part L’ Specification! !
Bilfinger Ireland Group- Company presentation | Q1 2014
Overview of Energy Efficiency Directive which will be main legislative driver to 2020 and beyond.
page 10
EU 2020 target & beyond (Art 1 & 3 Rev 2)
Public Building Renovation (Art 5)
Energy Procurement (Art 6)
Energy efficiency services (Art 18)
Qualification, accreditation, certification
Energy Audits EMS (Art 8)
Information for market actors
Metering and billing
Public Building Renovation (Art 14 & 15)
EEO’s and alternative measure (Art 7)
Binding End Use Savings Targets (Art 7)
Indicative National Efficiency Targets (Art 3)
Financing the measures (Art 20)
Review & Monitoring
National Building Renovation Strategies & Plans (Art 4)
Eligibility of measures & savings (Art 7)
Key
Setting the targets
Reaching the targets
Getting on track NB - Energy Efficiency Directive –
Guidebook Overview Map
Bilfinger Ireland Group- Company presentation | Q1 2014
Energy Retrofit Grants & Supports
page 11
Support Programme Administrative Body
Area of Application
Better Energy Communities (BEC)
SEAI Large scale retrofit projects incorporating performance contracting and third party funding. Grants available up to 35% of capital investment.
Energy Exemplar Programme
SEAI Substantial assistance towards investment grade audits and contract establishment in context of EPC Framework
Accelerated Capital Allowance Scheme (ACA)
Department of Finance & SEAI
Allowable depreciation to be written off in year 1 of capital investment. Capital items in compliance with index maintained by SEAI.
Research Funding IDA / EI / SFI Potential funding in context of collaborative programmes where facility is used as a Demonstration site
Bilfinger Ireland Group- Company presentation | Q1 2014
SEAI Exemplars
page 12
Business Work Business Work Key
Boliden Tara Mines Irish Prison Service Building Fabric
Carbery Group Kerry County Council Mechanical Services
Carton Bros Kildare and Wicklow VEC Electrical Services
DIMPCO Letterkenny Institute of Technology Biomass heating
Dublin City Council Liffey Meats Public lighting
Dublin City University Mayo County Council Fingal County Council Radisson Blu Four Seasons Hotel Roadstone Wood Ltd
GE Healthcare St. John of God Hospital Health Service Executive West Tesco Institute of Technology Tralee University College Cork
Bilfinger Ireland Group- Company presentation | Q1 2014
What to do
page 13
Supply Demand Renewables • Wind turbines • PV Solar • BioMass • Anerobic Digestion • Accelerate Aerobic Digestion Conventional • Combine Heat & Power – Co or Tri Generation • Cascading Condensing Boilers • Ground source heat pumps ?
• LED lighting • Wireless controls, IoT, M2M, TRV’s • Windows, replacement vs window film • Insulation • BMS controls upgrade • Boiler optimisation • Voltage optimisation • Ventilation Heat recovery • Rain water harvesting • On-going Energy monitoring & targeting
software • Smart metering • Ventilation variable speed drives • Etc etc
Bilfinger Ireland Group- Company presentation | Q1 2014
What to do
page 14
Wind turbines Pharma • Astellas, Killorglin, Co Kerry 800kw • Cork Lower Harbour Energy Group - 6 off 2 to 3 MW
turbines - Janssen Biologics (formerly Centocor), DePuy, GSK and Novartis (http://www.clheg.com/the-project.html)
• Pfizer Puurs Belgium
Drivers
Bilfinger Ireland Group| Company presentation | Q1 2014 Seite 15
Advantages Improving Energy Efficiency is one of the most effective ways to address - Improve profitability - Create jobs - Energy security - Climate change Governments can help stimulate investment in Energy Efficiency & accelerate implementation through national Energy Efficiency strategies - Ireland National Energy Efficiency Action Plan 2
Disadvantages - Higher initial capital costs - Uninformed investors with little familiarity with Energy Efficiency products - Risk exposure - Discount rate issues - Difficulty of quantifying external benefits - Split incentives between tenant & landlords - Absence of qualified “Green” technicians
Bilfinger Ireland Group- Company presentation | Q1 2014
Customer, Market & process and Contract Types
Seite 16
Customer, Market & Process Customers • Unwilling / Unable
to fund projects • Willing to fund from
energy revenue
Services Market (UK) • 2012 = €1.99bn • 2020 = 7.73bn
ESCo Market 2020 = €5.95bn
Energy Services • Initial analysis
define/design solution
• Arrange funding & agree contract
• Monitor & verify savings
Managed Services • Project delivery &
management of initiatives
• Routine maintenance
• Daily management of energy savings
Contract Types Guaranteed Savings • Financial Risk = Client • Performance Risk =
ESCo
Shared Savings • Financial Risk = ESCo • Performance Risk =
ESCo
Onsite Utility / Discount Energy Purchase • Financial Risk = ESCo • Performance Risk =
ESCo
Contract Duration • Up to 6 years for the
first two • 10-15 years for the third
type
Bilfinger Ireland Group- Company presentation | Q1 2014
The Irish Situation
Seite 17
• Total efficiency spend in Ireland (public & private) close to €250m • Supporting almost 6000 jobs • Lifetime savings outweigh costs by €300m • €1 government spends brings €5 economic benefit • Programme to move away from grant basis
• Obligations on energy suppliers • New finance mechanisms – Pay as you save • Energy suppliers are now signed up to efficiency targets • Scale of targets informed by National Energy Efficiency Action Plan (NEEAP) • Several suppliers are now establishing efficiency businesses
• Energy suppliers will be active, but will not be source of loan funds
Dr. Brian Motherway, Chief Operating Officer, SEAI, Workshop on “Financing energy savings and energy efficiency in Europe”, European Parliament, Brussels, 4th October 2011
Bilfinger Ireland Group- Company presentation | Q1 2014 Seite 18
Project Methodology
Shared Savings Project
Summary Survey Building walk-through, to identify energy
conservation measures Preliminary proposal is presented
M&V Firm Engaged Monitoring & Verification (M&V) firm engaged
to establish baseline Final proposal is presented
Installation Works Services and technologies are
installed
On-going Monitoring Periodic reporting on energy reduction targets Share of savings paid over contract life, pro-
rata to targets
Bilfinger Ireland Group- Company presentation | Q1 2014 Seite 19
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Before Project During project After Project
Client Savings HSG Savings share Energy Cost
Example 1 – 3yrs: Project Value = €2,900k Annual Electricity Savings (kWh)
~ 7,238,223
Annual Co2 Savings (kWh)
~3,944,831
Bilfinger Ireland Group- Company presentation | Q1 2014 Seite 20
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Before Project During project After Project
Client Savings HSG Savings share Energy Cost
Example 2 – 5yrs: Project Value = €700k Annual Electricity Savings (kWh)
~ 1,653,695
Annual Co2 Savings (kWh)
~901,264
Bilfinger Ireland Group- Company presentation | Q1 2014 Seite 21
Advantages/Disadvantages of ESCO Financing
Advantages - Reduces project risk for customer - Enables financing of comprehensive retrofits - Standardised contracts & processes - Can be combined with other incentive programs to enhance returns - Rely on rigorous monitoring/verification (M&V) & detailed data collection - International Performance
Measurement & Verification Protocol (IPMVP)
Disadvantages - Process can require substantial negotiation and documentation - Substantial transactional costs associated with M&V - Project approved and developed on a case-by-case basis - Difficult to finance smaller projects - Does not justify underwriting
costs to lender
Bilfinger Ireland Group- Company presentation | Q1 2014
Sources of Funding
Seite 22
• Pay as You Save • Utility or third party financier covers upfront cost, and customer repays investment through a charge on their monthly utility bill • Investment in an Energy Efficiency Fund Dublin 29 November 2013 - Energy Minister Pat Rabbitte T.D., today announced Sustainable
Development Capital LLP (SDCL) as the Preferred Applicant for the creation of a €70 million Irish Energy Efficiency Fund.
• Project Finance • High Street Banks • HSG Zander via parent Bilfinger Berger • Investment banks • Green Private Equity • Carbon Trust/Siemens Financial Services
• €654m
• European Energy Efficiency Fund (EEEF) • Since 2011 • Size at 1st closing - €265m
• European Local Energy Assistance (ELENA) • Since 2010 • Total Budget 2009 – 2010 - €30m
• Joint European Support for Sustainable Investment in City Areas (JESSICA) • Since 2007 • EU Countries can choose to invest some of the EU structural fund allocations in revolving funds to help recycle financial resources to
accelerate investment in Europe’s urban areas
Bilfinger Ireland Group- Company presentation | Q1 2014
SDCL Group Sustainable Development Capital LLP
SDCL is a specialist financial and investment advisory group, authorized and regulated in the UK by the FCA. SDCL focuses on initiatives that aim to generate enhanced risk-adjusted returns through scalable business models that positively impact the environment and society.
Fund!Mandates!!In!November!2013,!SDCL!was!appointed!preferred!bidder!by!the!Irish!Government!to!manage!a!Eur70m!fund,!for!nonCdomesDc!energy!efficiency!sector!Irish!Government!has!commiGed!Eur!35m,!with!SDCL!bringing!matched!funding!of!at!least!Eur!35m.!The!ambiDon!is!to!substanDally!scale!the!size!of!the!fund!in!Ireland!to!focus!on!public!and!private!sector!energy!efficiency!investment!opportuniDes;!SDCL!UK!also!manages!a!STG!100m!nonCdomesDc!EE!fund!with!cornerstone!investment!of!STG!50m!from!UK!Green!Investment!Bank!(fund!established!Sept!2012)!In!Asia,!SDCL!manages!a!$100m!fund!for!the!Singapore!Government!focusing!on!manufacturing!sector,!along!with!having!recently!launched!a!200m!STG!UKCChina!fund,!deploying!UK!technologies!in!China!base!EE!projects.!!!!!
• SDCL�s!investment!business!focuses'exclusively'on'the'energy'efficiency!sector,!managed!by!dedicated!regional!teams.!
• !UK!!!• !Ireland!• !Asia!
• SDCL!seeks!to!finance!the!capital!costs!associated!with!energy!efficiency!retrofits!in!industrial,!commercial!and!public!buildings!and!infrastructure!assets.!Returns!are!typically!structured!!as!a!share!of!savings!achieved.!
• SDCL!seeks!to!maximize!energy!savings,!costCefficiency!and!performance.!It!seeks!to!work!with!bestCinCclass!energy!services!companies!and!suppliers!on!soluDons!that!can!be!scaled!and!replicated.!
23!
Bilfinger Ireland Group- Company presentation | Q1 2014
Project Investment Size Typically from Eur1 million to 20 million.
Energy Efficiency Infrastructure
Building retrofit: generally involving systems solutions (incl. PPP variations in the public sector) Industrial energy efficiency: (incl. from the existing and/or future supply, conversion, transmission, distribution or consumption of energy) Urban infrastructure: (incl. street lighting, heat networks and urban infrastructure)
Renewable Heat and Power Renewable energy solutions within an energy efficiency scheme, distributed energy and district energy Renewable heat, heat recovery, combined heat and power and heat networks
Structure of Investment Finance for up to 100% of the project cost Make equity or equity-like investments; arrange project debt
Target Payback Period; and Typical Term
Target 3-5 year simple payback (this can be a blended average of the proposed interventions) Target 5-10 year contract term (this can be customised to the extent supported by the project economics)
Typical Retrofit Opportunities • Industrial buildings • Industrial process • Street lighting • Education • Healthcare
• Hospitality • District energy • Science/technology parks • Retail malls • Public buildings
SDCL Group Sustainable Development Capital LLP
Bilfinger Ireland Group- Company presentation | Q1 2014
SDCL Group Sustainable Development Capital LLP
• Off Clients balance sheet • Bilfinger’s balance sheet
Bilfinger Ireland Group- Company presentation | Q1 2014
Bilfinger as an ESCo & EPC
page 26
• Energy Centres, Supply & Demand Side Building Retrofits • Energy audits, feasibility studies • Engineering design • Equipment procurement • Subcontractor management • Construction • Measurement and verification • Operation and maintenance • Project financing (optional)
= Turn-key
Bilfinger Ireland Group - Company presentation | November 2013 Seite 27
Collaboration – Energy Trading How to fund the stage 2 M&V
&
MORE SAVINGS: " Access to the wholesale market - giving price advantage to smaller customers " Improved supplier terms and conditions alongside competitive supply margins, negotiated through the size of the
portfolios
MORE UNDERSTANDING: " Access to all your data and reporting 24/7 " Added extras - including the provision of AMR and cost neutral green electricity (subject to availability)
MORE STRATEGIES: " Greater risk management – spread the risk over a longer period of time through multiple trading decisions " Proven track record – Inenco has improved upon the market average 7 years out of 8, average by 11%
WHY CHOOSE A PORTFOLIO?
Bilfinger Ireland Group| Company presentation | Q1 2014 page 28
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7/1/2010 12/1/2010 5/1/2011 10/1/2011 3/1/2012
Date
OPTION ONE - CAPPED
Bilfinger Ireland Group| Company presentation | Q1 2014 page 29
PROTECT Cap Market Customer
position Lock Unlock
Ma
rke
t Pric
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Good for budget certainty 1 – CAP is set 2 – Volume locked out under cap protecting against rising market prices 3 – Unlock to re-expose volume to falling prices and capitalise on downward market movements 4 – Relock to take profit when downward market movements reverse
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7/1/2010 12/1/2010 5/1/2011 10/1/2011 3/1/2012
Date
OPTION ONE - CAPPED
Bilfinger Ireland Group| Company presentation | Q1 2014 page 30
" Optimises your price through risk management
" Protection against rising market prices
" Provides an upper level budgetary price
" Capitalises on downward market movements
PROTECT Cap Market Customer
position Lock Unlock
PERFORMANCE OF STRATEGY Gas : 23% p.a. improvement against average forward market price
Power : 19% p.a. improvement against average forward market price (Market average taken over the three year trading window)
Ma
rke
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DBOF
Design
Build
Operate
Finance
Further Reading
Bilfinger Ireland Group| Company presentation | Q1 2014 Seite 32
• Financing Energy Savings and Energy Efficiency in Europe, European Parliament, Brussels, 4 October 2011, www.europarl.europa.eu
• Joint Public-Private Approaches for Energy Efficiency Finance, International Energy Agency (IEA), www.iea.org
• Energy Efficiency Financing - Models And Strategies, Capital E For The Energy Foundation, www.cap-e.com
• Evaluating Energy Efficiency Policy Measures & DSM Programmes, International Energy Agency (IEA), www.iea.org
• A New Way Of Using EU Funding To Promote Sustainable Investments and Growth In Urban Areas, JESSICA, European Investment Bank, www.eib.org
• ELENA – European Local Energy Assistance, European Investment Bank, www.eib.org
Come and see the team
Bilfinger corporate presentation page 33
• Bilfinger Team have jacket lapel pins
• Please say hello to our team and come and visit us
• Our corporate box is Havelock Suite, Room 419
Jeff Smith MBA, MBIFM, MIPFMA
Chief Executive Officer Bilfinger Ireland Group Landscape House Landscape Road Churchtown Dublin 14 Republic of Ireland Phone +353 1 215-7000 Fax +353 1 215-7070 Mobile +353 87 0957511 [email protected] www.fm.bilfinger.com
Many Thanks & Any Questions ?
