Business Achievement: Finance

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Samas Capital for providing the structured financing that is enabling some of the country's most successful property-assessed clean energy (PACE) programs to finance energy efficiency upgrades and renewable power systems at residences and small businesses-including the groundbreaking Florida PACE program which also finances storm-hardening upgrades.

PACE is the hottest innovation in clean energy finance since the solar leasing and power purchase agreement (PPA) model pioneered by SolarCity and others set residential solar markets on fire. With PACE, local governments use their property taxation power to facilitate the financing of energy efficiency upgrades and renewable energy installations on private property by issuing bonds which are paid back through property tax assessments. First adopted by Berkeley, the method quickly spread to other local governments-before it was nearly killed in July 2010 by the Federal Housing Finance Agency which objected to PACE loans having senior position on residential mortgages.

But third-party PACE program managers such as Ygrene and Renovate America and lenders like Samas are giving PACE life. Samas is backing the number-two PACE program in the country, Western Riverside Council of Governments' HERO PACE program, and newer PACE programs in San Francisco and San Bernardino County.

Samas is also providing the capital and servicing infrastructure for the $500 million Florida PACE program, which features the brilliant innovation of combining energy efficiency upgrades with structural improvements to make homes more resistant to hurricanes. (See Florida PACE award under Business Model Innovation: Combining GHG Mitigation with Climate Adaptation.)

Describing itself as an "International Financial Innovator, Originator, and Asset Manager of Structured Products," Samas's principals "have a wealth of experience in asset-backed securities origination, trading, and securitization." In addition to the Western Riverside County and Florida programs, the U.S. Department of Energy's Better Buildings Challenge website credits Samas for providing $150 million in "PACE financing to commercial properties throughout California through San Francisco's GreenFinanceSF and CaliforniaFIRST."

In addition to streamlining the establishment of PACE programs, Samas helps streamline the loan origination process with a call center staffed by more than 100 "client support specialists," "state-of-the-art underwriting solutions," according to its website.

Consulting and engineering firm MWH Global and its client the European Bank for Reconstruction and Development (EBRD) for developing lending programs to stimulate private investment in energy efficiency upgrades and distributed renewable power in Turkey. A developing country with per capita GHG emissions much lower than those in Europe, Turkey is growing rapidly. With electricity demand increasing by 7% annually averaged over recent years, it is one of "the world economies with the largest emissions growth since 1990," according to an EBRD report.

MWH is coordinating EBRD's Mid-size Sustainable Energy Financing Facility (MidSEFF) and Turkey Sustainable Energy Financing Facility (TurSEFF). The former has a credit line of almost €1 billion targeting mid-sized renewable energy projects, while the latter makes about €400 million available to local banks for on-lending to small- and medium-sized enterprises for energy efficiency and renewable energy projects to SMEs.

In 2013, MidSEFF exceeded the disbursement milestone of €500 million, financing about 3% of the total renewable capacity in Turkey and reducing the annual national CO2 emissions by 0.5%. As of November 2013 about €210 million of TurSEFF's funds had been lent, leading to estimated energy savings of 274,652 tonnes of oil equivalent (TOE) per year and reducing CO2 emissions by 688,186 TOE/year, equivalent to the emissions of 275,000 cars.

The TurSEFF programme has proven to be an effective instrument in overcoming inexperience and lack of awareness of stakeholders and difficult access to credit by SMEs, according to MWH. It also enhances the market penetration of highly efficient equipment.

According to MWH, its fees are tied to the volume of loans, creating a "relationship based on reciprocal support [that] is generating results beyond expectations¡­ raising sustainability consciousness with local banks, funding sustainable energy projects and stimulating intercompany knowledge transfer."

Clean Power Finance (CPF) for empowering the US solar industry, reducing solar costs, and facilitating utility investment in residential distributed generation (DG) solar. CPF is a financial technology company driving the mass adoption of residential solar. It connects institutional investors looking for profitable, low-risk assets with solar professionals who sell solar finance products that help U.S. consumers afford solar energy.

CPF entered the solar finance sector in 2011: today, 80% of top installers in major US solar markets access solar financing through CPF, according to the company.

In 2013, CPF deployed new technology that simplifies solar sales processes and reduces soft costs, making residential solar more efficient and cost-competitive. Also in 2013, the company closed a Series C round of financing that included four major US utility holding companies. Simultaneously, it helped one of the three largest US electric power companies deploy more than $55 million in residential solar assets.

CPF transacts more than $5 million in consumer credit applications for solar across its platform every day and manages half a billion dollars for solar investors. CEO Nat Kreamer pioneered residential solar finance when he co-founded Sunrun and sold the first ever residential power purchase agreement to a Redwood City doctor in 2007.

The Investor Confidence Project (ICP) formed by Environmental Defense Fund for enabling a market for investor-ready energy efficiency projects by reducing transaction costs and engineering overhead while increasing the reliability and consistency of savings.

As covered in prior CCBJ editions, financing small- and mid-sized energy efficiency projects is more difficult than distributed solar projects because of the inability to measure energy cost savings across multiple projects with precision. "Measuring efficiency (which really means 'calculating' savings) requires a variety of methods to read baselines and find the delta between what 'is' and what 'would have been," noted Stephen Lacey in a piece on the ICP for GreentechMedia.com. "That makes building owners and investors more skeptical about performance." And it hampers the ability of lenders to approve non-recourse project finance loans that are paid back by a dedicated revenue stream produced by the project.

The ICP developed Energy Performance Protocols with experts such as Sustainable Real Estate Solutions, EMCOR Services New England Mechanical and Connecticut's Clean Energy Finance and Investment Authority CEFIA. In December 2013, a $2 million, 98,000 sf commercial energy efficiency retrofit in Connecticut was financed using the ICP's protocols.

ICP is moving the energy efficiency industry closer to the Holy Grail of securitization, in which energy efficiency projects can be valued based on consistent parameters with little project-specific analysis and vetting-processes that ratchet up soft costs quickly. Securitization would make energy efficiency financing more attractive for a wider range of lenders and investors. "The $2 million project in Connecticut doesn't get the industry anywhere close to securitization. But it does create a bit more momentum for standards implementation within the state, which could spill into other markets," wrote Lacey. "And that's the first step toward a 'plain vanilla' efficiency market-the exact flavor investors are looking for.