Energy Efficiency Revenue Bonds

Overview

In 2011, SCA Managing Director (Trenton Allen) led the $67 million Energy Efficiency Revenue Bond (“EERB”) financing for the SEU. The transaction provided low-cost capital for eight energy efficiency projects performed by six Energy Services Companies for four State agencies and two higher educational institutions, including a technical college.

Challenges

Prior to the SEU, state agencies, nonprofits and local governments struggled to execute energy efficiency projects. Whether that was due to high cost of financing, financing and contract structure, identification of trusted construction partner or inertia, the result was still the same. The SEU was developed in part to reduce the burden of state and local governments by providing a dedicated and focused professional team to support the acceleration of clean energy projects within the state. By design, the SEU was focused on breaking down silos between various technologies and targeted opportunities with the greatest environmental and economic impact. In order to achieve scale and reduce cost, the energy efficiency revenue bond program was developed to aggregate the needs of the government (state and local) and nonprofit sector. As a newly created entity and first-time borrower, the SEU had to spend time considerable time introducing itself to the bond market.

Results

The SEU successfully issued $67 million of tax-exempt bonds to fund energy efficiency improvements throughout the state. The transaction produced over $34 million in guaranteed net energy savings to the participants and served as a precursor to the “Green Bonds” that have been sold into the bond market. The SEU model and the transaction have been lauded as a model for the financing and aggregation of energy projects and received AA+ from S&P and Aa2 from Moody’s, respectively. Mr. Allen served as the sole underwriter to the SEU and participated in all aspects of the transaction and organizational development including, legal formation, governance structure development, program design, program marketing, rating agency strategy formation, legislative and policy review, and transaction structure. The transaction demonstrated that a pooled, appropriation-backed bond structure was a viable mechanism to finance energy efficiency projects in the public sector.

Project Details

 

Client: Delaware Sustainable Energy Utility

Key Contact: Senator Harris McDowell, Board Chair

SCA Team: Trenton Allen

Customer Segment: State agencies, higher education

Contract/Vendors: ESCOs

Technologies: Building retrofit (lighting, mechanical systems, controls, others) and co-generation facility