Third party Investment

Table of content

Intro

Third party financing – financing alternative, tool for progress in green co-ownership buildings

Three major problems in today’s’ co ownership buildings :

  • Most co-ownership buildings have disastrous energy signatures;
  • Diverging interests create blockage situation. Example : owner lesser wants to minimize investments while occupants want to reduce charges. ;
  • Even when the co ownership has a positive attitude towards an investment project, it often can’t face the technical difficulties or even the financial strain to achieve desired objectives.

« An energy audit has been made. What now? »

Third party financing is the answer to all of these questions:

  • Energy savings through better environmental performance;
  • Savings are used to pay for the investments over time ;
  • A technical expert accompanies the co ownership throughout the project and guarantees a good result (he can only recoup his investment if the savings are actually there!).

The third party financing company not only brings financial resources, it also has the technical expertise to keep the project on track.

How does it work ?

Third party financing, how does it work?

Once a project has been identified, Sophia Environment will support all the needed investments: energy audits, project development, support, materials and equipment… Practically, Sophia Enviroment will give out a loan to its client, allowing the client to pay the different suppliers.

As a counterpart, once everything is in place and the works are finished, Sophia Environment will capture part of the savings in order to recoup its investment.

Savings are calculated on a yearly basis using the internationally recognized IPMVP method.

Since only part of the savings are used to recoup the investment, the client benefits from the other part as of the first year. At the end of the contract, 100% of the savings stay in the client’s pocket.

third party financing model

Benefits

Benefits of the third party financing approach

  • The co ownership benefits from part of the savings as of the first year;
  • No complicated financial setup for the client;
  • Single point of contact ;
  • Performance guarantee, since the third party’s profitability depends on good performance;
  • Coordinated and planned energy savings project: when savings are financed through the client’s own funds, priority is often set to the most profitable measures. The others are left out for the future. This can often lead to unwanted situations. Ex: you invest in a new boiler. A few years later you decide to insulate the building. You find yourself with an oversized boiler which leads to lower performance and will have cost you a higher price.
  • Increase in real estate value: better comfort and better energy rating will, in turn lead to a higher value of your property

Project milestones

Third party financing project milestones

  • Energy audits of existing equipment and building characteristics. This allows us to identify weak points and investment opportunities. This audit is required for us to make a proposal.
  • Investment proposal, indicating cost, benefit and expected return times of different measures.
  • Signed agreement with client;
  • Choice of partner companies, financing and supervision of works, maintenance contract negotiation...
  • Long term commitment : Sophia Environment is in charge of savings, followup of maintenance etc. for a period of about 10 years.

Eligible projects :

  • Renewable energies
    Solar panels, CHP, heat pumps…;
  • Technical equipment
    Better technical equipment (condensing boilers, ventilation, controllers and thermostats) and adjustment of existing equipment;
  • Insulation
    Building insulation (roof insulation, floor, facade, frame);
  • Various localized interventions
    Insulation of heating pipes, replacement of existing lighting with energy efficient alternatives, insulation behind radiators;

If other types of investments can be made (renovations, new construction), we can also finance of the additional costs of integrating the environmental component (better insulation, higher efficiency boiler etc..) .

Savings calculation– IPMVP

Savings calculation– IPMVP

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The method used to calculate savings can sometimes be cause for disagreement. This method is more than the simple comparison of energy bills before and after the project. It is necessary to take into account a series of exogenous parameters: outdoor temperature, energy prices, cost of additional or avoided maintenance...

To incorporate these factors in our calculations, we use the international IPMVP protocol (International Performance Measurement and Verification Protocol) developed by EVO (Efficiency Valuation Organization). IPMVP presents guidelines for calculation of savings from energy conservation projects. Respect of the guidelines enables verification of calculations by a third party and therefore offers the customer an additional warranty.

"Savings are calculated in a transparent manner, based on international standards"

FAQ :

What happens when there’s an unusually cold winter? Wont the savings be reduced since energy bills are going up?

No, the IPMVP protocol (see above) provides for the integration of such parameters. During a cold winter it is normal for energy bills to increase as it is for the energy consumption. However, this bill would have been even higher if no energy saving project had been undertaken.

To calculate savings, we standardize consumptions using degree days in a typical year. This allows us to compare more rationally.

Will you pass energy price increases on to me?

The answer is not one way. On the one hand, we already take into account a certain increase in energy prices during our project planning. A rise in prices is therefore expected beforehand.

On the other hand, an unexpected fluctuation in one way or another of prices will have a direct impact on savings calculation. Our contracts anticipate this kind of situation:

If the cost of energy has been overestimated, the savings will be less than expected. We will then adjust the reimbursement rate (never exceed the savings) if the situation persists.

If the price was underestimated, the savings will exceed our expectation. If this kind of situation persists, a reduced repayment period can be considered.

What if the expected performances are not reached?

In energy performance contracting, the third party is responsible for the performance of the installations. Project profitability for the third party is dependent on the good performance of installations. Therefore we strive to :

  • not overestimate the savings during the study
  • Respond as quickly as possible in case of poor performance

How do I know if my building can be considered?

Nothing could be easier! Just contact us and we will discuss the opportunity with you. If the project sounds interesting, then we will carry out the audit of your building.

Minimum project requirements

  • 20 to 30 apartments
  • Annual energy bill of more than 40,000 € for the common parts or shared heating