Introduction to PACE Solar Energy Industries Association NYC, NY – February 18, 2016 What is PACE?

PACE = Property Assessed Clean Energy

• PACE provides property owners with 100 percent upfront financing for energy and water upgrades and renewable energy projects.

• Owners realize savings immediately, and use those savings to pay back the cost of the measures through a special assessment that is placed on the property. Not a new idea: See the Philadelphia Opt-in Fire District of 1736 • This financing mechanism has long funded infrastructure projects like water, sewer, gas, and curb improvements. What is the national market for PACE?

• 31 states & the District have PACE- enabled legislation • 19 active commercial programs Source: PACENow • $105 million has been invested as of the end of 2014 Benefits of PACE

No Money Out of Pocket: 100% financing including soft costs

Immediate Savings: Cash-flow positive on day one

Extends Capital Budget: Paid for in operating savings

Longer Term (20 Yr.): Reduces annual payments

Comprehensive Financing: Covers broader capital needs

Off Balance Sheet Finance: Tied to property not your credit

Independent Validation: Reduces technical risk for owner How it works: The PACE transaction structure

PACE Capital PACE Note Provider Pass through payments $$ Municipal $$ Up-front capital Government / Local PACE PACE Assessment on title Property Administrator Owner Semi-annual tax payments $$

$$ Project Energy Cost savings

Energy Project / Contractor How PACE Works: Case Study

Customer: Non-profit affordable housing in need of deep rehab

Challenge: • Layer PACE in a larger capital stack to finance upgrades • PACE-secured PPA monetizes solar tax benefits Project: • Solar PV + roof repairs, energy efficiency, and water conservation measures How PACE Works: Sizing the Financing

ECMS Cost Lighting $150,000 Avg. Annual Savings Water conservation $50,000 Electricity $160,000 HVAC improvements $800,000 Water $10,000 Solar + roof rehab $600,000 Gas $10,000 Building controls $100,000 Total $180,000 Total $1,700,000

PACE • Savings offset annual payments up to $180,000 Eligibility • Finances up to $1.8 M (15 years @5.5%)

Note: Project financials have been simplified for illustrative purposes. How PACE Works: Project Benefits

• PACE Financing: $1,600,0000 (15 Year Term) • Tax Equity: $100,000

Property Owner: Annual Benefit • PACE finances solar PV and Utility savings $180,000 efficiency in one package PACE Payments $(167,000) • Annual net benefit of $13,000 = Net Cash Flow $13,000 $195,000 over 15-year term, Equity Investor Benefits improves affordability & rent SREC Revenue (pre-tax) $100,000 • PACE-secured PPA monetizes tax ITC $50,500 benefits / capital source Depreciation $49,500 • PACE allows customer with non- Total Benefit $200,000 traditional credit to access PPA Tax Equity -$100,000 • PACE provides leverage without Net Benefit $100,000 corporate guarantee

Note: Project financials have been simplified for illustrative purposes. How PACE Works: The Economic Case

Self-Funded PACE Investment by Property Owner $1,800,000 $0.00 Annual Utility Savings $180,000 $180,000 Annual PACE Payment $0.00 $(167,000)

Net Benefit Year 1 $(1,620,000) $13,000 Annual Net Benefit Years 2-15 $180,000 $13,000 5-year NPV of Cash Flows (@ 7% discount rate) $(878,000) $22,000 15-year NPV of Cash Flows (@ 7% discount rate) $52,000 $111,000 5-year IRR -19% Infinite 15-year IRR 6% Infinite PACE increases NOI & property value with Zero dollars out-of- pocket for the owner

Note: Project financials have been simplified for illustrative purposes. Questions?

DC PACE Commercial Program Administrator:

Bracken Hendricks, CEO [email protected] www.urbaningenuity.com