Scaling ESAs Through Site Bundling

Overview

Better Buildings Financial Allies Citi and Metrus Energy partnered to close Phase One and Phase Two of a groundbreaking transaction with a Fortune 100 technology customer for a multi-site, multi-state Efficiency Services Agreement (ESA). ESAs are a pay-for-performance, off-balance sheet financing solution that allow customers to implement efficiency projects with no upfront capital expenditure. While efficiency upgrades often focus on improvements at one property or site, this transaction demonstrates how ESAs can achieve scale.

Phase One, which was closed in September 2017, consists of a $14 million LED lighting upgrade across four sites in four different states. Phase Two closed in November 2017 and is a $13.2 million LED lighting upgrade project at another six sites. Cumulatively, these two phases will reduce the customer’s electricity use for lighting at these ten sites on average by 70 percent. These transactions, totaling $27.2 million in total investment, are part of an ongoing nationwide rollout that represents one of the largest ESAs in history and demonstrates how this financing model can be applied at a large scale.

ESAs can effectively and efficiently finance:

  • Multi-site projects. ESAs have the ability to assess different site needs and aggregate the projects to achieve both savings and scale. Bundling multiple sites under one ESA can achieve deeper energy savings and enable a site with a short payback period to offset another site with a long payback period. By aggregating the different projects, bigger projects can get implemented across a portfolio of facilities.
  • Leased properties. Leased properties can be problematic for ESAs as the lease term must be longer than the contract term, and ESAs typically have minimum contract term lengths for a project to be viable. Metrus overcame this barrier with a 5-year ESA term across all sites and by obtaining landlord consent with a streamlined process that highlighted the benefits of the upgrades to all parties.

Citi’s involvement in the deal aligns with its $100 billion Environmental Financial Goal, which aims to create innovative environmental solutions by lending, investing, and facilitating projects like this over the course of a decade (2014-2023). SmartWatt Energy, Inc., an energy system optimization firm, will monitor the client’s ongoing energy savings performance to ensure a guaranteed level of savings for the customer.

This resource is part of the Better Buildings Efficiency-as-a-Service Toolkit.

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Sector:

Commercial, Financial Services

Barrier:

Financing or paying for a project

Tool type:

Financing