Creating the Marketplace for Sustainable Energy Assets

Bridging the Finance Gap

28 March 2019

OUR STORY

From the

US… …to Europe

Joule Assets launched in 2010 as a NY-based investment fund

for Energy Reduction Assets (ERA) – focusing on projects under

$1 million.

Today Joule Assets Inc. deploys PV and clean energy with

municipalities as clients through Joule Community Power.

With a history Joule Assets Europe launched in 2016 with

the SEAF H2020 project, to shape the EU SEA market.

The SEAF project aimed to bridge the gap between

finance and sustainable energy projects across Europe,

through the development of an online platform, eQuad.

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OUR MISSION“Our mission at Joule Assets Europe is to bridge the gap between finance and sustainable energy projects. We create the

market through our eQuad platform, which expedites the finance process for real projects on the ground, and we shape

the market through influencing policy at EU and local level, and our involvement in EU projects.”

Jessica Stromback, Chair and SVP, Joule Assets Europe

CREATING THE MARKET

SHAPING THE MARKET

• Stakeholder engagement and outreach for wider industry

• Market shaping through EU project expertise

• Influencing policy through engagement at EU and national level, with a focus on supporting ESCO growth and

innovative financing mechanisms.

• Portfolio development and market creation for EE and DRES in Europe through platform

• Financial due diligence and risk assessment

• Contract development – from term sheet to master agreement

CREATING

THE MARKET

Bridging the finance gap in energy

efficiency through the eQuad platform

A project’s journey toward finance

We help ESCOs, engineering firms, and construction companies across Europe access

appropriate project investment by providing third-party valuation, performance

insurance, project certification, and due diligence that facilitate and expedites funding

for energy efficiency projects.

The Journey:

Project Developer

VALUATION INVESTOR-PROJECT

HANDSHAKE

INSURANCE

QUOTATIONSTANDARDISATIONCONTRACT

DEV.

SUPPORT

ESCO Finance needs

The key to growth is not technical, it is contractual!

Barriers:

• Size & Scalability

• Performance Risk

• Lack of standardisation

• Lack of financial knowledge

• Balance sheet burden

Solutions:

• Umbrella contracts to bundle projects with equal capabilities

• SPV structures: Align requirements between projects

• Performance risk mitigation through performance insurance

• EPC contracts: off balance sheet and performance based

• Innovative ad-hoc financing solutions

eQuad Investor Network

INVESTMENT FUNDS

BANKS

HIGH NET WORTH INDIVIDUALS

CROWDFUNDING

CASE STUDIES

Before and after financing deal

eQuad

Due DiligencePerformance

Insurance

Finance offer

of £5 million

7 days 10 days

PROJECT

1

PROJECT

2PROJECT

3

PROJECT

4

PROJECT

5Pipeline

£370k

Standardized investor-agreed

LaaS agreements

Off balance

sheet finance

LED supplier Product

warranties

Case Study I: Lighting-as-a-service

✓ Financing Process: lighting-as-a-service well understood and safe. Fund

was interested and the negotiations were simple.

✓ Criteria: we have £5 million to spend in 1 year – “you spend it for us on

lights”. Contractor had clients to make this realistic.

✓ Key Risk Concerns: 1) Pipeline risk, 2) Credit risk of various end clients

✓ CHALLENGE: Fund is large, took over 5 months to complete 3 simple

agreements with ESCO

➢ Financial deal secured - £5 million SPV secured for ESCO for 1 year

➢ BUT – ESCO lost pipeline due to long investor process that was not fit for

purpose and had to start building their pipeline from scratch.

Process

• Contract standardization matters! ESCO-client, ESCO-fund, Fund-Client

• The Fund’s experience level matters

• The ESCO: Will use this as a launching pad for their business. Gain clients and

attract an equity investor in their company

Main Learnings

Investment Case I: Lighting-as-a-service

Outcomes

Investment Case II: Shared Savings

Energy efficiency upgrades for retail chain in Italy

FUNDS REQUIRED €4 million

CLIENT Italy retail establishment

NUMBER OF

SITES/BUILDINGS

500+ (64 sites already completed – ESCO self

finance)

TECHNOLOGIESLighting, HVAC, Refrigeration, Other (dependent

on individual site)

OBJECTIVES

Replicate in all buildings the project already

implemented and operational in 64 buildings

(CAPEX provided by Contractor)

ANNUAL SAVINGS €3 million

CONTRACT DURATION 7 years

ROI 3 years

CLIENT FINANCE NEEDS Set up SPV for “ramp up” period of project

Investment Case II: Shared Savings

✓ ESCO track record – Contractor had proven years of experience with the same

technology and projects of similar scale in different markets.

✓ Strong credit rating of contractor and end client. Contractor also had strong

balance sheet and was willing to take on performance insurance as additional

guarantee against any shortfall in performance

✓ Equipment was proven and from a trusted, internationally recognized

company

✓ Repeatability of projects, easy to aggregate

✓ Timeline of installation fit well with timing of fund

✓ A large portion of CAPEX was already behind

✓ CHALLENGE: Credit worthiness of parent company (end client)

➢ Investor offered to finance the project but increased cost of finance due to

poor credit worthiness of parent company

➢ ESCO left the deal and the project has not been implemented.

Investor response - YES

Final Outcome – ESCO chose no deal

Is there a future for EPC from the financiers’ perspective?

YES!

The money is there and the will is there.

CONCLUSIONS

EPC..

✓ Reduces risk for investors

✓ Gives contractors skin in the game

✓ Can incentivize end-clients

• A lack of contract standardisation

• A lack of risk assessment standardisation

• A lack of access to growth capital for ESCOs

• A lack of Project Developers’ robust project pipelines

• Credit worthiness of clients is an issue beyond EPC

However – challenges remain:

Many of these problems are beyond what eQuad was

designed to do;

But we have to start somewhere!

CONCLUSIONS

Look to develop the market in a way that

standardises risk assessment and contracts for

investors

• A billion € market rather than millions

• Leading to lowered cost of capital

• Confidence and scaling, aggregation

• Growth

Joule’s Vision Remainsto remove finance as a barrier to the growth of

the green economy

TO DO THIS

THINK BIG

WEBINARS

17 April | 13:00 – 14:00 GMT

“Self finance, debt, equity, available finance today and investors

requirements”

https://www.eu.jouleassets.com/the-power-of-ee-third-webinar http://go.leonardo-energy.org/190418DSMU48_Join.html

18 April | 15:00 – 16:00 CST

“From EU Project to Market Enabler:

Creating the marketplace for

Sustainable Energy Assets”

Scalable Innovative

Financing for Smart Buildings

Smart Energy in

Practice: Collection of

use cases on digital

decentralised solutions

Publications

IEA Energy Effiency

Report 2018

White Paper: The Sustainable

Energy Asset Framework

Further Reading

17

Thank you!

Caroline Milne

Director of Marketing and Communications

Joule Assets Europe

+32 (0) 4 87 54 39 07

cmilne@jouleassets.com