Purchasing versus Leasing Renewable Energy

Purchasing versus Leasing

Renewable Energy

Presentation to

NeighborWorks America

Joint Convening of Asset Management & Chief

Financial Officers

Key Questions

1. What are the benefits and challenges of

purchasing versus leasing solar systems?

2. What do you need to know to make a

decision between the two options?

3. How do you make the benefit worth the

brain damage?

1. Intro to NHT/Enterprise

2. Why Solar?

3. Purchasing versus Leasing

4. NHT Renewable Model

May 20, 2014 NHT-Enterprise/NHT Renewable

National Housing Trust / Enterprise

Preservation Corporation



Own & Operate approximately 3,000 affordable rental

units along the East Coast and Illinois; typically with a

local partner.



NHT/Enterprise has achieved green certification

(Enterprise, Earthcraft or other) on approximately 1/3

of units, 1000 units, in its portfolio.



First Enterprise Green Certified property in DC

(Galen Terrace)

1. Reduce operations and maintenance costs

2. One of few capital expenses with an actual

payback

3. Environmental Stewardship

4. Local Energy Production

5. Resilience

Why Solar?

Solar Technology

Solar Thermal

Galen Terrace Apartments

Benefits

1. Energy Savings

2. Environmental benefit 3. Price stability

4. Local energy production/Resilience Challenges

1. Roof Inspection and Structural

2. Up-front Capital (Operating Income, Reserves, or Loan) 3. Approvals

4. Generation Risk 5. Construction Risk 6. O&M

Purchasing

Typical Electric Bill $60,000

Solar saves 30% New Electric Bill $40,000

Benefits

1. No installation costs

2. No O&M

3. Environmental benefit

4. Local energy production

5. Price stability

6. Energy Savings, but 80% less than purchasing

Challenges

1. Roof Inspection and Structural

2. Multiple approvals

3. Legal fees, roof inspectors, & structural engineers

4. Loss of control: 3rd-party owning an asset on your

roof

5. Less energy savings (must share)

6. Cost to prepare the roofs

Leasing

Typical Elec. Bill $60,000

Solar lease saves 6%

New Elec. Bill $56,500

What’s in a Solar Lease?

1. Responsibilities of each party

2. Energy pricing structure

3. Insurance requirements during construction and operation

4. Roof damages

5. Termination of the agreement

6. Transfer of property or system ownership

Galen Terrace Financials

Solar Thermal Example

System Production (Therms) 6,000 Natural Gas Price $/Therm $1.10

2014 2015 2016 2017 2018 2019

Purchase Option

Equity Investment $ (300,000) Federal Tax Credit (30%) $ 90,000

Income (Savings and Credits) $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000

Net Cash Flow $ (210,000) $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000

Payback 4 Years

Leasing Option

Equity Investment $ (15,000)

Income (Savings) $ 3,500 $ 3,500 $ 3,500 $ 3,500 $ 3,500

Net Cash Flow $ (15,000) $ 3,500 $ 3,500 $ 3,500 $ 3,500 $ 3,500

NHT Renewable Model

1. Owning and operating solar at the portfolio-level (5 properties) 2. Setting up leases with the property partnerships

3. Opening projects up to new income streams 4. Aggregating multiple properties

5. Making the benefit worth the brain damage

NHT Renewable NHT/Enterprise Preservation Corporation Property LLC

NHT Renewable Project Scope

Solar Thermal Systems: 2 Solar Photovoltaic Systems: 4 Total Project Cost: $1.25 million Photovoltaic: 300,000 kw/year Thermal: 10,000 therms/year Project Installation: Q2 2014

R Street Apartments Meridian Manor

NHT Renewable (Hybrid)

1. Environmental benefit 2. Energy Savings

3. New income streams

4. Local energy production 5. Price stability

6. System ownership

7. Properties: No upfront cost or O&M Challenges

1. Roof Inspection and Structural 2. Up-front Capital

3. Legal and Accounting 4. Approvals

5. Construction Risk 6. O&M

NHT Renewable Financials

Income (Savings and Credits) $ 210,000 $ 210,000 $ 210,000 $ 210,000 $ 210,000

Net Cash Flow $ (875,000) $ 210,000 $ 210,000 $ 210,000 $ 210,000 $ 210,000

Lessons Learned

Roof Inspections & Repairs

Challenges

• Ensure roofs meet or exceed the l0 years

lease term

• Prepare for necessary repairs to support

solar systems

• Ensure systems are designed to limit

damage to roofs

Lessons Learned

• Find a good roofing consultant

• Roof inspections should be the first thing you

do

• Don’t assume management is “taking care of

your roof warranty”; have independent inspections done

Stakeholder Approval Process

• Approvals take a great deal of time, persuasion and education • NHT Renewable was 9 month process

• Needed approval from investors, lenders, bondholders, government regulatory agencies, tenant associations and cooperative board of directors

Lessons Learned

• Learn to speak their language • Start early in the process

• Even if not required, notify all interested parties • Get leadership involved early

If you want to learn more…

Beverly Hanlin

Director of Asset Management

[email protected]

(202) 333-8931 x121 Jared Lang

Sustainable Development Manager

[email protected]

(202) 333-8931 x115