Joule Assets Tries New Scheme to Finance Smaller Energy Efficiency Projects
Joule Assets has come up with a financing scheme that could enable more small businesses to obtain capital for energy efficiency projects. Joule Assets works with vendors of energy efficiency services, providing them with funds. They, in turn, loan the money to the end-user businesses.
Joule Assets today announced its first vendor customer is Ener.co, a provider of HVAC technology that saves energy by promoting thermal conductivity in air-cooled condenser coils. Joule’s financing model will enable Ener.co to move forward on nearly $1 million of approved projects, previously stalled because of a lack of financing.
Mike Gordon, CEO of Joule Assets, said the financing scheme works by creating a desirable investment. “We’ve created a basic stream of cash that is highly reliable for investors,” he said.
Gordon provided a hypothetical example: Joule Assets may authorize a vendor for $2 million. The vendor would set aside $400,000 as security. If the vendor performs 20 projects and four of them fail, the $400,000 would act as a loan loss reserve.
In exchange, the vendor gets to move forward on projects and only has to show the loan loss reserve on its balance sheet. The vendor also gets to vet the energy efficiency projects without having to deal with the customers’ banks. “They’re getting the opportunity to create $2 million of projects for $400,000,” said Gordon of the hypothetical example.
“This doesn’t mean that every single vendor is eligible,” he added. “You need a really valuable product that you know they’re going to deliver on. It’s got to achieve energy efficiencies, and you’ve got to be secure they’re going to deliver.”
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In Ener.co’s case, the company says its NanoSure technology, when applied as part of its restoration service, reduces HVAC energy consumption by as much as 43 percent, allowing for project cost payback in one to three years. Ener.co COO Carlos Cervantes said the NanoSure protective coating is more thermally conductive for HVAC equipment than base metals, such as copper and aluminum.
Four-year old Ener.co counts among its customers the City of New York, which has approved its technology as an Energy Conservation Measure under Local Law 87.
“We were often having to wait six months or more to close a sale,” said Cervantes. “If having to pay up front was no longer a large issue, we believe that’s a game changer for us.”
It’s regularly reported that small- to medium-sized businesses have a hard time getting funding for energy efficiency upgrades. And although smaller projects represent a substantial portion of the overall energy efficiency market, large investment houses prefer large bundled assets.
Another model for funding energy efficiency projects is the Energy Savings Performance Contract, but Gordon said, “ESPCs work very well for $1.5 million (projects) and above, but for the amount of work it takes to guarantee savings and get a deal done, once you’re down in the sub-million level, they don’t get done.”
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