The Power of Project Finance

An Innovative First Step

With the rising cost of utilities around the country, business owners are seeking innovative ways to offset the impact these costs are having on their bottom lines. LED lighting retrofits can be a simple first step that companies of all sizes can take to help reduce their energy consumption, those associated costs, while dramatically reducing their carbon footprint. We know that the use of LEDs decreases overall energy consumption for a few key reasons: 1) LEDs only use a fraction of the wattage that incandescent or fluorescent bulbs use for comparable or in most cases greater lumens, 2) They don’t release the heat that traditional bulbs do, thus lowering the burden placed on HVAC systems and, 3) The rated lifespan of an average commercial LED lamp or fixture can be 15-20 years (50,000 to 100,000 hours) or up to five to ten times that of conventional commercial bulbs and fixtures. As with most things in life, spending more upfront for a better-quality product to “do it right the first time” versus buying a greater volume of a cheaper product that has much less longevity, often ends up saving you more in the end.  

The Freedom to Do More With Less

But even if converting to LEDs can guarantee a steady stream of energy savings and elimination of typical lighting maintenance (ballast replacement / labor costs / lamp replacements / etc.) over the longer term, still how can a business rationalize the initial upfront capital investment required when they are focused on cutting costs today? Or conversely, if the business is able to re-deploy its capital back into its core competency and earn a higher return in comparison to what it would achieve on its investment to convert to LED, then it could be a tough sell. This is the primary thesis behind why Aquila Environmental developed its proprietary Project Finance Program, a program that helps businesses make the decision to upgrade to a LED energy system a “no brainer” by eliminating any capital outlay or risks that would normally be associated in doing so.

Aquila’s Project Finance Program does not require the time-consuming process of a prospective client trying to figure out how to internally underwrite an LED energy project with their conventional lender or the burdening of their balance sheet that other financed cap-ex events would normally require. It also does not involve a large amount of cash being diverted away from a business’ core competencies in order to pay for the energy project.

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So, what does this program look like?

Aquila provides a stream-lined financing service that is developed 100% internally.  No talking to lenders or equipment leasing companies, no having appraisers come out to your building to crawl around and try to estimate the value of the LED system you would be installing, no crazy subordination of existing liens, or no onerous balance sheet restructuring to prohibit covenant defaults.  Aquila simply quotes the overall project cost, and through its standardized “Department of Energy” and “National Renewable Energy Laboratory” engineering audit determines the project’s energy savings, and then after project completion, splits those savings with the business owner. Typically, there is a 80/20 savings split between Aquila and the building owner for a period of ~4-5 years until the project cost has been recouped by Aquila.  What this means is that you are able to convert your facilities’ obsolete, energy draining, and most likely sub-safety standard lighting system for $0 upfront yet share in 20% of the savings on Day 1!  Keep in mind, the systems we install typically have a useful life of 15-20 years; therefore, if the contract was fulfilled by Aquila keeping 80% of the savings for 5 years, you would still have another 10-15 years of garnering 100% of the savings for yourself!   

Yes, there is a solution after all that allows businesses to make an energy-efficient lighting upgrade and enjoy all of its wonderful benefits (economical, environmental, and human intangibles), without 1) Having to bare the up-front risk 2) Creating a huge burden on the businesses capital 3) Requiring complex lender underwriting and balance sheet re-structuring.

Maybe this is a project that could be worth considering after all?