Leasing & Energy Savings Guarantee.
A national care home owner and operator, provides a range of care services to over 10,000 residents. Energy costs represent a significant percentage of their overall operating costs with high heating and lighting levels for each home vital to the comfort and well-being of the residents.
– Significant investment in energy efficient technologies was required to reduce operating costs and meet carbon reduction targets.
– Capital expenditure budgets were being used to meet expansion requirements.
– To ensure savings projections from suppliers were achieved.
– To keep visible debt ratio levels low by providing off balance sheet transactions.
Asset Facilities Limited provided a finance and performance guarantee quote based on an overall cost of £4,200,000 made up of:
- LED Lighting
- Boiler Optimisation
- iBems (Intelligent Building Energy Management Systems)
Asset Facilities worked closely with the client to provide a package of finance and insurance that ensured that the project was guaranteed to be cash flow positive from day 1.
Having reviewed the proposals and technical specifications provided by the client’s chosen equipment suppliers, Asset Facilities and its partners determined that the technologies should be capable of delivering the level of energy savings indicated and were happy to provide a guarantee that if the equipment failed to deliver the savings projected, Asset Facilities’ performance guarantee would make up any shortfall (in this case up to 80% of the original projections).
Having spoken to a number of its panel of funders, one bank was chosen to provide the finance element. A line of credit was agreed with the bank on behalf of the client and lease for the total requirement was provided allowing the client to draw down on funds as and when each care home project was completed to ensure no payments had to be made on the unused portion of the facility.
In order to allow the client to retain his capital for expansion projects, and to match savings to payments, a 60 month finance lease (to include all soft costs as well as the insurance policy premiums), payable in arrears was entered into, in effect guaranteeing that the project and therefore the client would enjoy free cash delivered their bottom line whether the technologies performed or not.
As the risk of the debt had been transferred to the insurance company, the client was able to book the entire transaction as off balance sheet thereby keeping its debt ratios within its existing banking covenants.