?What does a contractor need to think about to pursue this kind of financing?
Contractors suitable for Joule Assets financing:
• Seek long-term relationships with their customers—rather than just
seeking up-front payment
• Stand by their performance, i.e. energy-saving performance
• Desire returns over the contract life
• Intend to seek customer renewals after the end of their existing contract
• Are confident in their project delivery, as they do have first loss exposure
• Have an established measurement and verification process
?How do you perform the verification of energy savings?
We use third-party engineering firms. To the extent that we have large
exposure on a single project, we’ll look to retain third party performance insurance as well.
?What is your minimum size of investment?
Projects can be as small as $10,000; our sweet spot typically ranges from $50,000- $500,000.
?It sounds like you provide the financing to contractors. Does the facility owner have to sign off on the financing?
No. The contractor may have to change its existing Customer Agreement to
ensure that they are able to deliver on their financing contract with Joule
Assets, but the facility owner does not transact directly with Joule’s ERA Fund.
?How do you determine the cost of the financing?
Financing rates depend on the geographic area, the contractor and the
diversity of projects pursued. We offer attractive rates that differ according to individual circumstances.
The upside that we share with the contractor and the customer comes in the form of
conditional cash flows (rebates, market revenues, rate optimization, etc.).
?What’s the typical length of a financing contract?
Generally 3-5 years.
?Who gets the demand response (DR) revenue in these deals?
DR revenues are shared between the customer, contractor, and the Energy
Reduction Assets Fund. Revenues are shared as equally as possible so that
our incentives are aligned.
?What happens if the estimated savings aren’t realized? Who covers the payments, the contractor or the customer?
The contractor is stepping up to that performance, if there is a shortfall, the
ERA Fund has to get paid its capital and base return. If there are any shortfalls,
the contractor needs to make that up. It really depends on a contractor’s
contract structure. It’s rare to have a MESA-type contract in our portfolio.
?Is the financing made available to countries outside of the United States?
?Could you please explain the loan loss reserve?
The size of the loan-loss reserve decreases over time based on good performance.
?How do you compete with a program offered by a large utility or retailer, such as an Efficiency Made EasySM, where they will finance energy efficiency and roll everything into the bill?
We do not compete with those programs but we can prospectively work with
them. We are open to working with contractors who are participating in
Efficiency Made EasySM to provide either alternative or integrated financing
?How much is the interest rate on a loan, for example of $50,000?
We offer attractive base interest rates. We tend to be on the bottom end of that
spectrum when there are diverse projects, the loan loss reserve is ample, the
experience with the supplier is superb and customer engagement is a critical
component of the offering. We tend to be on the top end of that structure when
there is more disengagement, less diversity.
?Who are the current investors in the Energy Reduction Assets Fund? How much capital are you raising? Are there other similar VC funds focused in this space?
We will deploy a minimum of $100 million over the next few years. We haven’t
seen similar funds, and one of the reasons we are so open about this structure
is that we don’t really see a lot of it as replicable.
?Do you include solar and storage?
Yes we do, but from our standpoint solar should come after energy efficiency.
?How can we qualify as a contractor?
We are in the process of engaging and talking to solution providers and
contractors out there to help them understand more about the process. We are
happy to talk about our process with anyone who is interested. We are actively
seeking contractors from the major markets; PJM, Northeast, East Coast, New
York area, West Coast, California.
Throughout Europe there are fantastic opportunities: the Nordic States,
Benelux, Austria, Serbia, Croatia, Italy, France, United Kingdom and Ireland.
The tenure for the loans is 3-5 years. Our first efforts are in the U.S. and
Europe but we will evaluate other countries' market sizes.
?We have an energy storage solution, where we sell demand response directly to PJM. Do you finance such deals?
Absolutely, those are classic conditional cash flows; there may even be other
?On a remodel, will you finance upgrades that don’t produce energy savings?
As long as those are separated out from a performance standpoint we are open
to it. But we are very focused on ensuring that the capital we deploy is for energy reduction assets so we are less enthused about upgrades that don’t go
to creating energy reduction assets.
?Any interest in solar projects outside of the U.S.?
Potentially—not discounting it, but it’s a matter of the markets we understand;
it’s a matter of what the solar projects are doing and the counter-parties end
?How are the loan loss reserve levels determined?
It’s a measure of the contractor, the experience, the type of measure, the
number of projects, exposure to a few large projects or many small ones, in
short, how dispersed is the risk. If the two or three largest exposure pieces add
up to a certain amount, you can probably determine your loan loss reserve
based on the failure of those two or three projects.
?What are typical questions that Joule will ask to contractors in determining financing?
1. How many proposals are you making?
2. How many deals are you closing?
3. How many more might you close with constructed financing?
4. What are the resistance questions you are getting from your clients?
5. How can we solve those resistance questions with both a financing product
and our joint material?