Q. We don’t traditionally use third-party funding. Why should we consider using Metrus’ ESA?
A. Internal capital can be an efficient way to pay for projects with short paybacks. Even our customers who fund small projects internally find that working with Metrus enables them to complete larger, more impactful projects (with longer paybacks) that might not otherwise receive funding.Do you contract for facility management services or maintenance services on equipment? The Efficiency Service Agreement (ESA) is similar to other service agreements since it does not require upfront capital expenditure. The ESA is performance-based which limits the service cost to actual reductions in energy cost that result from the project. Customers value an ESA because it can be used to fund projects across an entire facility portfolio. This typically doesn’t happen using internal funds alone.
Q. Is Metrus’ ESA similar to a Power Purchase Agreement (PPA) for renewable energy?
A. Yes. Like a PPA, ESA payments to Metrus are based on a measured quantity of energy units (e.g., kilowatt-hours of electricity, therms of natural gas, or killogallons of water). However, ESA payments are based on energy units saved (e.g., “negawatts”), enabling customers to treat energy efficiency as a resource to fund improvements and to mitigate the environmental impact of their business operations.
Q. Does Metrus assume project performance risk?
A. Yes. The ESA is a pay-for-performance structure in which Metrus takes on project risk. Customers only pay for realized savings.
Q. Is Metrus Energy an Energy Services Company (ESCO) or general contractor?
A. Metrus is neither an ESCO nor a general contractor. We are an objective, full-service developer and financer of efficiency retrofit projects. Metrus pays for 100% of the upfront costs of projects and does not promote a specific technology solution, ESCO or contractor. However, in close consultation with its customers, Metrus will select and partner with leading ESCOs to provide project design, engineering and implementation services.
Q. How does Metrus get paid?
A. Once a project is operational, customers make quarterly payments to Metrus based on the realized savings associated with their reduced energy and water consumption. Customers pay these bills from their operating budgets as if they were paying a utility. Metrus does not mark-up or add margin on to any project costs.
Q. Who else has used an Efficiency Services Agreement (ESA) for their building?
A. Metrus has multi-million dollar ESA projects in 26 different states with Fortune 500 industrial and commercial firms as well as major institutional customers (including education and hospitals). Many of our existing customers are rolling out ESA programs across multiple sites in different states.
Q. What size of projects is Metrus able to develop and finance?
A. Metrus targets projects that are in excess of $1,000,000. We have no set maximum project size and can fund smaller-sized projects for customers interested in aggregating projects as part of a multi-facility efficiency investment.
Q. How does the cost of capital under an ESA compare to other options?
A. The ESA is different than other forms of financing since it delivers a service beyond just installing new equipment and is off-balance sheet. Typically, the benefits of the ESA carry a premium of a 100 to 200 basis points over a capital lease. Put in general terms, the ESA’s cost of capital is about 5-7% compared to 4-6% for a capital lease.The ESA also provides unique benefits compared to other funding options. An ESA: (i) covers all project development costs, (ii) takes ongoing performance risk, (iii) pays for ongoing maintenance and monitoring services, (iv) can be used to add new efficiency upgrades over time, and (v) provides the benefits of off-balance sheet accounting treatment.It’s important to realize that ESA payments will be made with dollars that you are already paying to your utility. The ESA provides a means to redirect your current utility spending to pay for facility improvements and upgrades.
Q. Is the Metrus ESA like a lease?
A. Although a lease and an ESA have some similarities, there are several key differences: (i) ESA payments are variable and based on actual savings (just like your utility bill which goes up/down based on your energy use,) (ii) Metrus invests its own capital into each project and is the long-term owner of the energy and water efficiency assets, (iii) Metrus pays for ongoing maintenance and monitoring services and (iv) new efficiency upgrades can be added over time. These differences are important because based on recent accounting changes, all leases will be on-balance sheet. Unlike a lease, an ESA is a service agreement and is off-balance sheet.
Q. How do you calculate savings?
A. Savings are calculated using U.S. DOE energy savings measurement guidelines that have been in use in the energy efficiency industry for decades. Savings calculations are based on three key factors: 1) pre-project measurements of the efficiency of existing equipment, 2) post-project measurements of the efficiency of newly installed equipment, and 3) fixed baseline parameters such as facility operating hours and degree days. Ongoing measurement reports calculate the actual units of avoided energy (kWh of electricity, therms of natural gas, etc.) resulting from the project. All baseline inputs and savings calculations are prepared in collaboration with customers and agreed upon prior to project construction.
Q. How do I know the savings will materialize?
A. You’ll immediately see lower utility bills and energy savings will be documented in the annual ESA savings measurement reports. What is unique about the ESA is that you pay only for actual energy savings delivered. Metrus and the ESCO bear the risk of project underperformance. If the project delivers no savings, your invoice would be for zero dollars.
Q. How do changes in my operations affect savings calculations?
A. We work hard upfront to isolate savings calculations on the actual performance of the efficiency equipment and not the day-to-day operations of your facility. Savings calculations are set up to measure the efficiency of the new equipment and should not vary with your day-to-day operations. During the development process of the detailed energy assessment, we work with your facility staff to fix and agree upon key baseline operating parameters to the savings calculations like operating hours, production levels and occupancy. These inputs are agreed upon and fixed prior to contract signing. In this way, equipment efficiency is measured without worrying about changes in day-to-day operation that are outside of Metrus’ and our ESCO’s control.
Q. Does Metrus take over a customer’s relationship with their local utilities?
A. No. None of Metrus’ financing products interfere with a customer’s relationship with their utility. Customers continue to control their energy supply arrangements, interface with their local utility representative, and pay their regular utility bill for energy they consume.
Q. Do ESA rates fluctuate with my utility rates?
A. No. ESA service charges are set at contract signing and then escalate each year at an agreed up escalation rate (similar to a solar PPA). The ESA escalation rate remains the same whether actual utility rates increase or decrease over time.
Q. I locked into a low electricity supply price. How will ESA services charge compare?
A. Our goal is to have customers be cash flow positive for the entire ESA term. We work upfront with customers to: (i) set ESA charges at a discount to current utility costs, and (ii) use ESA escalation rates that reflect historical (and current) energy market trends.
Q. What happens if the customer sells the facility during the ESA term?
A. The ESA offers periodic buy-outs that provide the customer the flexibility to exit the contract should their circumstances change. The buy-out amounts are stated in the contract and are set at reasonable levels. If the business is sold, there is also the potential option to have the ESA transfer to the next owner pending approval by Metrus.
Q. What happens to the equipment at the end of the ESA term?
A. At the end of the ESA term, customers have three options: (i) the customer can purchase the equipment at fair market value, (ii) the customer can agree with Metrus to extend the original ESA for an incremental time period, or (iii) terminate the agreement and ask Metrus to remove relevant equipment.