Funding Your 2010 Energy Plan: Valuable Financial Tips and Resources

1. Funding Your 2010 Energy Plan:Valuable Financial Tips and Resources March 30, 2010

2. Meet your moderators Matt Macon, Manager, Corporate SMB Accounts, FPL Mike Carter, Sr. Engineer, Business Energy Service, FPL Rob Risley, Sr. Sales Consultant, FPL Energy Services, FPL James Gallman, Sr. Area Manager Small Business Administration

3. Agenda • Essential Steps to Building a Successful Plan • Identifying Energy Savings Opportunities • Financing Options, Tax Credits & Incentives • FPL • Performance Contracting • Federal, State and Local Agencies and Policies • Private Loans • Leasing • Bonds • Additional Tools • Tips for Getting Started

4. Creating and implementing an energy plan reduces your cost of doing business Benefits of a Good Plan • Provide competitive edge and improved image • Saving money makes your business more profitable and competitive • Saving energy is earth friendly, a quality many consumers respect in today’s marketplace • Improve environment • Lowers carbon emissions and helps the planet • Reduce operations and maintenance costs • Saves energy and money month after month • Reduces maintenance costs

5. Step 1 Make a commitment Step 2 Assess performance Step 3 Set clear and measurable goals Step 4 Create an action plan Step 5 Implement the action plan Step 6 Evaluate your progress Step 7 Communicate results Step 8 Recognize achievements Following these eight steps will help you build your 2010 energy plan Eight Essential Steps to a Successful Plan Source: EPA ENERGY STAR

6. A critical step in developing your energy plan is creating an action plan and updating it annually Tips for Building an Action Plan • Develop a way to track and report energy usage • Prioritize energy-saving opportunities by technology, cost/payback or behavior modification • Prepare a budget that factors in FPL incentives and tax credits • Consider electric rate options available from FPL • Put a maintenance plan in place • Include evaluation of any new equipment installed

7. Whether your company is large or small, many financing options exist to help fund energy efficiency improvements Financing Options for Small and Large Companies • The options that are right for your company depend upon factors such as: • Company size • Risk tolerance • Credit rating • Enhancement type • Savings impact * In rare situations

8. FPL offers programs and services to help you identify and implement energy plan action items Florida Power & Light • As your energy partner, FPL will: • Evaluate your energy usage • Provide recommendations • Offer rebates • The process begins with a free Business Energy Evaluation (BEE) • Onsite evaluation • Call 1-800-FPL-5566 • Request to your FPL account manager, if you have one Insert Photo

9. FPL will recommend solutions specific to your business and discuss your eligibility for incentives on new equipment What You Will Learn from the BEE • Recommendation for installing energy improvements, such as upgrading your A/C unit, lighting or insulation • Information about FPL’s incentive programs that will help you pay for the installation of more energy-efficient equipment • A list of low-cost measures you can undertake – programmable thermostats, occupancy sensors, etc. – that will help save energy • Recommendations to implement energy-saving practices, such as exploring alternative electric rates, properly scheduling equipment turn on times to lower demand cost, or simply reducing lighting levels It pays to take advantage of FPL energy efficiency programs. Office Depot has received $25,000 in bill credits over the last two years for 12 stores enrolled in the On Call® program.

10. Once your company has identified savings opportunities, the next step is to select initiatives with the highest impact Prioritizing Opportunities • Consider which items account for the highest consumption • Compare your energy use averages to those of similar companies within your industry • Run an Return-on-Investment analysis • Select the initiatives that have the biggest impact

11. Your Opportunity Cost ENERGY STAR offers a free Cash Flow Opportunity calculator The calculator will help you: Understand the total value of your investment Answer three key questions: How much new energy efficiency equipment can be purchased from anticipated savings? Should this equipment purchase be financed now, or is it better to wait and use cash from a future budget? Is money being lost by waiting for a lower interest rate ENERGY STAR’s Cash Flow Opportunity calculator helps you prioritize your options by computing return on investment Visit www.energystar.gov/index.cfm?c=business.bus_financing to access the ENERGY STAR Cash Flow Opportunity calculator

12. FPL Prescriptive Incentives Business Energy Evaluations identify the main sources of energy consumption in your facility and can offer rebates on qualifying improvements

13. Savings from implementing changes recommended during a Business Energy Evaluation can be significant FPL Prescriptive Incentives

14. To qualify for a business custom incentive, you must demonstrate to FPL that a project: Will trim at least 25 KW from summer peak demand Differs from other FPL conservation programs Proposed measures must have a simple payback of no less than 2 years The following proposals are ineligible: Power generation technologies Proposals based on fuel switching or wheeling, and Technologies currently being evaluated by FPL Each application is judged separately Business Custom Incentive FPL also offers custom incentives for large projects Contact your FPL Account Manager if you believe that you have a project that merits consideration

15. Energy Service Company (ESCO) An Energy Service Company (ESCO): Develops, installs and finances projects designed to improve energy efficiency of buildings Serves as a business partner for the life of the project Acts as the general contractor Assumes associated technical and performance risks Performance contracts with ESCOs are good for financing large and complex projects ($150,000+ annual energy cost)

16. Energy Service Company (ESCO) An ESCO performance contract is an agreement to manage a group of efficiency projects from beginning to end Savings generated are used to cover the cost of the project An ESCO performance contract is integral to the management of a group of energy efficiency projects FPL Energy Services has completed many successful Performance Contracting projects with federal, state and local agency facilities in Florida

17. Performance contracting gives guaranteed energy savings with no capital requirements After Performance Period Performance Period Before Contract Savings GuaranteedE + O&M Cost Savings Financing Debt Service Savings Facility Energy and O&M Budget BUDGET ALLOCATION ($) Facility Energy and O&M Budget Facility Energy and O&M Budget TIME LEGISLATIVE FINDINGS“The Legislature finds that investment in energy, efficiency and conservation measures in agency facilities can reduce the amount of energy and water consumed and wastewater produced and produce immediate and long-term savings”— FL Senate (www.flsenate.com)

18. Benefits of FPLES Performance Contract Self-funding financial vehicle that pays for debt service out of savings Reduces energy related operating expenses Promotes sustainability stewardship Stimulates the economy and creates jobs Improves energy efficiency goals Reduces GHG and carbon foot print Eliminates maintenance & repair costs of aging equipment Improves the bottom line Economic Prosperity Economic Prosperity The The Triple Triple Bottom Bottom Line Line Social Social Environmental Environmental Responsibility Responsibility Stewardship Stewardship Performance contracts bring many financial and environmental benefits

19. Conservation and Upgrade Opportunities Lighting redesign and/or retrofits HVAC and mechanical systems Building envelope upgrades Renewable energy Back-up generation and power quality solutions Building and Equipment Controls An ESCO contract will guarantee that you will achieve your goals to conserve energy, and money Learn more at: www.fpl.com/services

20. Used a tax-exempt master lease program to pay for a guaranteed savings performance contract Financed energy upgrades of A/C, lights, water, kitchen, laundry, heating, trash compaction, utility rate changes, and solar systems Lowered the total project cost by financing the energy upgrades through 3 of 4 regions and over 6 million sq ft Performance Contracting helped Florida’s Dept of Corrections improve its facilities and maximize energy savings Success Story: Florida Dept of Corrections The PC process has allowed FLDC to meet state-mandated budget reductions while minimizing impact to agency services

21. Types of SBA 7(a) Loans SBAExpress 50 percent SBA backed guaranty Average loan = $35,000 Maximum loan = $350,000 Streamlined application process for easy access Response to application given within 36 hours Other 7(a) loans Export loan programs 90% guaranty + no fee Maximum loan = $2.0 million Rural lender advantage program Special purpose loans program Eligible items Retrofit facilities New installations Energy efficient equipment ENERGY STAR Other All of the SBA’s 7(a) bank loans can be used to fund green improvements Savings small businesses make from adopting energy improvements also include federal energy tax savings

22. SBA Certified Development Company (CDC)504 Loan Program SBA CDC / 504 loans finance energy-efficient improvements Long-term financing tool for economic development within a community Job creation/retention requirement (1 job/$35,000 loaned) Can only be used for purchase of fixed assets Major portion of funds must be for real estate purchase Provides financing with long-term, fixed-rate financing to acquire major fixed assets for expansion or modernization Financing is provided by a Certified Development Company Non-profit corporation set up to contribute to the economic development of its community The SBA’s CDC / 504 loan program is good for making significant capital improvements • Eligible products • Energy-efficient appliances • Alternative fuel for vehicles • Replacing transportation fleet with hybrid vehicles • Purchase of improved-mileage vehicles • Increased efficiency, HVAC, heat pumps, geothermal energy • Energy-efficient doors, windows, skylights • Increased insulation • Wind and solar power • Energy-efficient light bulbs

23. SBA Energy Conservation Loan Energy Conservation Loan For the following small businesses that work with energy devices or techniques to conserve energy: Design Engineer Manufacture Distribute Market Install Service Not designed for end users Eligible devices or techniques Solar thermal equipment Photovoltaic cells and related equipment Products or services that increase the energy efficiency of existing equipment The Energy Conservation Loan is designed for the entity who builds, installs or services qualified energy measures

24. SBA Loan Programs Micro-Loan Program Small, short-term loans Average loan = $13,000 Maximum loan = $35,000 May be used for working capital or the purchase of inventory, supplies, furniture, fixtures, machinery and/or equipment Obtained through intermediary lenders Non-profit, community based lenders Required to provide business training and technical assistance to borrowers The SBA’s Micro-Loan Program is appropriate for small, quick projects For more information on SBA programs available, please visit: http://www.sba.gov/financialassistance

25. Loan Eligibility Eligibility requirements For profit Meet SBA size standards (NAICS/SIC) Not engaged in lending, real estate development, investments or speculation Credit requirements Good character Management expertise Feasible business plan Adequate equity or investment No 100% financing Sufficient collateral Ability to repay debt from earnings Collateral Personal guaranty of principals owning 20 percent or more Personal assets may be required Loans will not be declined solely for insufficient collateral, but loan will be secured to the maximum extent possible Ineligible use of proceeds Speculation Partial change of ownership Payment to principals of the business Delinquent payroll / sales taxes Once a company has met SBA requirements, the loan qualification process is similar to the one used for bank loans For more information on SBA programs available, please visit: http://www.sba.gov/financialassistance

26. Agency Policies and Programs Small Business Administration (SBA) American Recovery and Reinvestment Act of 2009 Energy Improvement and Extension Act Energy Policy Act of 2005 Commercial Building Tax Deduction ENERGY STAR U.S. Department of Energy Building Technologies Program FEMP Programs LEED Programs Renewable Energy Production Tax Credit Renewable Energy Technologies Investment Tax Credit Florida State Sales Tax Incentives Many federal, state and local organizations and policies exist to support your energy management efforts

27. American Recovery and Reinvestment Act of 2009 $4.5 billion to convert federal buildings into high-performance green buildings State energy efficiency and conservation block grants funded ($3.1 billion) Renewable energy Production Tax Credit (PTC) of 1 to 2.1 cents per kWh 30% Investment Tax Credit Cash grant 30% for fuel cell, solar, small wind 10% for geothermal, micro-turbine, and combined heat and power property Federal stimulus money has been allocated for upgrading government buildings For more information, visit the federal government’s official ARRA 2009 web site at: www.recovery.gov. /

28. Energy Improvement and Extension Act of 2008 Eight-year extension (through 2016) of 30 percent tax credit Commercial solar installations Eliminated the $2,000 tax credit cap Small wind power For wind turbines with capacities of 100 kilowatts or less Geothermal heat pumps Fuel cell tax credit limit is tripled, to $1,500 for each 0.5 kilowatts of capacity Creates a new ten percent tax credit for certain combined heat and power systems Extended the energy-efficiency tax deductions for commercial buildings through 2013 Tax credits have been extended/enhanced for renewable energy

29. Energy Policy Act of 2005 Commercial Building Tax Deduction (§179D IRS Code) Up to $1.80 per square foot Building envelope ($0.60/ft2) Heating, cooling, ventilation ($0.60/ft2) Interior lighting ($0.60/ft2) Available to owners or tenants (or designers, in the case of government-owned buildings) of new or existing commercial buildings Must save at least 50 percent of the energy cost of a building that meets ASHRAE Standard 90.1-2001 Verification (software) and certification requirements Incentives are available for improving energy efficiency of commercial buildings

30. The state of Florida has and is creating many energy programs that may benefit you State Incentives • Local government grantees will be putting together energy efficiency and conservation strategies to determine: • How to spend the money to increase energy savings • How to reduce greenhouse gas emissions in their communities • The state of Florida is also creating several new energy programs funded by ARRA that will help expand energy efficiency projects and renewable energy investments in the state For more information, visit: http://myfloridaclimate.com

31. Corporate tax credit $0.01/kWh for electricity produced from 1/1/2007 through 6/30/2010 No maximum specified for individual projects Maximum of $5 million per state fiscal year for all credits under this program Unused credits may be carried forward for up to five years Eligible Renewable / Other Technologies: Solar Thermal Electric Photovoltaics Wind Biomass, Hydroelectric Geothermal Electric CHP/Cogeneration Hydrogen Tidal Energy Wave Energy Ocean Thermal This tax credit encourages the development and expansion of renewable energy facilities in Florida Renewable Energy Production Tax Credit For more information, visit: http://www.myfloridaclimate.com/climate_quick_links/florida_energ...

32. Corporate tax credit 75% of all: Capital costs Operation and maintenance costs Research and development costs Maximum incentive varies by application Unused amount may be carried forward and used in tax years beginning 1/1/2007 and ending 12/31/2012 Eligible Renewable / Other Technologies: Fuel Cells Hydrogen Ethanol Biodiesel This corporate tax credit promotes investment in hydrogen powered vehicles and fuel technologies Renewable Energy Technologies Investment Tax Credit For more information, visit: http://myfloridaclimate.com/climate_quick_links/florida_energy_cl...

33. Solar energy systems have been exempt from Florida’s sales and use tax since July 1, 1997 Solar Water Heat Solar Space Heat Photovoltaics Solar Pool Heating In June, 2006, Senate Bill 888 created a sales and use tax refund for "equipment, machinery and other materials for renewable energy technologies" Ethanol Biodiesel The refund is available to a purchaser on a previously paid Florida sales tax This sales tax refund is available for previously paid Florida sales taxes Florida State Sales Tax Incentives For more information, visit: http://myfloridaclimate.com/climate_quick_links/florida_energy_cl...

34. Financing Options and Considerations Options Private loans Bonds Leasing Considerations Different lenders do different lending than in the past Lenders wish to stay within footprint Reduced competition Limited tax appetite Higher rates Smaller deals harder to fund Longer time in underwriting Shorter terms Over 15 years difficult Community banks playing a larger role Although the economic climate is affecting energy efficiency project financing, options are still available

35. Private Loans Description Organization avoids expending cash on hand Goal is to negotiate terms where the payments are lower than the cash savings from the project Considerations Equipment loans normally require a down payment of 20 – 25 percent Secured by a lien on the items purchased Lenders look at organization’s financial strength to determine if additional security is required Borrower’s ability to negotiate favorable terms depends on lender’s perception of risk Bank loans are the most common method of financing equipment purchases • Makes sense when monthly energy savings are enough to cover finance charges ...

36. Bonds Considerations Complex agreements with a high transaction cost Issuing municipal bonds requires approval by legislative bodies and voter referenda Some state energy programs raise money with bonds to create pools of money for funding smaller projects sponsored by local governments and school districts Financing with bonds is common in the public sector • Description • Debt instruments sold by public and private-sector organizations to borrow money from capital markets Public-sector organizations should check with the state government to determine if their projects are eligible

37. Leasing Considerations Available from commercial lenders Equipment manufacturers or their affiliates will often set up the lease and arrange for equipment purchase and delivery The financial accounting and tax rules for operating and capital leases differ significantly Ideally structured so that energy savings are enough to cover finance charges Lease periods range from 5 to 10 years Leasing is a good alternative to purchasing by providing access to low-cost, and in some cases, tax-exempt funds • Description • A loan in which the lender retains legal title to the property being leased • Different types of leases: • Operating Lease • Capital Lease • Municipal Lease (tax exempt) Leases are fairly quick to set up and administer compared to other forms of financing

38. Articles, calculators, and answers to questions are at your fingertips FPL Power Now Resources • eLibrary articles • Tools You Can Use • Ask An Expert

39. Through ENERGY STAR, the Environmental Protection Agency offers several helpful financial feasibility tools ENERGY STAR Tools • Putting Energy into Profits: Small Business Online Guide • Building Upgrade Value Calculator • Cash Flow Opportunity Calculator • Financial Value Calculator • Portfolio Manager • Track multiple energy and water meters for each facility • Benchmark your facilities relative to their past performance • View percentage improvement in weather-normalized source energy • Share your building data with others inside or outside of your organization

40. Helpful Links Department of Energy (DOE) http://www.energy.gov/florida.htm Florida Climate Commission http://myfloridaclimate.com/climate_quick_links/florida_energy_climate_commission DOE / Florida State Partnership http://apps1.eere.energy.gov/states/state_specific_information.cfm/state=FL Small Business Administration (SBA) Loan Programs http://www.sba.gov/services/financialassistance/sbaloantopics/index.html Edison Electric Institute (EEI) http://www.eei.org/whatwedo/Partnerships/NationalKeyAccounts/Pages/default.aspx Energy Star www.energystar.gov SBA Resource Guides www.smallbusiness3.com More information on energy grants, tax incentives and rebates available from Federal and State governments

41. Next Steps First, make a commitment to energy management Contact your FPL customer manager if you have one Take a free Business Energy Evaluation Call 1-800-FPL-5566 Or, if you are a small business, take our Online Business Energy Evaluation at www.FPL.com/OBEEwww.FPL.com/Business Prioritize energy-saving opportunities Prepare a budget Select funding options using the tools and resources outlined Consider benefits of an ESCO – www.fpl.com/services As you evaluate your funding options, use the tools and resources outlined to guide your decisions. Start the process with a free Business Energy Evaluation from FPL