1. City of Melbourne
Financing your retrofit
Scott Bocskay, Chief Executive
Sustainable Melbourne Fund
25 July 2012

2. Sustainable Melbourne Fund
– Wholly owned, independent trust established by Melbourne City Council in 2002
with an investment of $5 million - currently a $6.4 million fund
– Expertise in energy efficiency, renewable energy and project management and
delivery
– We have two distinct roles
1. Through our investment program provide loans of up to $500,000 for up
to 6 years; $8.1 million invested in energy generation, water savings and
energy efficiency projects since inception
2. Administer environmental upgrade finance on behalf of the City of
Melbourne

3. Council drivers
– To retrofit 2/3rds of the City of Melbourne’s
commercial office
– 38% reduction in energy use in commercial buildings
with 383 kilotonnes of CO2-e and five gigalitres
annual savings
– Drives investment at an accelerated pace – $2 billion
in retrofit activity
– Strengthens community through job creation – 8,000
new jobs

4. What is environmental upgrade finance?

5. How the process works

6. Key Features
– ‘Super’ senior –senior to existing mortgages (do not interfere with existing creditors
rights)
– Charge attached to property - Finance not registered on title, rather is a council
‘special rate or charge’ and remains with the property – multiple charges can exist
– Tenant Pass Through – EUC’s are council statutory charge, can be passed through
under triple net leases by agreement
– Local Government rights unfettered – The EUC’s are only payable to lenders upon
receipt
– Voluntary – The EUC’s are voluntarily entered into by the parties to the EUA
Design Principles to Projects
– Must deliver energy, greenhouse or water savings
– “Nailed down”–charge and benefits to remain with building the improvements also
remain with the building
– Recognise long flat tail of technology performance and encourage innovation
– Real opportunity lay in working with tenants to deliver comprehensive projects and
new cash flows

7. Role of Sustainable Melbourne Fund
– Work in partnership with City of Melbourne to set up the project underwriting
criteria, program guidelines and application processes of the environmental
upgrade finance mechanism
– Third party administrator - Assess and process project applications on behalf
of City of Melbourne
– Work with financiers to the program to make their products available to
customers
– Fee for service model – user pays, as benefits accrue to building owner and
occupiers

8. Environmental upgrade agreements - economics

9. Environmental upgrade agreement economics
- Building Owner
Providing Building Owners real benefit
EUA DEBT
Total Initial Project Costs Total Initial Project Costs
Description Cost Description Cost
Base Building Improvement measures $ 817,600 Base Building Improvement measures $ 817,600
Tenant Improvement measures $ 499,827 Tenant Improvement measures $ -
Project fees $ 105,000 Project fees $ 60,000
VEET Incentive -$ 59,979 VEET Incentive $ -
Total Anticipated Cost $ 1,362,448 Total Anticipated Cost (+/- 15%) $ 877,600
Building owner Benefit Building owner Benefit
Anticipated Annual EUC (10yr, 7.5% Anticipated Annual debt Payment (3yrs,
P&I) -$194,879.78 8% P&I) -$330,010
Anticipated receipts from tenants $ 195,222 Anticipated receipts from tenants $ -
Net cash position of Building owner $ 343 Net cash position of Building owner -$ 330,010

10. Environmental upgrade agreement economics
- Tenant
Providing tenants with an energy price hedge
Fixed cost
Variable
costs

11. Environmental upgrade agreement economics
- Tenant
Providing tenants with an energy price hedge
Year Ending 2012 2013 2014
Expenditure Pre retrofit
EUC Payment to Owner $ - $ - $ -
TLP Energy Bills $ 393,108 $ 432,419 $ 475,660
Tenant outgoings $ 396,933 $ 436,627 $ 480,289
Total Expenditure $ 790,041 $ 869,045 $ 955,950
Expenditure post retrofit
EUC Payment to Owner $ 195,222 $ 195,222 $ 195,222
TLP Energy Bills $ 309,435 $ 340,378 $ 374,416
Tenant outgoings $ 277,853 $ 305,639 $ 336,203
Total Expenditure $ 782,511 $ 841,239 $ 905,841
Net Position $ 7,531 $ 27,806 $ 50,109

12. 460 Collins Street, Melbourne
– $400,000 project
– Installation of high efficiency
chiller unit and building
management system upgrade
– Aims to cut annual CO2-e
emissions by approximately 170
tonnes

13. 123 Queen Street, Melbourne
– $1.3 million project
– Installation of trigeneration
system, occupancy sensors and
double glazing
– Aims to cut annual CO2-e
emissions by approximately 2500
tonnes
– First privately funded
environmental upgrade agreement
through the National Australia
Bank (NAB)

14. Kings Business Park precinct, South Melbourne
– $3.4 million project
– Installation of high efficiency
chiller units, cooling towers,
lighting system upgrades, heating
and air conditioning units and
controls
– Aims to cut annual CO2-e
emissions by approximately 2600
tonnes

15. Updated Victorian Legislation
– Bill passed to correct unintended
consequences of drafting matters
– Enables property portfolio’s who’s debt is
secured by multiple buildings to partake
– Came into effect at July 1st 2012
– Applies to a large amount of NLA within
Melbourne

16. Thank You
Scott Bocskay, Chief Executive
Sustainable Melbourne Fund
scott.bocskay@sustainablemelbournefund.com.au
+61 3 9658 8666
www.sustainablemelbournefund.com.au