By Rozalia Walencik
Structured Finance Associates partnering with Los Angeles County, has issued an $6.9m PACE bond(Property Assessed Clean Energy bond) with proceeds financing energy efficient improvements to the “d2Dusit constance pasadena” project. Structured Finance worked with Celtic Bank to arrange the funding.
PACE is a useful financing tool used in the US which allows property owners to gain upfront finance 100% of the costs of energy efficient retrofits to their buildings. Local governments first issue the municipal bond to investors and then use the proceeds to make loans to building owners that want to make renewable energy or energy efficiency upgrades and installations. The loan is then repaid through a property tax assessment.
The proceeds of the bond will be used to install LED lighting, elevator motors, controls, window treatments, water systems, insulation and new HVAC (Heating, Ventilation and Air Conditioning control system). All of these will save 207,488 kWh per year in electricity usage and reduce water consumption by 3,200,000 gallons.
While the bond is a step in the right direction, investors might also want to know about the percentage of energy efficiency improvement expected against past performance. Without this it’s hard to tell if this is a ‘deep energy-use reduction’, which the International Energy Agency describes as crucial to achieve more sustainable future. The Climate Bonds Green Property eligibility criteria require energy efficiency projects to achieve 30-50% emission savings (depending on the tenor of the bond) or commercial buildings to be in the top 15% in their market in terms of relative emissions performance. (Note that the criteria’s public consultation has been extended until end of August).
