Finance from the Clean Energy Finance Corporation (CEFC) through an Environmental Upgrade Agreement (EUA) will help improve a 15-storey B-grade commercial office building in Sydney, to reduce its energy use by about 30 per cent.
CEFC CEO Oliver Yates said that through an agreement with City of Sydney, the Anglican Church on behalf of the Parish of St James, would access up to $700,000 from The Australian Environmental Upgrade Fund financed by the CEFC and National Australia Bank and managed by Eureka Funds Management.
“This latest EUA-financed project reflects a growing market for EUAs and demonstrates the typical improvements achievable in existing buildings to reduce operating costs and improve their attractiveness to tenants,” Mr Yates said.
The finance for the upgrades to St James’ Hall at 169 Phillip Street is linked to the property and is paid back through an environmental upgrade charge on rate notices.
Tenants provide contributions equal to or less than the savings they make in their utility bills as a result of the works. These contributions can then be used by the building owner to service the loan repayments.
City of Sydney Lord Mayor Clover Moore said EUAs were helping building owners take advantage of affordable long-term financing options to improve building performance.
“It’s encouraging to see how this innovative form of financing can dramatically improve the energy efficiency of their buildings and I hope to see many others access Environmental Upgrade Agreements to deliver great results for our city,” she said.
Churchwarden James Balfour said that over the next few months, new air conditioning, lighting, and building management systems would be installed.
“The project provides benefits for our tenants as well as for us and for the environment. It’s a win-win-win,” he said.
The upgrade to St James’ Hall is expected to reduce base building energy consumption by about 30 per cent, and reduce greenhouse gas emissions by more than 340 tonnes a year, according to KMH Environmental which scoped the retrofit and undertook an energy audit report on behalf of the New South Wales Office of Environment and Heritage.
Building Manager JLL’s Director of NSW Property Management Troy Shepherd said EUAs provide an innovative financing model as building owners seek to minimise the environmental footprint of their assets.
“As the building managers, we are pleased to have participated in this project with our client. Projects like this are aimed at reducing occupancy costs for tenants and provide a more environmentally-friendly workplace.”
Enhancing energy efficiency of existing buildings through EUAs was one of the most cost-effective ways for the commercial property sector to reduce ongoing operational expenses and carbon emissions.
EUAs can support major upgrades, with the finance effectively being repaid through energy savings; The EUA mechanism uniquely helps building owners by creating an incentive to bring forward investment in energy efficiency.
Eureka Funds Management Director Niall McCarthy said that the unique funding mechanism offers building owners long-term capital of up to 10 years.
“This provides additional funding on top of existing arrangements held with banks whilst allowing the matching of the capital cost with the energy savings produced,” Mr McCarthy said.
“Eureka has sufficient capital to fund similar opportunities in the future to enable other building owners to improve the sustainability of their buildings.”
An Environmental Upgrade Agreement is secured and tied to the property rather than an owner. This allows capital to be accessed at a competitive rate and for a longer term, improving the attractiveness of undertaking energy efficiency upgrades.
Loan repayments are made as an agreed environmental upgrade charge which is paid to the local council along with the rates charges for the land, and the council passes the repayments on to the finance providers.
These building upgrades are designed to deliver cost savings such that the upfront cost of the upgrades is offset by lower operating costs meaning that repayments may be cost neutral or have only a small impact on cash flow.
Environmental Upgrade Agreement (EUA) finance of up to a total of $80 million (with up to $30 million from CEFC) is available through National Australia Bank (NAB), the Clean Energy Finance Corporation (CEFC) and Eureka Funds Management for retrofits to improve performance of commercial buildings.
Building owners who have already used EUA finance have reduced their base building energy costs by anywhere between 30 and 50 per cent, depending on the extent of the upgrades and equipment installed.
EUA finance is for improvement projects from $250,000 that reduce energy use, lower carbon emissions and save water. It is available for commercial properties in Sydney and Melbourne, and across many regional centres in NSW.
The EUA financing is provided for eligible projects and approved case-by-case through The Australian Environmental Upgrade Fund (TAEUF), a partnership between CEFC, NAB and Eureka Funds Management. Eureka Funds Management acts as trustee and program manager for the fund.
In New South Wales, EUAS are a growing opportunity for the property sector. The framework for implementation of EUAs has been developed by the NSW Government Office of Environment and Heritage to facilitate their wider adoption across the state.
This includes providing financial and technical support to councils and building owners to assist implementation. This has helped establishment of officers dedicated to working with property owners and the industry to facilitate progress of their EUA projects in Sydney, North Sydney, Parramatta, Newcastle and Lake Macquarie.
The City of Sydney has been supporting EUA agreements for the past two years. EUA projects involving the council have included the installation of a highly-efficient gas-powered trigeneration plant at the Central Park combined residential and commercial development at Broadway.