Performance contracting - A financial perspective
Performance contracting has proven to be a viable business option for addressing chronic and capital intensive building retrofits and lowering energy and operational costs. Over the years, many organizations in both the public and private sectors have been able to initiate projects that have significantly reduced costs and upgraded aging building systems. Certainly the financial incentives associated with eliminating capital expenditures and financing projects by servicing debt through energy and costs savings, renders the decision to implement these programs an easy one on the surface. This form of creative financing, coupled with contractual guarantees from energy service companies, further enhances the attractiveness of energy efficiency projects. It is critical in today`s business environment that a component of the management team responsible for final decisions on these projects has a basic knowledge of capital financing. With the competition to provide financing for performance contracts increasing, the products being developed to differentiate offerings are growing and thus the building owner is faced with more room for error. It is the purpose of this paper to assist the reader in avoiding these pitfalls by providing a basic exposure to capital financing, examining some of the barriers to maximizing financial strategies in implementing a performance contract, and providing some suggestions on how to avoid these barriers and fully realize immediate and ongoing benefits of performance contracting. The intent here is to provide those interested in performance contracting with some additional questions to ask and areas to consider before taking the plunge.
- OSTI ID:
- 478247
- Report Number(s):
- CONF-961173--
- Country of Publication:
- United States
- Language:
- English
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