Creating Business Plan for establishing an ESCO Knowledge for the Promotion & Establishment of an ESCO Industry in Jamaica Agreement No. C0037-12 Based.

Creating Business Plan for establishing an ESCOKnowledge for the Promotion & Establishment of an ESCO

Industry in JamaicaAgreement No. C0037-12

Based on TECHNICAL ASSISTANCE IN THE PREPARATION OF ESCO BUSINESS PLANS that Fundación Chile contracted from ECONOLER, as part of the program “Promotion of Market Opportunities for

Clean Energies”, co-financed by IDB-MIF (ATN/ME-9862 CH)

Ana María Ruz – January 23rd, 2013

Contents

Introduction Contents of a Business Plan

BACKGROUND THE ESCO’s VISION THE ESCO’s MISSION TARGET MARKET (DEMAND) THE ESCO ENVIRONMENT OFFER (ESCOs Products and Services) OBJECTIVES AND GOALS FINANCIAL ANALYSIS RISK ANALYSIS

Jamaican EE Target Market ESCO Environment

Fundación Chile provided technical assistance to the project’s Chilean ESCOs (3) in the preparation of their own business plans

A guide was created to allow the Chilean ESCOS to define

their business plans. Available.

Summary of that guide was presented on Oct 2012

Now we propose to work below two schemes: Individual work by company or Joint work for developing common aspects of ESCOs business plans

Introduction

Contents of a Business Plan BACKGROUND THE ESCO’s VISION THE ESCO’s MISSION TARGET MARKET THE ESCO ENVIRONMENT OFFER OBJECTIVES AND GOALS MARKETING ORGANIZATION RESOURCES FINANCIAL ANALYSIS RISK ANALYSIS SHAREHOLDERS TIMELINES

Introduction

Contents

Introduction Contents of a Business Plan

BACKGROUND THE ESCO’s VISION THE ESCO’s MISSION TARGET MARKET (DEMAND) THE ESCO ENVIRONMENT OFFER (ESCOs Products and Services) OBJECTIVES AND GOALS FINANCIAL ANALYSIS RISK ANALYSIS

Jamaican EE Target Market ESCO Environment

This section should describe the entrepeneur’s general idea. Relevant elements could be:

• The history of the company• The company’s most important current products in terms of sales• Internal or external events that led to the creation of the ESCO• Definition of the ESCO adopted

From the typical ESCO model and adapt it to the circumstances. The simple definition of an ESCO is: "a unit or company that offers one or more of the following services: 1 –a comprehensive service that is a one-stop shop for the implementation of a full EE project, 2 - a way of sharing a project’s technical risks with a performance contract, and 3 - help a client to obtain investment financing.

• Why the ESCO model is being adopted and why is it an interesting business opportunity?

Background

Contents of a Business Plan - Background

About UsAmeresco, Inc. is a leading independent provider of comprehensive energy efficiency and renewable energy solutions for facilities throughout North America, delivering long-term value through innovative systems, strategies and technologies. Ameresco's solutions range from upgrades to facility's energy infrastructure to the development, construction and operation of renewable energy plants combined with tailored financial solutions. We work with customers on both sides of the meter to reduce operating expenses, upgrade and maintain facilities, stabilize energy costs, improve occupancy comfort levels, increase energy reliability and enhance the environment.

The Company was founded in 2000 by George Sakellaris, a pioneer in the energy service business. To best serve its wide-ranging clientele, Ameresco has regional offices located throughout North America. With dedicated energy and business professionals with years of experience and strong commitment to customer satisfaction and service, Ameresco offers you the resources needed to successfully plan, execute and even finance the energy program that will create real, sustained economic and operating benefits to fulfill your unique requirements.

Contents of a Business Plan - Background

Contents of a Business Plan - Background

This section should describe the entrepeneur’s general idea. Relevant elements could be:

• The history of the company• The company’s most important current products in terms of sales• Internal or external events that led to the creation of the ESCO• Definition of the ESCO adopted

From the typical ESCO model and adapt it to the circumstances. The simple definition of an ESCO is: "a unit or company that offers one or more of the following services: 1 –a comprehensive service that is a one-stop shop for the implementation of a full EE project, 2 - a way of sharing a project’s technical risks with a performance contract, and 3 - help a client to obtain investment financing.

• Why the ESCO model is being adopted and why is it an interesting business opportunity?

Background

Could you write in one to three paragraphs your Company Background?

(10 minutes)…. or share with us…….

This section should describe the ESCO’s aspirations. The vision is a short text (a sentence less than half page). It is a good strategy to present the vision to employees and

customers in a way that generates pride It should also be presented to suppliers and trade associations in

such a way that it creates a brand image For example:

• “The ESCO fights climate change sustainably for the benefit of future generations”

A list of the values of the company can be developed: a series of words that characterize the ideals of the enterprise or the unit. For example: "excellence", "quality", "thorough", "professionalism", "commitment", "innovation", etc.

ESCOs Vision

Contents of a Business Plan – ESCOs Vision

Contents of a Business Plan – ESCOs Vision

This section should describe the ESCO’s aspirations. The vision is a short text (a sentence less than half page). It is a good strategy to present the vision to employees and customers in a

way that generates pride It should also be presented to suppliers and trade associations in such a

way that it creates a brand image For example:

• “The ESCO fights climate change sustainably for the benefit of future generations”

A list of the values of the company can be developed: a series of words that characterize the ideals of the enterprise or the unit. For example: "excellence", "quality", "thorough", "professionalism", "commitment", "innovation", etc.

ESCOs Vision

Could you write in one paragraphs/sentence your Company Vision?(5 minutes)

This section describes in a practical way what the ESCO’s role is. Examples of elements to include are:

• what it sells and to whom• what economic area it belongs to• what its specialty is• what its target market is• who are its suppliers• what are its main activities• what will be its sources of investment financing, etc.

For example:The ESCO’s Mission is to sell energy saving projects to organizations in Jamaica’s public sector, such as hospitals and schools, including measures for saving energy with medium and/or high levels of investment. The ESCO mainly sells engineering services, including: energy efficiency audits, detailed engineering, construction supervision, starting-up, and monitoring the measurement and verification (M&V) of the equipment purchases and works together with a contractor; it takes the technical risk with a "guaranteed savings" model and helps its clients in the search for financing from commercial banks.

ESCOs Mission

Contents of a Business Plan – ESCOs Mission

This section describes in a practical way what the ESCO’s role is. Examples of elements to include are:

• what it sells and to whom• what economic area it belongs to• what its specialty is• what its target market is• who are its suppliers• what are its main activities• what will be its sources of investment financing, etc.

For example:The ESCO’s Mission is to sell energy saving projects to organizations in Jamaica’s public sector, such as hospitals and schools, including measures for saving energy with medium and/or high levels of investment. The ESCO mainly sells engineering services, including: energy efficiency audits, detailed engineering, construction supervision, starting-up, and monitoring the measurement and verification (M&V) of the equipment purchases and works together with a contractor; it takes the technical risk with a "guaranteed savings" model and helps its clients in the search for financing from commercial banks.

ESCOs Mission

Could you write in one paragraph/sentence your Company Mission?(5 minutes) … or share with us……

Succinctly state what economic sector or branch of industry will be the ESCO’s target market

• Qualitative description• Market size• Determination of the sales goal (sector(s), client(s))

Target Market

Case 1: One specific new technology (Heat recovery)

FINANCINGShort Term direct financing from client

or bankMedium Term after building a trust

relation with banks go to loansTotal or partial financing could be offer

Case 1: Target Market & OFFERPRODUCTS Identified technologies from strategic

suppliers (partners)M&V of savingsM&O

CONTRACTSEPCSupport for getting financing leasing or

borrowMedium term Performance Contract –

Guaranty Savings or Direct LoansLong term Share savings or Fast Out

MARKET SIZE3000 Boilers in Santiago Region with 1000

Industrial BoilersMarket Target 100% in 10 yearsUnknown market in Peru, Argentina &

Bolivia

Case 1: One specific new technology (Heat recovery)

Assumptions• Based on products and associated services • Market annual rate penetration of x%• Loan by 80% of the invesment at 5 years

Target Market and goals

Risk Analysis1. Technical risks

• Suppliers must give valid warranties• Equipment must have clear Minimum Performance levels

2. Project risks• Good insurance• Have credit lines “available” during construction, using contracts as backup with financing

institutions

3. Measurement and Verification Risks• Client must understand and accept documented/signed M&V methodology • Number of times than Measurements will be made (M&V) must be defined on

contracts• Base line model and criteria also must be part of contracts

4. Financing risks• Have preaproved/simultaneous financing with financing institution• Take care of financing institution interest rate (could make less interesting/kill

the business)

Case 1: One specific new technology (Heat recovery)

Target Market and Risks

Case 2: EE Chilean market

PRODUCTEE Pre diagnosisEnergy Audits Investment projects studiesProject profitability studiesTechnical Inspection of constructionM&V of savings, M&O

CONTRACTConsulting servicesContracts were supplier takes the risk In the future ESCOs performance

contracts

FINANCINGNow, payment directMedium term - Leasing ESCOsLong term - Private Investment Fund

Case 2: Target Market and Offer

MARKET SIZEBy sectorsGeneral level

Contents

Introduction Contents of a Business Plan

BACKGROUND THE ESCO’s VISION THE ESCO’s MISSION TARGET MARKET (DEMAND) THE ESCO ENVIRONMENT OFFER (ESCOs Products and Services) OBJECTIVES AND GOALS FINANCIAL ANALYSIS RISK ANALYSIS

Jamaican EE Target Market ESCO Environment

Jamaican EE Target Market

Jamaican EE Target Market

Jamaican EE Target Market

Jamaican EE Target Market

Source: JPS annual Report 2011

1% 11MMUSD/year

1% 11MMUSD/year

Jamaican EE Target Market

1% 11MMUSD/year

1% 11MMUSD/year

Jamaican EE Target Market

Source: PCJ annual Report 2010

Business sizeBe aware of real EE market sizeUtilities could be the best and worst partners

ESCOs market needsTechnical trustRegulatory frameworkFinancing optionsSource: IFC Energy Service Company Market Analysis, ECONOLER 2011

Important for ESCOs

Business plans are highly confidential for ESCOs Normally, ESCOs professionals are in the day by day work and

they have no time at all International experience has not always local aplicability,

ecosystems are different in each country Commercial Plans and Management on EE and ER SMEs has

low level of development ESCOs can start with a LIGHT Business Plan ESCOs can develop their own strategies, it is good to help them

improving EE ecosystem

Important for DBJ

For the understanding of the business environment should be reviewed• Macroeconomics• Energy sector• The energy efficiency environment• Financial environment• Tax related issues• Technology environment• Competition

The Esco Environment

Creating Business Plan for establishing an ESCOKnowledge for the Promotion & Establishment of an ESCO

Industry in JamaicaAgreement No. C0037-12

Based on TECHNICAL ASSISTANCE IN THE PREPARATION OF ESCO BUSINESS PLANS that Fundación Chile contracted from ECONOLER, as part of the program “Promotion of Market Opportunities for

Clean Energies”, co-financed by IDB-MIF (ATN/ME-9862 CH)

Thanks for your attention¡¡¡