Loan Strategies for School Energy Improvements, Part I

out once it's available we are excited here today to have both R new America schools program and the loan programs office both two different teams within the US Department of enery do a co- webinar really to highlight the opportunity to utilize lpo program uh funds so Mariah if you flip to the next side I'm going to take us through some introductions and some intro slides on the renew America schools program and then I we'll pass it over to some colleagues from The Loan program office so if we go to the next slide so just high level for you all uh there are two different teams here within the department of energy uh I am under the state and Community energy program which houses the renew America schools program this program funds uh grant opportunities for Energy Efficiency and renewable upgrades at K12 public schools and the other colleagues with me on the call today Hans and Elizabeth are with the loan programs office we will probably call that lpo for short so my apologies for the acronyms we do our best today uh to not use too many acronyms within doe U but this is a finance uh Innovation clean energy and advanced transportation and tribal energy projects so we're excited for them to share a little bit more there's lots of nuances to it so hopefully this is just a starting point for you all and we can continue to engage with folks let's go to the next slide please uh so I'm Andrea Soka again I'm on the state and Community energy programs which we refer to as scap and specifically with in m and I'm on the schools of nonprofits team that runs the renew America schools program I will let Hans and Elizabeth introduce themselves everybody I'm Hans reamer and I'm a contractor with the loan programs office uh based out of Washington DC area and I lead our state and local engagement team and I work with States across the country there are several of us in the team we're working with states to help understand how to unlock lpos financing and how to bring it to Bear to support state goals for for clean energy so really grateful for this opportunity we think we've got some exciting possibilities we're eager to share over to you Elizabeth H I'm Elizabeth Bellis wolf also a contractor with the Outreach and business development team at the loan programs office At Doe uh I coordinate our state supportive transaction work so when hans's efforts with states have borne fruit and there's an application ready to come into our office I help shepher that and guide our applicants and my colleagues in uh bringing that to fruition so I'm excited to talk to you all today about the program and some of the relevant terms thanks thank you both so we wanted to start out with talking about the challenge is at K12 schools um and so while at the renew America schools program you know that's largely a grant program we are trying to provide technical assistance and opportunities to access other financing and why we are doing this webinar we think there's a really great opportunity here for collaboration with lpo so hopefully a lot of this doesn't come as a surprise to you all but you know with over 100,000 Public Schools across the country we continue to be in a major need for both maintenance and capital funding um and some of these you know statistics are a few years old and so this number just continues to grow and with some of the uh bipartisan infrastructure law and I'll explain what that is on the upcoming slide as well as the inflation reduction act there are some really great opportunities that we think can help solve some of these maintenance and capital fundings while also helping you hopefully reduce your overall operational costs making things more energy efficient so if we go to the next slide wanted to just highlight some of the statistics that are known out there in terms of energy usage at schools um you know so primarily based on the GAO report it has been found that really HVAC uh is needed in almost a third of the public schools across the country and when we look at the education sector space heating accounts for the largest share of the muus uh consumption at 42% followed by cooling lighting and Etc so you can see some of those statistics there which again probably doesn't come at a surprise to you all so we're really looking at creative ways both for you all to consider maintenance um and capital needs while also reducing those overall energy uh expenditures that you have right now hopefully putting additional money back into your operating costs if we go to the next slide wanted to just give an overview we will talk or you might hear Bill reference and so I wanted to just explain quickly what that is if were not familiar so back in November of 2021 Congress passed the bipartisan infrastructure law we typically refer to it as Bill uh that provided doe $62 billion across many different programs within the agency one of which is the renew America schools program but you can see here it really covers a wide expanse from upgrading grid infrastructure to some of our smaller programs in different teams if we go to the next slide about nine months later another major legislation passed in August of 2022 uh and President Biden signed the inflation reduction act which we often refer to as Ira um and this also is a very historic moment really across both of these in combination one of the things that's interesting about this is the tax credits that now became available to tax exempt entities such as public schools we do plan to host a separate webinar specific to tax credit uh often referred to as elected pay or direct pay uh so stay tuned for that make sure you've signed up on the renew America schools program list serve so that you will be notified when that webinar comes up later in the spring um but that really I think can play into how you think about the potential opportunity to use some of this loan program uh funding that's again it's a loan that's available as you think about ways to leverage the tax credits that are available through Ira we go to the next slide so when you think about Bill and Ira again these two massive legislations uh kind of three different buckets that we think about them in it could be in a competitive Grant format again such as the renew America schools grant program or many of you are probably familiar with the EPA clean School Bus program uh those are all very highly competitive and a a very strategic and streamlined application process then there are things like what I just mentioned with the IRS and treasury for or tax pay uh tax credits either that elective pay so they're not competitive but you have to submit you know really when you're completed with the project and those a certain time what we're going to talk about today is different than those two which you probably uh are a little bit more familiar about we're going to talk about the third bucket which is loans and that's my colleagues F and Elizabeth will talk about the doe Loan program office and what their opportunity is to help you think through funding strategies as you think through the projects you need to implement so if we go to the next slide so we see a number of different values in terms of working with lpo and we really see ourselves as a liaison to help bring you know a lot of all of our key stakeholders in the renew America schools program our school districts and other key stakeholders that are hopefully on the call with us today or listening to the recording we really want to bring you all to lpo to have these conversations and think about opportunities that might come about the benefit of the Loan program is it is not a competitive process thus they can have more streamline conversations with you all that is different when it comes to our competitive Grant uh where things need to be you know done in a more public Q&A process um but we can have one-on-one conversations if there is an interest in pursuing any of the Loan program so they have access to patent uh Capital flexible financing and really just committed to doe Partnerships so if we go to the next slide I'm going to pass it over to Hans and Elizabeth to take us through a series of slides that hopefully explains a little bit more about their program what they can fund and how this might work great I'll just want to thank skep and then I'll pass it to Elizabeth we're really grateful for the leadership in the State Community energy programs department and team and you're out in the communities across the country you're working with school districts in a once in a generation opportunity here and to to bring this together with financing I think has tremendous potential so thank you Andrea and appreciate it and uh to Elizabeth thanks Hans let's go right into our slide two all right so as Andrea mentioned the loan programs office at the US Department of energy administers multiple loan authorities um you've heard of our tribal program perhaps uh and each of these has a different statutory framework requirements and considerations we're very well known for early support of innovative projects in electric vehicle manufacturing and utility scale solar as just a couple of examples today though we're here to tell you more about our Loan program for projects supported by state energy financing institutions or seis because this program may be the most relevant to many of the school projects that you are considering unlike many of the lpo projects you might be most familiar with projects that come to us through this program do not need to demonstrate Innovation they may use fully commercialized Energy Technologies that have already been in continuous operation at scale in the US for more than five years instead of demonstrating Innovation these projects qualify for lpo support by demonstrating meaningful support from one or more State energy financing institutions let's move to slide three thank you so while Innovation is not required like all lpo projects sey supported projects do need to demonstrate a few key facts first they have to reduce greenhouse gas emissions second there needs to be a reasonable Prospect of repayment this is a loan and not a grant and third they need to employ a technology from a list of eligible C categories that include categories like efficient use technology renewable generation and storage just to name a few next slide there are at least two typical routes by which sey supported projects seek lpo support the first and probably the most common is where a private sector project developer applies to lpo for a project that anticipates receiving significant funding from a state agency an example might be a private sector School Bus uh operator or solar developer or even an Energy Services Company in these inst es the state involvement and risk is quite limited the burden is on the private sector applicant to provide information to lpo pay for transaction expenses and repay the loan the state energy financing institution the sephi provides support but doesn't have to Source or provide the large amount of equity that's required for a project to be eligible for lpo support sometimes however projects are just too small for the developer to apply directly to lpo for support even though they're receiving meaningful sephy support and we'll talk a little bit later about uh sort of project size guidelines but in these instances asafi might apply directly to the loan programs office to support a clearly delineated portfolio of underlying projects across a number of sites or schools that together constitute a unified project that lpo can support to take this route the seie will have to be comfortable with the idea of being a party to a contract with lpo making representations and Covenants about the project accepting choice of Law and venue provisions and making a commitment to repay a loan that has been guaranteed by the federal government with the seie borrower that is not for profit which is typically the case for most public institutions additional Federal requirements regarding domestic content generally apply from the build America by American uh law and come back to Federal requirements like Baba later in the presentation but it is an important consideration in thinking through the approaches to lpo supporting a school's project in addition ASI will need significant funds to cover the portion of project costs that cannot be Finance by lpo so I'll turn it over now to my colleague Hans who will walk you through some simple infographics to illustrate the difference in the capital stack between these two common approaches to sephi supported projects Hans great next slide please okay so I'm going to we're going to show two slides uh that illustrate those two options that Elizabeth just walked through so what we're trying to do here is give a representation of the lpo portion of the project the lpo finance portion as well as the equity or subordinated Capital portion and then the sephi meaningful support um so this visualization is where a let's say it's an energy as a service company that is going to do improvements and an energy project across 100 Schools uh that company is the borrower from lpo and that company is presumably bringing to the table the sponsor equity and the private Equity mezzanine debt although that could be there could be different flavors of that there could be philanthropic debt uh equity in there to improve the finances of the project for for schools uh but the thing we kind of wanted to call your attention to is there's a slice there there's a layer there that is the sephi investment so we'll we'll talk a little bit more about what seis might be in these situations but this is just a representation to show lpo will finance a portion of the project the sephi has to finance a portion of the project and the applicant comes to the table with a significant amount of subordinated capital and Equity next next slide so again as mentioned that that form mentioned slide was really when a project is larger because our loans you you really don't want to borrow less than 100 million doll from us due to the costs that we'll we'll talk about it a little bit later so how would you think about it if you had the possibility of doing $1 million projects you know $2 million projects across a large port folio of schools uh again you can have a company that is the borrower from us or you could have an special purpose vehicle that is organized by the state by a partner to the state and and that vehicle could be the borrower so in that case uh you still have the same kind of limitation on how much of the project lpo is going to finance and then you still have the requirement for a sephy to make a meaningful investment in the project and you still have the equity requirement um but you might think about how you Source some of those a little bit differently when it is essentially a public sponsored project um so again this the purpose here is when you have lots of small projects that are alike uh you can bring you could potentially organize a special purpose vehicle and come to us next slide thanks Hans let's now talk a little bit more in detail about the nature of the support that lpo can provide for a project lpo can work together with an institution called the Federal Financing bank at the US Treasury to provide a guaranteed loan directly to your project and just a note we handle the Federal Financing Bank interface for you you don't have to make any kind of separate application it's all one process or if you have an eligible third- party lender that you'd like to work with lpo might guarantee that lender's loan to the project in either case though the lpo guaranteed loan must be senior it cannot be subordinated to any other financing in the structure and lpo also generally requires a senior security interest in the relevant project collateral whether that is the hard assets or contractual revenues the interest rate or guarantee fee for a SEI supported project can depend on a number of factors including how long the loan is to be outstanding the treasury rate on the date of each draw how risky the project is the extent to which the project aligns with policy objectives and the availability of any appropriated funds that might be used to subsidize any expected losses for any loan from the Federal Financing Bank the starting building block for thinking about the ultimate cost to the borrower is whatever the applicable treasury rate is for the tenor or the term of the draw that's being requested so for example if you're asking for 10-year loan you would look at the 10year treasury rate then there's a 38 percentage Point liquidity charge um and then a risk-based charge is negotiated with the applicant and will be set at commitment based on the rating the risk rating for the project on the date of Any Given draw on an lpo guaranteed loan from the Federal Financing Bank the interest rate for that draw is set based on the relevant treasury rate on that date plus the agreed spread applicants are responsible for paying due diligence costs including those incurred by Doe for our advisers and those can frequently run multiple millions of dollars in total and they begin to be incurred and required to be paid before the applicant receives a commitment of lpo support if a commitment is received applicants are required to pay a commitment fee that begins at 6% of the total amount committed and a reduced percentage for very large loans it's sort of a declining balance declining scale there are also annual maintenance fees of up to $500,000 annually for particularly complex or labor intensive projects or loan agreements these can be much lower for simpler uh projects and Loan agreements this slide covers some of the key legal limitations on the terms of an lpo supported loan but rather than reading you all of the information on this slide um and note to think about these figures as you're reading them it's it's rare that actual lpo supported loans have terms that go to our absolute maximum or minimum legal legally permissible amounts um what's realistic for a particular project will depend on the facts and the circumstances of that project and maybe more conservative than the legal limitations here for example while lpo can support up to 80% of the costs of your project of the eligible costs of your project it's frequent that it is actually representing only 50 to 70% of the capital stack on some projects that it supports similarly while lpo can provide support for up to 30 years for projects that are financing very long lived equipment it's not uncommon for supported load tenders to be shorter than that so so that was a lot uh but Hans will review and deep and dive in a little bit deeper on some of the topics we covered on this slide later in the presentation I'll turn it back to him now to tell you more about considerations specific to school projects all right I think we're about a mile deep already and uh it's a lot of information here so we know that this slide webinar will be available online and uh there are a lot of resources on our website that provide the kinds of information about the terms for example as Elizabeth just walked through um and I'll just say before we proceed further like when you're interested we work with you so don't feel like you have to fully process all of this now or our goal is to hopefully get you interested um so I'm I'm just going to walk through some of the considerations that come up as you were thinking about how lpo could be a resource I mean just very fundamentally it's potentially an alternative source of of debt for your projects um you could figure out a strategy to uh leverage the tax credits and LPL financing uh could be very very very uh interesting the possibilities here so I'm not going to provide we're not going to provide a kind of howto necessarily but we're going to just talk about some of the issues that might you'll you'll encounter and frankly we're looking for creative thinking there to help figure out how to deploy uh this capital and and to make the most of this opportunity so we're it's it's a moment for people who can be creative about finance and and apply Finance to our goals so uh we're here to to be a resource for you as you as you proceed um so some of the issues that are relevant here first uh just to State the obvious for the schools that might participate in the program there can be a simple benefit of a reduction in their energy cost uh you know that's the incentive for schools to sign up you could certainly structure a program so that schools have a have a reduced energy cost there can be additional benefits as well but you know that's kind of a starting point here um second we we talked a little bit about the framework of the loan sizes now this applies really in both in both instances of how lpo financing could be utilized but the core idea is organizing a pipeline of of projects and they there're projects that are similar enough that they can ultimately be rated as a portfolio um so um we generally as mentioned we we we find that due to some of the costs of the application process and some of the requirements of the financing that it really doesn't make much sense to seek less than $100 million loan and there is no upper limit here so um I mean there's always practical considerations but uh there there isn't a statutory uh limit to how large a loan could be so but we we would certainly suggest that $100 million loan size is the is the starting point so with our limit on how much of a project we can Finance you know you're talking about a portfolio that might be 125 million 13 30 million 140 million um and the portfolio projects you wouldn't necessarily need to have 200 schools committed um but you have to have enough that we can really do adequate diligence on that as Elizabeth mentioned our financing we have to find that there is a reasonable Prospect of repayment and that's based on an extensive diligence process so you would come forward with a portfolio whether it's the company that is the applicant or it's the special purpose vehicle that's the applicant in either case there's there's a sufficiency in the in the portfolio to proceed through the requirements of due diligence um you mentioned a little bit about the distinction uh or or the kind Equity requirement so lpo is looking for partners you know we we we want to fund projects where there is sufficient first loss Capital so that we're not the only ones um you know stepping up when there's a default and so we we look to the applicant to come to the table with Equity resing debt other forms of subordinated capital that is available in the event of default um now how do you meet that requirement again this is where some creativity can can come into play uh there could be a role for philanthropic uh Capital um certainly School school districts or states have appropriative Appropriations for energy expenditures for uh equipment upgrades and the question will be how can some of those funds essentially be available to meet the equity requirement um you know you could have private investment there's there's lots and lots of different ways to think about it uh just please kind of see the framework here of of subordinated Capital there's some sponsor Equity required and then additional subordinated Capital required for protection against default um the tax credits are of course a major element and the tax credits are the probably the long largest single source of financing for clean energy projects that are out there so you can think through how How could an individual School benefit from the clean energy tax credits and then use our financing to kind of help smooth that path um so that certainly is is a big opportunity here um kind of mentioned already core question who's the borrower and you just think think that through there's there's multiple ways you could build a program uh and we're here to give you some feedback on on what those could be but um you know is it a state entity itself is it a special purpose vehicle is it alternatively a private sector entity that is already providing services to the schools all of those are are possibilities next slide please okay um the question has been asked about uh meaningful support what does that mean and as Elizabeth described we are allowed to wave the Innovative technology requirement when there is a state energy financing institution that is making a meaningful investment in the project um we review the proposed investment by the sephi and we assess whether we indeed find that it is Meaningful uh there is a Blog and a webinar on our website where we have more information about that uh there's a lot of nuance in that discussion so um you know we can we'll we talk with you as you proceed but um a headline Point here is there could be lots of different entities in the state that might be the sephi uh it could be a construction Authority potentially it could be the energy Administration it could be a green Bank could even be an economic development Authority perhaps there's a jobs focused strategy in your portfolio that would be interesting to an economic development Authority or or Commerce Department there's there's lots of possibilities here so just kind of think through how how would a project be financed and what state en might be willing to support it I think we have talked a little bit about the distinction between meaningful support and the equity requirements so hopefully that was that was clear from the at least the visualizations if just not generally the discussion but um generally speaking you know the equity requirement is is much more than the sephy investment requirement the sephi investment is essentially a drisking investment um it's not the core Equity requirement so uh I think the visualization kind of expressed the relative shares there but we're here to give you feed back on that um okay so a a point here about uh we we cannot guarantee tax exempt bonds uh that something we're not able to do is other it's essentially restricted Federal support um it's worth noting that other sources that when you use tax exempt bonds there are some implications for the tax credits as I'm sure you are aware of and you're you're working with your tax advisors on so the question is you know how do you balance the different sources of of debt or financing to maximize the total resources that you have available and certainly our our Theory here might be that lpo is a strong possibility for you to maximize the total resources that you have available um a a a overarching point um and uh then I'll I'll pause and uh we have one more slide in the school considerations but I want to make sure if anything for Elizabeth to jump in on but um regarding our finding of ability to repay which is kind of it's the core methodology or it's it's it's what we do here so when your project is less risky then there's a stronger ability to repay and when there's a stronger ability to repay that is going to mean that it has lower cost capital potentially it might have a simpler application process which might cost you less money as an applicant um it could take a lot less time so as you're thinking about various approaches to the extent that you can find a way for the state or for a highly a collection or a you know highly rated agency to guarantee repayment uh that will be a significant Advantage for your project it it isn't you know we can ALS do project finance that doesn't have that benefit but it's just that if you can gain access to that it's going to cost you less and take you less time which are are things that uh are important so Elizabeth would you uh would you please join us here sure no I agree with all of that um I think then maybe I can tie together a few thoughts and some of the questions that are coming to chat with what you said um someone asked is this one entity are multiple and I think we usually have one entity that is the borrower but they might be using backtack agreements with a number of underlying entities uh as a way to aggregate a project so the answer is sort of it could be either depending on um how large the project sizes are somebody also asked about underwriting to attendance base revenues as opposed to Energy savings we have the general requirement that we find a prospect of repayment we don't have a specific um regulation on sort of which types of revenues we look to in making that determination so we can see projects that have guarantees from the state and we're looking just to the state's credit rating and in that instance frankly we don't have to get into as much of the details right of the underlying schools Revenue if we have a credit worthy State that's a very easy structure moves quickly probably has lower cost we also see sitations where that's not possible the state isn't ready to stand behind all the school districts maybe there's a very wide variety of credit ratings of the various school districts in the state is only willing to stand behind some of them um in those sorts of instances that's when we're going to dig into the sources of revenue that the particular off-taker has essentially to to look to to support debt service payments on the loan um and that's where you know if you've got a third party developer that you're working with and you are just agreeing we're going to pay a certain portion of our Energy savings that's a way in which we might be looking to Energy savings but that's by no means the only way we would think about underwriting for these projects um it's one of our great blessings and arguably our curses that we are not very formulaic we have a lot of flexibility um so it's harder for us to just show you a slide and say this is how we do it but the plus side of that is I think we're able to analyze a lot of these different kinds of structures that you're asking about and really encourage you to bring those to us so we can dive in with them uh with you on them H I don't know if that's where you were going with that y awesome thank you um so some additional additional commentary here so draws from an lpo loan can be staged over several years um so you will request an amount and then ultimately as we'll get to you'll you'll pay a commitment fee for the amount that you want to borrow but you don't have to draw it all at once so you could draw it down over several years uh I think Elizabeth already mentioned that the rate that you would pay would be based on the applicable treasury rate for that ten or uh 10e treasury 10e term um it's worth noting the the potential here because if you have a really effective project execution then some of the tax credit resources could potentially be available for Equity needs as you proceed through the project timeline so you know those are some of the factors to to be aware of okay next slide all right um Elizabeth maybe I'll pass it to you sure so this is a kind of a going further on that riff I had about different ways we underwrite and think about uh potential project structures folks often assume that we can only finance against hard collateral as in you know a pledge an equipment pledge of a lean against the solar or uh you know the haac system or the buses or the EV Chargers or whatever it is that's being financed that is certainly something we're comfortable with we we like that kind of a structure but we also understand that in the context of schools you're often working with thirdparty providers uh and what they may have is essentially a right to receive revenues from you with respect to what has been installed and the the services that they're providing and they can actually pledge the revenues on those contracts as they're collateral to support their repayment of a loan if you choose to go with the structure where rather than applying directly as a school or as a state you have a private sector entity that's applying with respect to a number of projects that you might be providing more limited support to um this we are still Limited in what we Finance I think I did see a question about sort of the costs that we can support we do have specific regulations listing out uh kind of a list of never allowed and generally allowed and then then kind of a catchall for dealing with things that we might not have thought about um some of the obvious never allowed costs are uh bribes uh success fees uh operating expenses so ongoing uh staff after the project is sort of set up and commissioned the ongoing onm is not an allowable cost that you can draw for um but The Upfront Capital cost of most energy related systems right is really kind of our our orbit that we're looking at we do see some applicants who are using Vehicles as energy related assets so we can talk about that if your school district is doing that um even though that would traditionally be more on the transportation side of of things we're seeing more uh crossover in projects than we used to um and then uh sort of as as Hans moed there's there's Revenue generation options with some of these projects right where you're um allowing to someone to optimize when you're charging or discharging your assets and as a result they're paying you a share of the revenue that can be generated in some locations as a result of being able to provide that flexibility we're seeing that that can be very significant um for assets that you have sort of set schedules that don't necessarily correspond to the Peaks that are um challenging to manage in your utility Zone it can be a real opportunity to offset costs so that's something we can help you explore as well um if you're talking to us about your project great next slide please okay so the last couple slides are basically information that you'll find on our website so I just wanted to kind of draw your attention to them so that you know how to find the additional resources that are available um so I did put a link in the chat earlier and of course Andrea is going to send out a follow-up communication to everyone who registered um but on our website uh you'll find one of the pages as you see here which has our program guidance so that's kind of a an overall manual uh for working with lpo uh it's very helpful it's quite well written um and then you'll see application instructions so we have as you'll we'll walk through a little bit you know a multi-stage application process so you can look here to see what do you submit for a part one application for a part two application so you got a better sense of what the requirements are to be an applicant next slide all right um so we've we've talked a little bit about fees and costs um but this is definitely one of the hurdles for this project strategy um because the application costs that an applicant incurs have to be paid in real time you know you have have to pay them upfront essentially the good news is uh some or lot a lot of those expenses you can reimburse yourself essentially from your loan proceeds at your first draw so you don't necessarily have to you know incur that expense all forever but uh but you do have to have those funds up front so what does that cost well there are several different sources of cost there's no fee but there's several different sources of cost one of them is that we when when an application gets really far into the process we hire independent advisors to rate the project and do various aspects of the diligence and that ensures that the project knows that there's an independent advisor that and the taxpayer knows that there's an independent advisor so those costs will typically run somewhere $1 to $3 million but as mentioned if there was a rating a you know a highly rated agcy that was guaranteeing the project there might be on the lower end of that uh cost range so uh it's not you know you can do this in different ways but um in an event there is also a commitment fee so the total amount that you are going to borrow uh at conditional commitment you pay 6% up to the first two billion um and then a lot of applicants will hire their own advisory service firm to help them move through the process now in these instances it's possible that a governmental borrower would have essentially in-house capacity to provide that I we don't know so we're we're we're looking to potential applicants to kind of help think that through but uh in any event those are some of the sources of expenditure in the process next slide so we've we've provided some reference to the interest rate spread uh you know the core rate is the applicable treasury plus 38 and then an additional spread so the riskier the project the higher the potential spread um several things to note here and first of all there's a Blog that's referenced uh that on our website that has a little bit more detail about this but um you can see this there's a chart that we is published on the a website so you can kind of get a sense if you can get a sense of where your project would rate you can kind of get a sense of what your what Your spread might be over a treasury plus 38 um we also do have limited funds that are credit subsidy funds so projects that meet policy objectives that are you know really strong uh they can request a reduction in the in the uh essentially the risk-based charge so that is something that we can consider uh of course it's optimal to figure out a strategy that reduces the risk of the project essentially and allows you to be on the the lowcost end of that Spectrum um great next slide all right um I think this might be the last one so um we've mentioned that there is a federal support restriction uh which means that a project cannot benefit from other federally appropriated funds uh you know in the Project's finances so this can be a little tricky you know you have to build a project Financial structure that is insulated for example from uh Department of Education funding you know you have to really show how it's free and clear from that just as an example um tax credits however are allowed so again that's the major source of of opportunity here is to utilize tax credits so we'll we work with you carefully on those issues um all projects must uh must comply with Davis bacon act uh with NEPA uh if you're doing ground mounted projects for example uh you know you have to be could be a little bit of a longer timeline there um projects must provide Community benefit plans uh the cargo preference act applies and then for nonprofit and government Borrowers uh as Elizabeth mentioned build America bu America Provisions do apply so you know we're we'll work with you on on how to manage that um and then lastly just to reiterate you know bigger is better here um it's it's a lot of effort it's a lot of work and you probably don't want to do it for for 80 million um okay uh Elizabeth would you like to expand on any points on this slide just I might for those who might not be familiar just a quick hits Davis bacon says you've got to pay the prevailing wage for the applicable County for the applicable uh work classification if you've ever worked on another federally funded project you might be familiar but if if not that's um that's sort of high Lev Davis bacon NEPA is the Environmental reviews process um there's different levels of NEPA involvement if you are just building something on existing facilities existing buildings and um parking lots that's likely to be a less intensive process if you're building on completely undisturbed ground that you're clearing in order to build something that's probably going to be a more involved process um Community benefits plans probably a pretty slam dunk kind of question for schools uh but that's where we're getting at our our justice 40 our disadvantaged communities um understanding if we're making sure we're being inclusive in uh hiring and Staffing these kinds of projects those kinds of considerations cargo preference has to do with how you bring the equipment into the country if it's being imported um so if you're procuring through doing a large procurement um sort of starting understanding where that's coming from it will be helpful um I guess the other one I would mention on federal support restriction is it's very facts and circumstances driven um sometimes we see uh applicants that are taking advantage of generally available Federal benefits uh like mortgage insurance uh that are not sort of awards or grants um and in some circumstances those might be excluded from um sort of the the problematic set so just really encourage you if you see that and you're concerned to come to us with the facts and we can help get you some feedback on that rather than assuming that you're you're out of the park because of something um without talking to us about it I do see one question in the chat about the applicant H that I could try to address unless you want to wait till so um there's a representative from an Esco who's asking you know who who should who applies you know do we apply on behalf of the school or the clients or um do we need them to fill it out directly and I think the answer to this depends on who is putting up the capital to to um build a project in many cases there are develop sort of energy developers that do energy as a service and they really are financing the project they're they're doing the financing for the capital expenditures and they're going to be the direct applicant if the Esco is only going to be providing the service of building on behalf of a school and the school's really the one who has to raise the money and will own the installed Assets in those kinds of situations it's likely that we will want the school to be more involved in the application process there's a question in the chat I will also uh address about um could a project if a project uses a renew America School Grant uh does that mean it can't Ed uh LPL financing um I mean the strict answer is yes that is a example of a Federal grant that would disqualify a project um you know I I think the the way to think about it is is there one project that has the Grant and there's a different project that does not have the grant um or is the grant for some kind of work that is expended and completed uh before the lpo finance project would begin so you know there's there's different ways to think about how to design a project so that it is uh you know kind of free and clear of other Federal support I see another question about funding programs for smaller projects I think that that's exactly why we see some of the seis coming in and aggregating these smaller projects right because they they aren't going to be able to access us directly um but as a as kind of a portfolio then they're able to access us um in terms of smaller projects that don't have that there I think a lot of the the state Green Banks are very very interested in those kinds of projects and maybe have a smaller ticket size than us we also have someone on staff who is uh our financing ecosystem expert so when we are when we are sort of faced with projects that we can't Aggregate and are too small sometimes she's able to uh make suggestions or introductions uh to the ecosystem to help uh kind of continue that project along its way even if we're not able to support it at lpo all right next slide okay so uh we mentioned you know the multiple stages of the process uh it takes about a year end to end for a project that is um you know kind of clearly defined and and uh proceeding methodically um it could be faster if there is a guarantee uh that can reduce the need for for complex diligence uh it could be longer if there is not uh if if it is truly a complex project Finance so it really does just depend on the nature of the project and and how it's structured next slide okay um so the last question you know slide relates to a a good question in the chat about is there a list of seis um there is not there is a list on our website of exemplary seis these are seis that we have indeed you know reviewed and said yep that looks like a sephi um the the reality is that most States would have several entities that could be a sey and so for us we look to the applicant or potentially The Entity the sephy itself to come to us and say hey we we're thinking about supporting a project can we use sephi support essentially to to allow that project to apply so we recommend that you think about using our website and the and the list of seies that are published there to help kind of help navigate what entities in the state might potentially be seies we can certainly give you some feedback on that if you come to us and ask us some questions we can certainly respond to that but unfortunately it's not so easy as uh you know here is a list of the entities for you to go talk to um you know you have to do a little bit of kind of researching strategizing about what the seies might be and that could be if you're a public sector entity too I mean if you're a school district it it's possible that a school construction entity could be a sey um it's possible that the state energy office or the green Bank could be the sephi uh and there's different interests that they might have in in these projects so um you know there's just so many possibilities that we really need we need for the uh potential applicants to kind of come up with us strategy and then come to us one thing I would add Hans is somebody asked you know is legislation always required you can probably tell this from the list of Exemplar but a number of them didn't pass any new legislation before they were added to the list right I think most States actually do have agencies that were set up for the purpose of financing the types of energy projects that we support that doesn't mean that all all potential um agencies will meet our definition but um I think it's actually a minority if we were to count that actually were new newly created and often that was not because they were being created to be a sey but because they were already in the process of creating a new green bank or something like that and so there was legislation associated with that um let's see and I see a number of questions about kind of examples of schools that are doing this and Publishing information so we do publish transaction profiles when we close deals so as if and as we move these through you will see them we don't have any up yet we are having active conversations we have an applicant in the pipeline or two uh so we hope that we'll have something to share with you um that will be exemplary but not yet so uh work with us and help us change that just gonna add that AI is is really a state or or you know public agency or quasi public agency uh it's not a local entity and and we look for the for the investment State dollars not local dollars now it is likely that local dollars will be very important to these projects they can play other you know provide other sources of capital in the capital stack but that one specific qualifying investment from a sephi you know is generally going to need to be State dollars through a sephi so again we're we're here to give you feedback on what that might be okay uh next slide all right uh I'll last last comment here uh one of the nice things about lpo is that we are not like a grantmaking agency where we can't help you put in your best application uh we we will help you put in your best loan request because we need to know all the information about your project and we're going to work with you on you know helping to understand what it is that you want to do and so that we can understand how to determine ability to repay and and all of the many complex issues associated with your project so as we progress with whether it's a state that is interested and we do have interest from States about doing these projects in the school sector um or if it's a company that is the applicant in either event we would convene regular calls you know we we talk to you to work through all the issues that arise over time whether in the pre-application stage or all the way through commitment Elizabeth that's a great point it's a very iterative process um and a very different than what you may have experienced with a lot of other Federal funding uh approaches um I guess what I did see one more question that we had an answered on m&v um but that's the kind of thing that I would encourage you I think to follow up with us so we can dive in and give you a little bit more information specific to what you're considering that was excellent Hans and Elizabeth I was trying to keep track of the questions in the chat you guys are doing a great job answering as we went I had the m&v so I'm glad you just answered that I do have one other one in here that I don't think we answered asking would the CBO or superintendent of the school district be able to use the loan for a full master plan energy related and non-energy related or is this an application per project that meets all requirements I think most of the costs are going to have to be energy related um if you have a comprehensive plan and it's all energy related though that might be broader than you are thinking of um so maybe if we want if you wanted to provide us a copy of the plan and then we could give you more more specific feedback that was great any final thoughts otherwise I think you guys did an excellent job explaining I think I just want to emphasize what hans's been saying throughout and certainly Elizabeth too like this is complicated and we're here to work with you or really LP I should say say and I will direct you to them uh we really want people to take advantage you know we want to have that those couple case studies that we can share we don't have that to date but would love that and this has been a a great partnership um just internally within doe trying to think of how can we maximize lpo for different entities than what traditionally have accessed this funding in the past than you yeah just as a reminder in the chat I put a couple times this has been recorded and the slides will be available we knew this would be a lot to take in hopefully you can go back and reference different parts of it as you have questions it'll be posted through our YouTube channel so um please be on the lookout we'll send a follow-up email when that is all available on our website and then just a couple other closing highlights as we wrap up here in the last couple minutes uh other really big announcement for us this morning for the renew America schools program our next round of applications actually opened this morning um so please visit herox ./ renew America or sorry renew schools prize you can also just visit our renew americ schools web page and all of the links will be there we do have an a webinar coming up tomorrow this will be recorded um and we have a follow-up one next Tuesday and office hours in April and May applications will be due June 13th um so no is long anticipated and people have been anxiously awaiting that the applications are officially open uh so please sign up for those webinars so you can learn a little bit more I also mention at the top of the hour we are planning an elective pay webinar in April and May so stay tuned on our website we'll post the date as we confirm that here shortly and then we also had a webinar last week on March 12th all about uh four different tools and resources so please check out the recording and slides are or sorry the recording excuse me is available we actually demoed the tools so there's no slides associated with it uh and then you're also welcome to watch our webinar back from November called power of Partnerships and hopefully that's helpful so a lot of great information all on our website we try to keep people up to dat please don't forget to sign up for updates that's a really great way to receive our email blast with this information um I'm also GNA plug in Hans and Elizabeth's and a general sephy email address for anyone that wants to reach out to them directly in the chat you're welcome to you're also always welcome to email us at schools doe.gov and we will certainly get you connected with the right people at lpo with that I think we were right at an hour that was perfect hopefully answered a lot of questions got some wheels turning lots to think about here looking forward to speaking with you all please do not hesitate to reach out excellent thank you all have a wonderful day