Funding upgrades through energy savings
Energy saving pay back the finance – with tenants
Maximising your building’s energy efficiency is an investment with financial benefits that building owners rarely enjoy. After all, it’s your tenants who receive the reduced energy bills. Eureka EUF can enable you to finance your environmental upgrades with the money saved on those same energy bills.
As you pay back the finance through fixed, quarterly Council rates over a 7 to 10 year period, the payment is treated as an outgoing. Your tenant’s outgoings decrease or stay at their current level, it is the energy savings that pay back the finance. This means it can be significantly cheaper than traditional debt, or even cash, as you will pay less than the price tag of the works.
Take John for example
He’s a building owner that has just been quoted $2 million for his environmental upgrade. If he recovers just 55% of the total upgrade costs through outgoings he will end up paying a total of just over $1.1 million including his finance costs! Not only is this nearly half the cost of his works but John is able to spread the cost over 10 years! This is an actual upgrade funded by Eureka EUF in Sydney’s CBD.
What about my tenants? The legislation protects tenants so they can only contribute the amount that they will save on their energy bills. So it’s the energy savings, not the tenants, that pay for the upgrade. Your tenant’s outgoings decrease or stay at their current level. Tenants will enjoy all the benefits of working in a building with better lighting, air conditioning and facilities but without a capital outlay from themselves. This product allows building owners to bring forward works that may otherwise not be performed.
In VIC tenant consent is required to include EUF in outgoings. But if the energy to be saved by the tenants equals or exceeds the EUF then it is a win-win.
If you are looking to improve the energy efficiency of your building or have been encouraged to do so by your government, CitySwitch or environmentally conscious tenant then you should look into EUF.
“We were aware that to keep pace with the competition in the market place, we needed to listen to our tenants. We saw that the EUA mechanism made good sense and we were more than happy to work together to negotiate the EUA for this lighting project. We found this form of funding no more complicated than a typical commercial loan and the contributions from the tenant made this very worthwhile financially.” Australian Unity Investments, Grant Nichols, Property Portfolio Manager
Energy saving can pay back the finance – Owner occupier or gross lease tenants
The EUF is repaid via fixed, quarterly Council rates over a 7 to 10 year period. The costs are therefore offset against the energy savings you receive over that period, which essentially make this cash neutral or positive in your cashflow.
Given that you don’t incur the cost of the works upfront, you can do those works without blowing your budget and forecasts. Especially when you are looking to bring forward works or need to do works that had not previously been forecast.
Energy savings may not be sufficient to fully repay the EUF.
Find out more about the benefits of Eureka EUFFind out more
The key benefits
- No mortgage security
- Designed not to impact on current debt and covenants
- Fixed interest rate
- No upfront spend
- Long term finance, up to 10 years
- Energy savings used to fund the repayments, good for budgets and forecasts