CEFC finance to lift green retrofits for commercial property

13 March 2014

Commercial property owners now have access to significant additional Environmental Upgrade Agreement (EUA) finance through agreement by Clean Energy Finance Corporation (CEFC), National Australia Bank (NAB) and Eureka Funds Management (EFM).

CEFC CEO Oliver Yates said the CEFC had committed up to $30 million in partnership with NAB, for a joint total amount of up to $80 million in finance for EUAs, to help overcome the funding challenges faced by those undertaking commercial property upgrades.

"This CEFC and NAB commitment to this financing structure will support growth of EUA finance in Australia and provide a boost for commercial property owners and managers seeking to reduce their buildings' energy consumption and costs," he said.

The EUA is innovative finance linked to the property rather than the owner and it already has a track record of upgrading 0-star National Australian Built Environment Rating System (NABERS) buildings to perform as 4 and 5-star properties.

Industry research shows that 4 to 6-star equivalent buildings generate an average 10.3 per cent return - notably higher than the 7.8 per cent return of lesser-rated properties.

Mr Yates said that EUAs allowed for longer term finance and the facility for payments to be made through council rate notices, providing flexibility that makes them an attractive finance option for many in the property sector.

EUAs are currently offered by the Cities of Melbourne, Sydney, North Sydney, Parramatta, Newcastle and Lake Macquarie. The provision of EUAs is in planning for Penrith and Wollongong and under consideration in Brisbane and South Australia.

NAB Associate Director, Environmental Finance Solutions, Ashley Robertson said enhancing the energy efficiency of existing buildings through retrofits under this collective funding program, 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. Through the mechanism created, EUAs lower financing costs for building owners and genuinely seek to bring forward investment in energy efficiency, which is a good thing." 

The EUA financing is provided for eligible projects, approved individually on a case-by-case basis, 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. 

Eureka's Executive Director Niall McCarthy said EUAs were ideally suited to projects involving lighting upgrades, solar PV, building management systems and upgrades to air-conditioning systems but could also provide the opportunity enhanced return on larger projects such as onsite power generation. 

"EUA finance allows property owners to use energy savings to pay back project costs, reduce energy bills for tenants and enables councils to support local business and industry seeking to improve sustainability," Mr McCarthy said.

The buildings sector has been identified as providing a range of financially attractive opportunities to reduce greenhouse gas emissions by 2020. However, despite these opportunities and the ongoing operational cost savings retrofitting offers, other than in large offices, to date there has been substantial underinvestment in Australia, with activity largely patchy and fragmented due to the many market and financial barriers. The CEFC is working to address these barriers, so that the property sector and the wider economy can benefit from these increased efficiencies.

The CEFC, NAB and Eureka EUA finance is already demonstrating these benefits in the following projects:

• The CQ hotel at 123 Queen Street, Melbourne halved its energy costs through a $1.3 million energy efficiency upgrade, installing an on-site generator to provide electricity, heating and cooling, occupancy sensors and double glazing. It is targeting 4 stars NABERS, up from 2.5.
• 470 Collins Street in Melbourne undertook a $720,000 EUA upgrade that has cut its energy costs by up to 30 per cent by installing a new cooling system, new building management system and energy efficient lighting.
• The former Ansett building at 501 Swanston St Melbourne is undergoing a $7 million environmental retrofit designed to halve its energy use through an upgrade to the plant room, chillers and boilers, new energy efficient elevators and solar film on windows. Utility cost savings of more than $80,000 a year are expected.
• In Parramatta, tenants and owners of 10 Valentine Avenue are achieving savings of about 70 per cent on lighting bills, following a lighting upgrade that has also improved the quality of office spaces, the building's value and its competitiveness.
• A $2 million upgrade to a Sydney CBD office and commercial retail building is expected to halve its grid electricity use through the installation of new lighting, building metering, improved heating and cooling and an upgrade of elevators and hydraulic services.