Environmental Upgrade Agreements

Yesterday morning, Net Balance hosted an event on the subject of Environmental Upgrade Agreements (EUAs), featuring speakers from the Sustainable Melbourne Fund and ClimateWorks.

It’s been a bit of a bleak few months in the energy efficiency space. The repeal of the carbon price removed a price signal that clearly favoured energy efficient investment; the defunding of the Energy Efficiency Opportunities (EEO) program relieved companies of the need to go out and seek opportunities to reduce their energy consumption; and the Victorian Government’s commitment to repeal the Victorian Energy Efficiency Target (VEET) scheme if re-elected has introduced further uncertainty into an area that already has its fair share of doubt.

But while the barriers to energy efficiency have grown, so too has the box of tools we can use to overcome these barriers. EUAs are one such tool. By involving the local council as an intermediary in the financing of energy efficiency projects, building owners can obtain 100% finance over longer-than-usual repayment periods at highly competitive interest rates. What’s more, EUAs enable building owners to levy an Environmental Upgrade Charge to their tenants as an addition to their council rates to help offset the cost of the project. In this situation, EUAs are structured so that the Environmental Upgrade Charge paid by tenants is more than offset by the cost savings in their energy bills. It’s also worth mentioning that EUAs also cover other types of environmental upgrades, such as water and waste management improvements.

The upshot of all this is that EUAs enable building owners to implement environmental projects at no up-front cost, and with positive cash flow, while allowing tenants to improve the efficiency and amenity of their offices while reducing their outgoings. If structured properly, they’re a clear win-win.

Sustainable Melbourne Fund and ClimateWorks have been working on a project to drive EUAs across Australia. The ‘Better Building Finance’ website will be launched within the next month or so, and will provide tools and information to help building owners and tenants to achieve energy efficient results through EUAs.

At Net Balance, we can help companies negotiate the technical and commercial aspects of EUAs. Contact us for more information.

 Charlie Knaggs is a Senior Associate at Net Balance. Charlie is based in Melbourne.