Which Financial Arrangement Is Best

There are at least three types of characteristics that can influence which financial arrangement should be used for a particular EMP. These include facility characteristics, project characteristics and financial arrangement characteristics. In this section, quantitative characteristics are bulleted with this symbol: $. The qualitative characteristics are bulleted with this sym bol: © Note that qualitative characteristics are generally "strategic" and are not associated with an exact dollar value.

A few of the Facility Characteristics include: © The long-term plans of facility. For example, is the facility trying to focus on core business objectives and outsourcing other tasks, such as EMPs?

$ The facility's current financial condition. Credit ratings and ability to obtain loans can determine whether certain financial arrangements are feasible.

© The experience and technical capabilities of in-house personnel. Will additional resources (personnel, consultants, technologies, etc.) be needed to successfully implement the project?

$ The facility's ability to obtain rebates from the government, utilities, or other organizations. For example, there are Dept. of Energy subsidies available for DOE facilities.

$ The facility's ability to obtain tax benefits. For example, government facilities can offer tax-exempt interest rates on bonds.

A few of the Project Characteristics include: $ The project's economic benefits. Net Present Value, Internal Rate of Return and Simple Payback.

© The project's complexity and overall risk. For example, a complex project that has never been done before has a different level of risk than a standard lighting retrofit.

© The project's alignment with the facility's long-term objectives. Will this project's equipment be needed for long-term goals?

© The project's cash flow schedule and the variance between cash flows. For example, there may be significant differences in the acceptability of a project based on when revenues are received.

A few of the Financial Arrangement Characteristics include:

$ The economic benefit of a project using a particular financial arrangement. The Net Present Value and Internal Rate of Return can be influenced by the financial arrangement selected.

Energy Management Handbook

© The impact on the corporate capital structure. For example, will additional debt be required to finance the project? Will additional liabilities appear on the firm's balance sheet and impact the image of the company to investors?

© The flexibility of the financial arrangement. For example, can the facility manager alter the contract and payment terms in the event of revenue shortfall or changes in operational hours?

0 0

Post a comment