How many times have you wanted a new product that would be complimentary to the business but no means to afford it? Such is the conundrum for many projects, where finance is the blockage.
A flagship example of this is when Bombardier lost out on a $2.5 billion contract to supply trains for London’s Thameslink Rail last year because Siemens was able to offer a deal that would see the rail connection paying nothing up front and leasing the trains.
We now see the rise of “third party finance” in energy, specifically in renewables and energy efficiency. A Dutch offshore wind project saw the manufacturers take a 20 percent stake in the project. The reason being, “You have a lot of new investor classes coming into energy that weren’t there traditionally, primarily institutional investors. In the energy space, the yield tends to hold up pretty well versus let’s say the leveraged finance market” said Kirk Edelman of Siemens financial Services.
There is also the Discounted Energy Purchase option, or the no capital outlay solution which is becoming popular with combined heat and power (CHP) engines. This is where a contractor will design, install, operate and own the cogeneration installation, without capital outlay and simply sell the energy produced at a discounted rate. The customer simply pays for the gas to power the engine and will only be invoiced for the electricity produced; the customer receives the heat output for free. The discounted rate includes all operation and maintenance costs, enabling customers to predict future energy expenditure and cash flow with confidence.
