EPC method – providing energy services with a guaranteed result, guaranteed energy services.

Energy services are commonly aimed at the reduction of final energy consumption in existing buildings. The most well-known method for achieving savings is the EPC method (Energy Performance Contracting) when a provider of energy services provides the complex turn-key service, including financing energy-saving measures and the guarantee of minimum savings related to energy consumption (this is ensured by a provider at his own risk).  Investments are made by means of achieved savings in energy consumption.

The main benefits of this method are achieving savings without putting burden on public budgets (investments are ensured by the provider at his own expense), acquiring new modern technologies, thus valorizing property of the public sector, reducing operating expenses, enhancing the economy of energy operating, reducing operating demands, the guarantee of minimum operating savings, improving quality of the working environment, job opportunities for domestic contractors/providers and improving the environment.

While preparing the energy-saving project there are three primary decisions at the beginning:

  1. Decision on the reconstruction of energy economy
    The motivation is:
    The need to reduce high operating expenses
    The need of the reconstruction of outdated technological energy equipment
    Complex renovation of the whole structure
    The need of the automatization of energy consumption management
    The endeavour to eliminate negative impact on the environment
  2. Decision on the manner of undertaking energy-saving measures
    The decision on the manner of undertaking measures is mainly affected by:
    Sufficiency of own investing means
    Qualified and capacity ensuring the respective project realization
    Certainty of achieving the expected result
  3. Decision on the model of financing energy-saving measures
    Financing can be ensured by means of:
    Own means
    Bank loan
    Providing energy services through the EPC method

For whom is the EPC method designed:

  • State institutions and organizations and allowance organizations and state organizational units: buildings of ministries and buildings and premises of all institutions and organizations established by individual ministries (faculty hospital, colleges, state cultural facilities, offices buildings and others)
  • Regions, towns, communities and their allowance organizations: healthcare and hospital facilities, educational facilities (kindergartens, primary and secondary schools), cultural facilities (theatres), sports facilities (swimming pools, ice stadiums), buildings of offices, public lighting and others
  • Private customers within the non-commercial and commercial sphere

Preparatory phase of EPC projects

Choose suitable premises...
It is very important to choose suitable premises for the prepared project
Satisfiable expectations of the customer…
Before further proceedings it is necessary to clarify whether customer`s respective expectations are satisfiable by means of the EPC project, or possibly to specifiy customer`s expectations more clearly with respect to feasibility of the prepared project.

Prepare the order during summer

It is necessary to familiarize with selection procedures of the public contract (procurement) and gather all needed details and information. It is generally appropriate to prepare the public contract (procurement) for the EPC project, including its approval by the customer, during summer months so that the notice of pubic contract (procurement) within the Information system for public contracts could be publicized between September and November.
VIn this case it is possible to finalize selection procedures and contract signing in good time before the end of heating season. 

EPC projects and financing

Two flows of financial means…

Projects solved by means of the EPC method are often aimed at the manner of project financing. In a large number of cases the contractor, among other things, provides refinancing of necessary investing means, usually by using the commercial loan from a particular bank. If the customer has access to financial means under better terms and conditions than the provider of energy services, he can decide to ensure financing by himself. He will provide the supplier with investing means without providing supplier credit and the supplier „only“ ensures the implementation of saving measures and the achievement of the expected volumes of savings within operating expenses.

Reduction of operating expenses…

Within the usual EPC project the flows of financial means are instalment payments, which the provider (company) of energy services has made, and which are in fact lent to the customer. This is provided by means of a fixed interest rate loan, so the value of instalments does not change during the whole period of contractual relationship.  The implementation of saving measures results in the reduction of operating expenses. The volume of savings during one year should not be lower than the volume of instalment payments.

Possibility of the sale of accrued receivables

In recent years energy service companies take the chance to sell accrued receivables to any particular bank. This means the usual indebtedness of the client , because he does not have a written debt agreement with the bank, but he only makes contract instalment payments to a different account. The loan guarantees within project financing stay with the energy service company.

EPC projects in the phase of their realization

Control proper implementation…

During the project realization it is inevitable to thoroughly check its proper implementation and the implementation (installation) of individual parts, in close accordance with the project and its intention. Before the implementation (installation) it is necessary to scrutinize possible non-functional (not working) parts of the heating system which might require rectification.

Measuring and monitoring energy consumption

After implementing respective measures the key part of the whole project is measuring and monitoring energy consumption. Before the respective measure is submitted to the customer, the respective implementation must be duly and sufficiently tried and tested within a trial run. The energy service company must closely cooperate with representatives of a building administrator, who will be responsible for proper functioning of the whole system. After putting the system into operation the consumption is monitored and evaluated by the provider`s  (supplier`s) representatives on a weekly basis or even daily, while the provider proceeds to the monthly checking/evaluation of measured values only within the routine operation of the system.

Long-term relationship of both parties

It is essential that both parties are maximally honest during negotiation proceedings and consumption annual accounting. The EPC project represents a long-term relationship of both parties, so there is no point in concealing or distorting any facts. This can only be done at the expense of the project, thus energy savings and efficiency.

Regarding the fact that this phase of the EPC project is crucial, it is advised to use services of an external professional company.