Consortium signs green property deals

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A consortium backed by companies including Lockheed Martin and Barclays Capital is on Tuesday announcing the first deals for a new scheme for energy-saving investments in offices and factories.

The plan is to open a market that could be worth $1,000bn or more in the US alone.

The scheme allows owners of financial and commercial buildings to finance energy-saving works such as insulation with bonds paid for through the property tax system.

The consortium, set up by the Carbon War Room, an environmental group, has signed deals with two US counties – Miami-Dade, Florida and Sacramento, California – that will deliver an estimated $650m of investment, with more projects to follow.

The potential for companies to make energy efficiency improvements to commercial and industrial buildings has often been described as “100-dollar bills lying in the street” because of the potential for investments to deliver very rapid pay-backs. It has also been identified as the most cost-effective way to cut carbon dioxide emissions.

In practice, however, that potential has often gone unrealised because of problems of financing, administrative complexity and the risk that the promised savings will not materialise.

The Carbon War Room’s plan aims to surmount all of those obstacle by bringing four companies together: Lockheed Martin, the contractor to lead the works; Barclays, a bank to provide finance; Energi, an insurance company that is a partner of Hannover Re, to guarantee the savings from energy bills; and Ygrene, an energy efficiency company that specialises in putting projects together.

The debt issued to pay for the works is intended to be highly attractive to investors because the service will be paid by an extra charge added to the building owner’s property tax, with the agreement of the local authorities.

The consortium members say companies should be able to save 30-70 per cent of their energy bills as a result of signing up for the programme: enough to create a good return for investors in the debt and the companies doing the works.

Sir Richard Branson, a founder of the Carbon War Room, said: “There is good money to be made, and good money to be saved ... It stacks up, and you can get cities all over the world wanting to do it, and financiers all over the world wanting to do it.”

The tide of political opinion in the US has in the past two years been shifting against taking action to combat the threat of climate change.

However, the consortium members believe their product will still be attractive enough to local authorities to create a market worth hundreds of even thousands of billions of dollars in the US alone.

Sir Richard said energy security and the threat of oil shortages was another important motive. “The world six, seven, eight years from now could be facing a potential catastrophe of demand exceeding supply,” he said.

The consortium also said its programme would be effective at creating construction-related jobs that are badly needed in the US.

The first two counties to sign up are expected to add a forecast 17,000 jobs.

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