The New York State Energy Research and Development Authority (NYSERDA) and the New York State Environmental Facilities Corp. (EFC) announced that the recent multi-million dollar bond issuance for energy efficiency financing has been recognized as “Deal of the Year for Small Issuer Financing,” by The Bond Buyer, a leading public finance publication.
The bond issuance represented a unique financing collaboration between the two State authorities and reflects Governor Cuomo’s strategic statewide plan to scale up clean energy through creative financing mechanisms, enhance New York’s competitiveness for clean energy businesses, and make the state’s energy systems more resilient.
NYSERDA’s $24.3 million bond issuance, completed last August, was backed by a guarantee through EFC’s Clean Water State Revolving Fund (SRF), the largest such fund in the nation, which provides AAA-rated financial assistance to local governments and public entities to finance clean water and drinking water projects. This marks the first time Clean Water funds were used to reduce air contaminants that contribute to water pollution.
The bond issue was also the first time NYSERDA has used revenue bonds to finance consumer loans for residential energy efficiency improvements issued through the Green Jobs-Green New York (GJGNY) program, which has a goal to reduce energy use and greenhouse gas emissions, support sustainable community development and create opportunities for green jobs.
Proceeds from the bond issuance are being used to replenish the $42.5 million GJGNY revolving loan fund. The EFC guarantee, along with a federal bond interest subsidy, enabled NYSERDA to offer $29.2 million for low interest rate loans to more than 3,200 consumers, pledged as repayment for the bonds. Some of the loans pledged for the bonds included loans using an on-bill recovery financing mechanism authorized by legislation signed by Governor Cuomo in August 2011.
“This bond issuance reflects Governor Cuomo’s strategy to leverage private sector financing opportunities to scale-up innovation and development and create a self-sustaining clean energy sector,” said Richard Kauffman, Chairman of Energy and Finance for the Cuomo Administration and chairman of NYSERDA. “This bond issuance was the initial endeavor, followed by the launch of the
$1 billion New York Green Bank, to create a bold, new market-oriented approach to overcome market barriers that currently prevent the widespread flow of private capital into the clean energy economy.”
“In partnership with EFC, NYSERDA was able to offer revenue bonds to the market for energy efficiency projects for the first time. This is an innovative approach that other states can model,” said John B. Rhodes, President and CEO, NYSERDA. “In addition, it is a precursor to the kinds of successful financial structures that New York State will launch through Governor Cuomo’s NY Green Bank initiative to drive private investment in energy efficiency and renewable energy projects.”
EFC President and CEO Matthew Driscoll said, “EFC’s collaboration with NYSERDA was truly groundbreaking. For the first time ever, EFC used the Clean Water State Revolving Fund to guarantee the financing of a residential energy efficiency program. New York State is the first state in the nation to extend its authority under the Clean Water Act by linking clean energy, reduced air pollution and improved water quality in New York’s lakes, rivers and Long Island Sound. There is a clear relationship between air pollution and water quality, and now states across the country have a new way to finance the solution.”
The U.S. Environmental Protection Agency, which approved the SRF financing, said, “New York is the first state ever to utilize the SRF to support initiatives that address atmospheric depositions that impact public health and pollute critically-important water bodies. These bonds were rated triple-A thanks to a guarantee from the New York State Environmental Facilities Corporation. NYSERDA will use the bond proceeds to finance consumer loans that will be used for the installation of residential energy efficiency improvements and Energy Star compliant products."
Giving the bond sale a ‘Aaa’ rating, Moody’s Investor Services attributed its rating to EFC’s “strong financial position” and “strong program management and oversight, including sound underwriting standards and ongoing surveillance of program borrowers.”
Similar kinds of innovative financing are expected to be available through the NY Green Bank, which will address financing gaps that are now barriers to clean energy investment – a win for the economy, the environment and public health.