3. Program Design

The R-DEER Business Case made several assumptions about program design which are summarized in this section. Notwithstanding the considerable work done to complete the R-DEER Business Case, the Entity would also need to conduct its own supplemental due diligence to ensure a successful entry into the market. Final program design would be the responsibility of the Program Administrator (i.e., the Entity).

3.1. Program Capitalization

3.1.1 Financing and Fund Flows

The R-DEER Business Case’s proposed financial model was designed to be flexible. Over time it could be adapted to include additional lenders, contractors, and third-party public or private investors. These investors could include private commercial entities and even other municipalities and other public entities. The model was designed such that the City will only be responsible for collection of the LIC payments and their transfer to the Entity. The City’s administrative costs are assumed to be recovered in the retrofit price. All borrowing is on the balance sheet of the Entity. The debt of an MSC is not attributed to the owner municipality.

See Appendix G – Municipal LIC Risk Assessment for more details.

Funding sources include:

• Loans from Lender Partners

• Customer payments via property taxes

• Interest on unused loans

• Initial working capital to form Entity

• Government and utility incentives (assumed to be zero in the Business Case analysis)

These funds would be used for:

• Lender interest payments

• Lender capital repayments

• Contractor payments

• Entity operational expenses

• Community Group sponsorship

The business case assumed at least a 4.25% return for lenders. This will be further validated and refined in the R-DEER Business Plan based on prevailing interest rates. The R-DEER Business Plan would also be stress tested to assess impacts of fluctuations in interest rates moving forward.

3.1.2 Capital Provider

3.1.2.1 Start-up and Working Capital

The MSC would require start-up funding to develop a final R-DEER Business Plan and working capital to set-up for program launch. Start-up and working capital will be recovered once the business is launched and be supplied by the City, the City’s holding company and/or grant funding (see Section 4.1.1 for additional commentary).

3.1.2.1 Ongoing Capital

Ongoing capital to fund the program will be sourced from impact investors, insurance companies, pension funds and other sources of patient capital.

3.1.3 Funding Flow

The funding flow is illustrated in Figure 2.