123 Queen Street, Melbourne

19 December 2011 – National Australia Bank and Low Carbon Australia on Monday announced they had signed the first privately funded environmental upgrade agreement through the Melbourne 1200 buildings program.

In a second announcement the City of Melbourne and the Sustainable Melbourne Fund also said they had signed another EUA, for a $3.2 million retrofit of the Kings Technology Park in Dorcas Street South Melbourne.

The NAB deal, for $1.34 million of energy efficiency upgrade work at 123 Queen Street in the Melbourne CBD, could be the long-awaited breakthrough the property industry has been waiting for.

It signals that the complex but promising financial arrangements, which enable repayments of funding to be made through a levy on council rates, may finally be gaining traction with the private finance sector. Other financiers such as Macquarie Bank are understood to be keeping an eye on developments, with a view to joining this emerging market.

But it has taken time to become established. Deals are complex, involving owners, tenants, local government authorities and financier. Melbourne’s 1200 buildings program initiated the Australian version of the scheme and NSW enacted legislation with the City of Sydney recently finalising its agreements template.

NAB has allocated $60 million to EUAs with finance of between $250,000 and $10 million available for each project.

At Queen Street the EUA will fund a trigeneration system to generate electricity, heating and cooling, as well as occupancy sensors and double glazing.

A savings of about 1300 tonnes a year of CO2-e emissions is expected.

NAB head of property finance, Andrew Balzan said he was pleased with the deal.

“NAB has worked extensively with the City of Melbourne to successfully legislate this new initiative, the key component of which is the partnership between building owners, tenants, councils, solution providers and capital providers,” Mr Balzan said.

“The signing of 123 Queen Street in Melbourne signals the first privately funded EUA. It is the first product of its kind in Australia, with legislation now implemented in parts of NSW and Victoria,” Mr Balzan said.

Chief executive officer of Low Carbon Australia, Meg McDonald, said: “This is a major milestone for low carbon finance in the Australian property sector. We are excited to be involved in the finance solutions readily available to building owners who wish to progress now to retro fit their properties and start capturing energy savings and reducing carbon emissions.”

City of Melbourne Eco-City councillor Cathy Oke said: “We know that access to affordable capital is a major barrier in retrofitting commercial buildings. This innovative financial mechanism removes this barrier and equips building owners with the financial tools they need. I’m confident we will see many more signings like it in the future.”

In South Melbourne, the agreement between the property owner, the City of Melbourne and Sustainable Melbourne Fund, is for four of the five buildings in the KTP precinct to be fitted with new high efficiency chillers, cooling towers, lighting system upgrades and heating and airconditioning units and controls, with aims to save 2600 tonnes of CO2-e emissions a year.

Sustainable Melbourne Fund Chief Executive Scott Bocskay said:“There is strong interest in environmental upgrade agreements from the commercial property sector and in what makes a retrofit project eligible for funding.

“Environmental upgrade finance represents one of the most significant breakthroughs worldwide in financing retrofitting of commercial buildings.”

According to Mr Bocskay Sustainable Melbourne Fund was established as a “commercially oriented, independent unit trust by Melbourne City Council in 2002 to progress sustainable development in greater Melbourne through strategic investments.”

It was established with an initial $5 million investment and is now worth $6.4 million, with $7.7 million so far invested in energy generation, water savings and energy efficiency projects to deliver improved commercial and environmental outcomes in the built environment.

The method of finance is stirring up huge interest in Australia and in the US where the Obama Administration recently announced US$4 billion would be used to fund energy improvements over public and private buildings.

• See the list of recent articles from The Fifth Estate on EUAs.

For information sessions on EUA to be held in Melbourne by Sustainable Melbourne Fund in early in 2012 contact irene.vlahos@melbourne.vic.gov.au