Energy-as-a-Service

Bernhard’s insights on the Energy-as-a-Service market.

Inflation Reduction Act Provides Huge Incentives for Clean Energy Projects

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By: Sam Selig

Signed into law by President Joe Biden on Aug. 16, 2022, the Inflation Reduction Act (IRA) aims to reshape the way the United States uses, produces and stores energy while making significant strides toward the reduction of greenhouse gas emissions.

There’s no doubt the IRA will have a substantial impact on American energy. But, what does it mean for both existing and future energy projects? In short: lump-sum rebates from the government of at least 30 percent on qualifying projects, a boosted and likely locked-in Investment Tax Credit (ITC) rate until at least 2032, a large expansion to the types of projects that can qualify for tax credits and more. Put it all together, and the IRA creates a lot of incentive for nonprofit entities to go big on energy efficiency and clean power generation goals.

The experts at Bernhard break down the new IRA and what it means for the energy sector:

What is the IRA?

A scaled-back version of portions of the Build Back Better legislative package that stalled in the U.S. Senate earlier this year, the Inflation Reduction Act of 2022 is still the most significant federal legislation passed so far in the 21st century when it comes to promoting decarbonization, the transition away from fossil fuels and clean energy production and storage.

Through changes to the IRS tax code and other measures, the IRA makes major investments in domestic energy production, efficiency and manufacturing, with a goal of reducing U.S. carbon emissions by roughly 40 percent by 2030.

The act is funded with $737 billion per year raised through several revenue-building measures, including a new 15 percent corporate minimum tax projected to raise $222 billion per year, prescription drug pricing reform that will bring in approximately $265 billion per year, and enhanced IRS enforcement that will raise an estimated $124 billion per year.

From those funds, the act allocates a total of $437 billion per year for domestic spending, including $369 billion per year for Energy Security and Climate Change mitigation, $64 billion to extend the Affordable Care Act and $4 billion to enhance drought resiliency in western states.

The remaining $300 billion raised annually by provisions of the act will be put toward federal deficit reduction.

What does the IRA mean for Bernhard and our customers?

For large-scale energy customers and projects, the impact of the IRA is multi-faceted. The law appears to be very positive for Bernhard’s projects and customer base, particularly for large hospitals, universities and municipalities that are in the market to decarbonize and reach greater energy efficiency.

Key takeaways from the IRA:

Provides nonprofits with a lump sum cash reimbursement from the government equal to at least 30 percent of the total cost of eligible energy projects: For Bernhard’s customers, this might be the biggest news. Under new changes to Section 48, eligible energy transition projects undertaken by tax-exempt entities — including many universities, hospitals, municipal governments and more — now qualify for Investment Tax Credit (ITC) equal to at least 30 percent of a project’s total cost. That percentage is payable in a lump sum when the project goes online. We say “at least 30 percent” because eligible projects by nonprofits that meet certain very strict requirements — including projects built in low-income communities, in areas with significant fossil-fuel related employment, or which meet domestic content requirements — can claim bonuses amounting to up to 70 percent of total project costs.

Expands the types of projects that are eligible for ITC: Project categories eligible for ITC under Section 48 of the IRS code were expanded significantly under the IRA, and now include solar, wind, biomass electricity generation, battery or thermal energy storage technologies, qualified biogas properties, microgrid systems and qualified interconnection properties. To be eligible for ITC, projects must be placed in service after Jan. 1, 2023 and start construction prior to or during 2025. That means almost any large-scale clean energy project started between now and the end of 2025 by a nonprofit entity would be eligible for ITC.

Makes qualifying projects that are less than 1 megawatt in size jump through a lot fewer hoops to claim ITC rebates (but Bernhard has you covered, even if your project is bigger): Most on-site Bernhard energy production projects are smaller than 1 megawatt. That’s important to customers because under the changes made by the IRA, qualifying projects by nonprofit entities that are less than 1 megawatt in size are automatically eligible for at least 30 percent ITC. Build a $1-million solar plant for your campus that is smaller than 1 megawatt, submit those project costs to the U.S. Treasury and you’ll get a check for at least $300,000. Under the IRA, qualifying projects that are larger than 1 megawatt are subject to stricter requirements to receive ITC, including a stipulation that the contractor completing the project pay prevailing wages and have an apprenticeship program. Bernhard already meets both of those requirements, so eligible clients can supersize their projects to more than 1 megawatt without worrying about taking a financial hit.

Amends Section 48 of the IRS code to return the Investment Tax Credit rate to 30 percent: In recent years, the ITC rate on qualifying energy transition projects has been eroded. In 2020, the ITC rate was 30 percent. It was reduced to 26 percent in fiscal years 2021-2022. Had the IRA not been passed, the rate was scheduled to sink further to 22 percent in 2023. With the passage of the IRA, the ITC is now returned to a full 30 percent. That rate is likely locked in for at least the next ten years, as the IRA specifies a 30 percent rate through 2032, or until U.S. electricity production achieves a 25 percent reduction in greenhouse gas emissions, whichever comes first. Energy demand is expected to rise significantly over the next decade, which likely makes a 25 percent reduction in emissions a high bar. Unless there’s a surprise jump in energy efficiency, an unforeseen new energy generation technology is discovered or a successful effort to repeal the IRA, chances are we’ll see the IRA-adjusted ITC rate on qualifying projects stick around until at least 2032.

Amends IRS code 179D on Energy Efficient Property Deductions and significantly lowers the bar on what constitutes an Energy Efficient Property: As opposed to the cash ITC payments provided to eligible projects through changes to Section 48, the changes made by the IRA to IRS code section 179D relate to tax deductions for projects that realize significant energy efficiency in qualifying commercial buildings. While the threshold to claim these tax deductions was previously a sky-high 50 percent year-over-year reduction in energy usage, tax code changes in the IRA cut that in half, to a much more reasonable 25 percent reduction. These deductions are allocated on a sliding scale, based on square footage of the project building and the energy savings achieved. The deduction starts at $.50 cents per square foot for a 25 percent energy cost savings, then increases by $.02 cents per square foot for each percentage point of cost savings greater than 25 percent, up to a maximum deduction of $1 dollar per square foot. Most nonprofit commercial building efficiency projects undertaken by Bernhard realize year-over-year cost savings of much more than 25 percent.

Makes these “Energy Efficient Property Deductions” transferable to project contractors, which can sell them to offset fees: In other big news for eligible decarbonization clients, if the nonprofit entity undertaking a building-efficiency project doesn’t need the tax deductions, 179D now says those deductions can be transferred to the architects, engineers and designers responsible for the energy-efficiency plan that realized the cost savings. Once transferred, these tax credits can be sold by the contractor to other interested parties, including banks or other corporations. That change to 179D allows Bernhard to fold the anticipated sale price of those credits into the financials of our projects to offset fees, which could potentially lower clients’ final cost on eligible projects.

As with any legislation that deals with the IRS tax code, the changes made by the Inflation Reduction Act of 2022 can be difficult to understand. What comes through loud and clear from these changes, however, is the IRA is a monumental change to the energy sector in America, and a huge boost for energy efficiency and clean energy production.

The IRA is very big news for Bernhard customers, and a big incentive for universities, hospitals and other nonprofits that may be considering clean energy production projects or efficiency efforts. If your nonprofit has been considering making energy improvements but dreading the cost, Bernhard’s advice is to strike now while the iron — and the IRA — is hot.

About the Author:

Sam is the senior vice president of renewable energy for Bernhard. He is responsible for the development of solar and renewable energy projects across multiple sectors and the overall development of Bernhard’s renewable natural gas program. Sam is a Registered Professional Engineer and has over a decade of experience in project development, technical sales, and executing maintenance agreements to create strategic company growth and enhancement in the ESG realm.

CenTrio and Bernhard to promote reliability, operational efficiency, and sustainability at LSU under a 30-year public-private-partnership

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The P3 deal will create more than $90 million in energy savings

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Bernhard and CenTrio reached financial close with the Louisiana State University (LSU) Board of Supervisors to modernize the utility systems at the University’s main campus in Baton Rouge. The 30-year partnership is expected to generate substantial energy and operational savings for LSU while promoting sustainability, reliability and efficiency of utility systems campus-wide.

Tiger Energy Partners (TEP), a joint venture between Bernhard and Johnson Controls, will design and construct the initial modernization solutions of LSU’s central power production, steam and chilled water plants. CenTrio, as the concessionaire, will fund the modernization in addition to operating and maintaining LSU’s utility systems for the next 30 years. CenTrio will have the opportunity to perform and invest into additional capital improvements to the utility system needed to accommodate campus growth and address capital renewal and deferred maintenance. TEP will have the opportunity to design, build, and finance future building mechanical system upgrades on the Baton Rouge campus.

“We are thrilled to begin this modernization project at the Baton Rouge campus,” CenTrio’s Chief Operating Officer Doug Castleberry said. “CenTrio looks forward to making the Baton Rouge campus more resilient, efficient, and sustainable. By investing in university campuses, we are not only helping with their immediate energy infrastructure needs but also allowing them to focus capital and other resources on their core mission of education and research.”

“Perhaps the most rewarding part of moving forward with this project is knowing we are increasing local job creation and creating a positive impact for the local economy,” said Ed Tinsley, Bernhard’s Chief Executive Officer. “Bernhard was founded in Baton Rouge more than 100 years ago and this partnership highlights our unwavering dedication to Louisiana now, and for future generations to come.”

CenTrio, a leading utility public-private partnership (P3) developer, investor, and operator that develops, manages and operates critical energy infrastructures serving more than 400 buildings in urban centers, universities, and hospitals across the United States with a focus on reliability, energy efficiency and environmental sustainability. In October 2020, CenTrio established a similar partnership with Syracuse University to modernize its utility system infrastructure under a 40-year public-private-partnership.

Bernhard has had a presence in Louisiana since 1919, completing more than 400 projects for LSU during that time span, including the design and construction of LSU’s existing combined heating and power system. In addition to its LSU experience and Louisiana headquarters, Bernhard also operates and maintains over 100,000 tons of cooling in markets throughout the Southeast, including the on-going operation and maintenance of the energy plants at Our Lady of the Lake Regional Medical Center and the Shaw Center for the Arts in Baton Rouge.

CenTrio also has strong ties to New Orleans and the State of Louisiana. The company began operating in New Orleans in 2000, providing thermal energy and backup generation services to Louisiana State University’s Health Sciences Center. The company has since spent over $100 million modernizing the facility, expanded to serve other customers in the city, and invested another $200 million in the local economy.

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Tulane University and Bernhard Announce Partnership to Optimize Energy Infrastructure and Improve Resiliency

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Project significantly reduces Greenhouse Gas Emissions and bolsters reliability of campus infrastructure

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Bernhard and Tulane University announced this week a 30-year Energy-as-a-Service partnership that includes large-scale and immediate improvements to campus infrastructure and the construction of a 1-megawatt solar generation facility that will produce 10% of the university’s total electricity needs at its uptown campus. The upfront improvements are expected to significantly reduce Tulane’s cumulative annual Greenhouse Gas (GHG) emissions with the ultimate goal of reaching carbon neutrality by 2050.

Drawing inspiration from the concerted sustainability efforts of Tulane and Bernhard, Project RISE (Renew, Innovate, Sustain, Engage) addresses significant capital renewal, sustainability and energy optimization priorities across Tulane’s uptown and downtown campuses. Through the innovative partnership, Tulane will accelerate the delivery of campus upgrades that will increase the resiliency and reliability of critical infrastructure on Tulane’s campuses. Bernhard is also guaranteeing significant annual utility cost savings over the length of the agreement, a commitment that includes bringing one or more Tulane buildings to certified Net Zero Energy status by 2025.

“This partnership is a major step forward in Tulane’s continued commitment to environmental sustainability. Through it we will significantly reduce our greenhouse gas emissions as we journey toward a carbon neutral future that also fully supports our critical research and educational missions,” Tulane President Michael Fitts said. “By increasing efficiency, building resilience and seeking alternative energy sources, the Bernhard and Tulane partnership is expected to also achieve the goal of a 30% reduction in greenhouse gases by 2025 as outlined in Tulane’s Climate Action Plan.”

“We see this partnership with Tulane as not only beneficial for their campus, but the entire state of Louisiana,” said Ed Tinsley, Bernhard CEO. “Tulane and Bernhard’s efforts in creating a more sustainable and resilient future with optimized energy usage and reduced carbon profile will have a positive ripple effect throughout the region.”

Being located in one of the world’s most active hurricane zones has granted Tulane University a unique perspective on the necessity of a reliable power supply. “Lack of consistent power during a weather event or local infrastructure failure can be detrimental to operations, academic instruction and the student experience and may cause catastrophic loss of research materials and specimens,” said Patrick Norton, Senior Vice President and Chief Operating Officer at Tulane. “With Bernhard, we have made a commitment to strengthen Tulane’s infrastructure on both the downtown and uptown campuses in a financially and environmentally responsible way.”

At commencement of the partnership, Tulane will transfer the risk of energy operations and maintenance to Bernhard. Bernhard’s team will immediately design and upgrade campus energy infrastructure including lighting, combined heat and power, standby electrical power, building automation, heating water, steam, and domestic and chilled water. Monitoring of asset performance and measurement and verification of energy savings throughout the project will be provided through Bernhard Connect®.

“We are proud to partner with Tulane to upgrade its energy infrastructure and to assist the university in reaching its goal of 30% emission reduction by 2025 and carbon neutrality by 2050,” said Rob Guthrie, Bernhard’s Chief Development Officer. “Project RISE not only provides the university with long-term operational certainty over the next three decades, but also insulates Tulane from natural disasters. The unique combination of distributed generation and energy efficiency strategies will reduce the university’s peak electrical grid demand by nearly 50%.”

The university was supported in the transaction by a group of advisors, including Ernst & Young Infrastructure Advisors, LLC (EYIA) as lead. Other supporting advisors included Baker-Donelson, LLP, McGuire-Woods, LLP, Deloitte Touche Tohmatsu Limited, and RMF Engineering, Inc.

DIF Capital Partners Invests in Sustainability and Energy Solutions with Acquisition of Bernhard, LLC

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DIF Capital Partners (“DIF”), a leading global independent infrastructure investment fund manager, through its fund DIF Infrastructure VI, today announced an agreement to acquire Bernhard, LLC (“Bernhard”) the largest privately-owned Energy-as-a-Service (“EaaS”) solutions company in the United States, from an affiliate of Bernhard Capital Partners.

Bernhard has provided solutions to its customers’ energy and infrastructure needs for more than 100 years and shifted its focus in 2014 to becoming a leading Energy-as-a-Service provider. As part of this business model, Bernhard enters into long-term turnkey EaaS concession contracts to upgrade, retrofit and service large existing building energy facilities in order to achieve substantial energy savings. Clients are currently predominantly higher education and healthcare institutions. To date, Bernhard has closed 15 EaaS transactions, including the largest EaaS concession in U.S. history. Senior management will retain a meaningful ownership position and continue its groundbreaking work leading Bernhard.

“Bernhard delivers distributed energy through its unique EaaS model which provides clients access to fully integrated and efficient energy solutions, thereby significantly reducing the carbon footprint of their buildings and utility systems. Bernhard’s approach fits perfectly with DIF’s Public-Private Partnership expertise and ambition to invest in clean energy infrastructure solutions around the globe.” said Gijs Voskuyl, Partner and Head of Investments for DIF Infrastructure VI. “We are excited to partner with Bernhard’s outstanding management team and support the company in their rapid growth at the forefront of the energy transition.”

“As Bernhard continues pushing to new heights in the EaaS market, we are excited to join forces with DIF Capital Partners given its extensive experience with Public-Private Partnerships, district energy, Energy-as-a-Service projects, and a shared commitment to efficiency, ESG and sustainability” said Ed Tinsley, Bernhard CEO. “The support and strategic counsel from DIF will help to guide Bernhard through the next chapter of our story.”

With DIF’s acquisition of Bernhard, the company will continue the acceleration of its market leading core EaaS business to healthcare and higher education facilities while expanding those services to other markets and geographies.

“The future of Bernhard has never been brighter,” said Tinsley. “Our track record proves we have the expertise and capabilities to push the industry to places it has never been before. With this announcement, we are truly at the forefront of a new era for energy solutions that will shape the world for generations to come.”

Bernhard Nominated for Project of the Year at Global P3 Awards 2021

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Alabama project honored in Project of the Year – Social Infrastructure category

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Bernhard, the largest privately-owned integrated solutions and energy services provider in the United States, has been honored as a finalist for Project of the Year in P3 Bulletin’s P3 Awards 2021. Finalists from across the world have been selected for their excellence in the area of Public Private Partnerships (P3).

“It is an honor to be recognized globally for our work in the P3 arena,” said Rob Guthrie, executive vice president of the development division at Bernhard. “Each of these projects offer unique benefits for the public sector, and we are proud to be among the leaders of this movement in the United States.”

The P3 Awards 2021 spotlights multiple categories celebrating the exemplary organizations, projects and individuals that have strengthened the development and implementation of P3s around the world.

Bernhard’s work with East Alabama Medical Center (EAMC) was selected as one of 10 finalists in the Project of the Year – Social Infrastructure category. The nominees include projects located in the United States and Canada.

“Bernhard has been an invaluable partner during COVID-19,” said Greg Nichols, executive vice president and administrator at EAMC. “Our work together turned a catastrophe into a catalyst for positive, long-lasting change for our organization, and the health of our community.”

Bernhard and EAMC entered an energy asset concession agreement giving Bernhard the right to use, maintain and renew EAMC’s energy infrastructure over a 30-year term. The project provided for crucial upfront energy optimization improvements, substantial projected annual energy savings, and a significant upfront cash payment to EAMC. The transaction is set to provide $826,000 in annual estimated energy savings and $30 million in improvements to the facility. The partnership not only provided EAMC exactly what it needed to meet patient and employee comfort needs, but also enabled an immediate allocation of crucial resources for fighting COVID-19 and saving lives.

The judging panel for the P3 Awards 2021 comprised a broad spectrum of more than 80 industry professionals representing both the public and private sector. The judges were selected based on their expertise, experience and integrity in the P3 market.

“Being shortlisted as one of the 10 best P3 projects in the world really speaks to the incredibly talented team we have at Bernhard and their willingness to innovate and push the industry forward,” Guthrie said.

Winners will be announced November 4, 2021, in New York City. To learn more about these awards and the other finalists, visit P3Awards.partnershipsevents.com. To learn more about Bernhard’s work with EAMC, visit Bernhard.com.

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Bernhard, LCMC Health Announce Landmark Energy Arrangement

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Bernhard and LCMC Health have announced a 15-year agreement to provide Energy-as-a-Service (EaaS) solutions at six of LCMC Health’s facilities. The EaaS arrangement, the largest of its kind in U.S. healthcare history, transfers the risk of utility operations and maintenance of LCMC Health’s chilled water system to Bernhard and allows for state-of-the-art infrastructure upgrades.

“This agreement allows us to improve and strengthen our facilities, better serve the needs of our community, and focus on our healthcare mission,” said Greg Feirn, LCMC Health CEO. “Bernhard’s technical, design, and financial experience in projects across the country proves they understand the stakes to provide not only sustainable, but reliable energy services for healthcare facilities.”

In the first two years of the partnership, Bernhard will deliver improvements to LCMC Health’s infrastructure that will create efficiencies and improvements in each facility’s operations, and provide utility cost savings once the improvements are completed. Cumulatively, the improvements are expected to yield a 26% reduction in LCMC Health’s enterprise carbon footprint.

“LCMC Health and Bernhard share in the belief that environmental responsibility should not just be an added benefit, but it should be our responsibility to ensure every decision we’ve made in the agreement will protect the natural environment of our shared communities,” said Ed Tinsley, Bernhard CEO. “The carbon footprint we are reducing is equivalent to more than 140,000 cars taken off Louisiana roads.”

With the agreement, LCMC Health joins a group of health systems, including Ochsner Health, Franciscan Missionaries of Our Lady Health System, East Alabama Medical Center, The University of Arkansas for Medical Sciences, and Midland Health in Texas, each of which has executed similar agreements with Bernhard.

The LCMC Health transaction further represents an important milestone in Bernhard’s exclusive agreement with HealthTrust and ProStar Energy. As one of the nation’s leading performance improvement organizations, HealthTrust offers procurement and supply-chain services to more than 1,500 U.S. hospitals and health systems, including LCMC Health.

“Our work with HealthTrust members across the United States illustrates how we can marry our proactive management, technology, and experience to offer efficient and reliable services time after time,” said Tinsley. “By leveraging the experience and expertise Bernhard provides, this first-of-its-kind transaction allows LCMC Health to focus more exclusively on its core objective of providing the best possible patient care at the most affordable cost.”

Energy-as-a-Service Transaction Provides Lifeline to East Alabama Medical Center

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COVID-19 has presented a wide array of unexpected and difficult experiences for businesses to navigate. Hospital administrators feel the pressures of balancing their budgets with looming financial constraints all during a burgeoning global health crisis. Even before the pandemic erupted, East Alabama Medical Center (EAMC) in Opelika found itself with a backlog of capital renewal and deferred maintenance, including crucial steam plant renovations on hold due to a lack of cash on hand. The administration did not want to take on debt in order to maintain a healthy credit position, but the necessary upgrades and opportunities for increased energy efficiencies and occupant comfort weighed heavy. The team partnered with Bernhard to begin exploring a solution and then, COVID hit.

“When the pandemic began to escalate, we felt like we were backed into a corner,” said Sam Price, EAMC’s chief financial officer. “A lack of on-hand resources went from a back-burner issue to a critical, immediate concern.”

As COVID-19 surged, Alabama particularly felt the oncoming devastation. Early in April, Alabama was projected by models to have the fourth-highest rate of COVID-19 fatalities in the United States. High-revenue elective procedures were deferred to make room for more beds for patients. Without these high-margin lines of service, resources became tighter and the need for a lasting solution became dire. EAMC officials decided to leverage all of their resources to give their community the best possible chance against the virus.

Most facilities were hesitant to make changes in the increasingly volatile environment, but EAMC realized the energy asset concession agreement under review with Bernhard was the best choice of action. Bernhard’s unique and tailored financing, integral to its Energy-as-a-Service model, and plan for energy optimization and enhanced occupant comfort created the ideal solution at the perfect time.

“The increasing demands on our facilities led to a daunting backlog of deferred maintenance, which was exacerbated during this time. Bernhard delivered a solution that allowed us to get ahead of the virus and keep our community as safe as possible.” – Sam Price, EAMC CFO

The two entered an energy asset concession agreement giving Bernhard the right to use, maintain and renew EAMC’s energy infrastructure over a 30-year term. The project provided for crucial upfront energy optimization improvements, substantial projected annual energy savings, and a significant upfront cash payment to EAMC. The transaction is set to provide $826,000 in annual estimated energy savings and $30 million in improvements to the facility. This is in addition to the $40 million net advance lease payment EAMC received; that’s immediate cash on hand and credit positive with a competitive interest rate.

Notably, under the Energy-as-a-Service model, the acquisition of the assets by Bernhard and recurring monthly service charges to Bernhard are off-balance sheet and credit-positive for EAMC. Bernhard worked with Warren-Averett, EAMC’s auditor, and Ernst & Young to review the relevant accounting considerations and ensure an off-balance sheet outcome. The hospital’s rating agency (Standard & Poor’s) agreed with the accounting treatment and viewed the transaction largely as credit-positive.

“We were eager to partner with EAMC’s two hospitals to serve the east Alabama area,” said Bernhard’s Executive Vice President of Business Development, Rob Guthrie. Our agreement empowers EAMC to focus its energy and resources on its core mission of providing high-quality, compassionate health care. We are proud to offer our expertise to deliver and sustain a win-win outcome for the next 30 years.”

The upfront improvements to infrastructure addresses a backlog of deferred maintenance at EAMC, including upgrades to:

  • Chilled water, tower water, heating water and steam systems
  • Air handling units
  • Building controls
  • Electrical infrastructure

Bernhard will also install a heat pump chiller heater, optimize procedure rooms, install LED lighting and facilitate retro-commissioning of the building’s automation system. These upgrades create efficiencies and improvements in the facility’s operation and also result in optimized energy savings.

“We are excited to partner with Bernhard on this long-term project and appreciate its critical role in helping EAMC allocate scarce capital resources for the things we need most to take the best possible care of patients,” said Price.

This energy asset concession transaction not only provides EAMC exactly what it needs to meet patient and employee comfort needs, but also enables an immediate allocation of additional resources for fighting COVID-19 and saving lives. The community is now better armed to fight COVID-19 while the facility added energy optimization, which creates future savings. For EAMC, COVID-19 became the catalyst for a positive and long-lasting change.

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Bernhard, Midland Health Execute 15-Year Energy Asset Concession Arrangement

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Bernhard and Midland Health announced today a 15-year energy asset concession arrangement which will address significant capital renewal, deferred maintenance, and energy optimization priorities at Midland Health’s main and west campuses. The transaction, which marks the continuation of a 10+-year old working relationship between Bernhard and Midland Health, will deliver substantial upfront cash and year-over-year cost savings to the health system.

“We are thrilled to continue building our partnership with Midland Health,” said Bernhard’s Vice President of Business Development Rob Guthrie. “Bernhard’s Energy-as-a-Service program will create notable cost savings for the hospital system, enabling Midland to continue to enhance its patient care and better serve the community.”

The improvements to Midland Health facilities will generate a minimum of $664,000 in annual utility cost savings guaranteed by Bernhard. Once the improvements have been made, the health care facility will join an A-rated peer group comprised of Ochsner Health, Franciscan Missionaries of Our Lady Health System, East Alabama Medical Center and several other southeastern health systems that have each executed recent agreements with Bernhard.

“Bernhard has long been a trusted partner to Midland Health,” said Midland Health Senior Vice President COO/CFO Stephen Bowerman. “Advancing our partnership through an Energy Asset Concession Arrangement just made sense.  This transaction aligned with Bernhard’s expertise will provide significant improvements to our utility plant, provide long term energy efficiency and position the hospital to continue to provide high quality care to Midland and our surrounding community for years to come.”

Bernhard’s innovative energy asset concession program transfers the risk of energy asset renewal to Bernhard over the full 15-year term, eliminating over $3 million from Midland Health’s future budgets. At the conclusion of the agreement, the energy assets are to be handed back to Midland Health in good working order and at no cost to Midland Health. The agreement represents another milestone in Bernhard’s extensive history in Texas, following more than 100 energy optimization projects across the state with nearly 40 healthcare entities.

To learn more about the project, click here.

Bernhard, East Alabama Medical Center Enter Into Partnership

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Bernhard and East Alabama Medical Center (EAMC) have announced a 30-year energy asset concession agreement involving the right to use, maintain and renew EAMC’s energy infrastructure over a 30-year term. The project also provides for upfront energy optimization improvements, substantial projected annual energy savings, and a significant upfront cash payment to EAMC.

“We are eager to work with EAMC’s two hospitals to serve the east Alabama area,” said Bernhard’s Vice President of Business Development Rob Guthrie. “Our partnership will empower EAMC to focus its energy and resources on its core mission of providing high-quality, compassionate health care. We are proud to offer our expertise to deliver and sustain a win-win outcome for the next 30 years.”

The upfront improvements to infrastructure will address a backlog of deferred maintenance at EAMC, including upgrades to chilled water, tower water, heating water, and steam systems, as well as air handling units, building controls and electrical infrastructure. Bernhard will also install a heat pump chiller heater, optimize procedure rooms, install LED lighting and facilitate retro-commissioning of the building’s automation system. These upgrades will create efficiencies and improvements in the facility’s operation and also result in energy savings.

“We are excited to partner with Bernhard on this long-term project and appreciate their critical role in helping EAMC allocate scarce capital resources for the things we need most to take the best possible care of patients,” said Sam Price, EAMC’s Chief Financial Officer.

The transaction with EAMC marks a continuation of Bernhard’s work in Alabama, which includes decades of completed projects for clients such as The University of Alabama, Auburn University, University of Alabama at Birmingham, Providence Hospital, St. Vincent’s Health System and more.

About EAMC

East Alabama Medical Center is a 340-bed regional referral hospital located in Opelika that serves a nine-county area.  The EAMC organization includes EAMC-Lanier hospital in Valley; between the two hospitals and their collective service lines, there are about 3,500 employees in the organization.  EAMC is the second largest employer in the region, trailing only Auburn University. Among the services that EAMC provides are open-heart surgery and cancer treatment, both of which are highly acclaimed specialties at EAMC. The hospital also operates multiple physician practices and the Auburn University Medical Clinic.  EAMC is in the process of building a Freestanding Emergency Department and Ambulatory Surgery Center in neighboring Auburn. EAMC-Lanier has a nursing home, acute rehab unit, and offers occupational medicine.  For more information, visit www.eamc.org.

 

Bernhard’s Project Portfolio Positioned for New Public-Private Partnerships

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The Foundations of P3 in Arkansas

By Ryan Corrigan, Director of Business Development, Bernhard

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Throughout our history, public projects like the Brooklyn Bridge or the Tennessee Valley Authority have rewarded our nation’s faith in public investment and been points of pride for our republic. Similarly, American commercial enterprises have always been called upon to meet truly national aims, such as Bath Ironworks during World War II, or IBM and Douglas Aircraft throughout the moon race. Some assets truly are public in service and scope, but that doesn’t mean private enterprise isn’t best oriented to design and build, operate, even own these public goods.

Seeing this potential, in 2017, the State of Arkansas wrote and approved Act 813, the Partnership for Public Facilities and Infrastructure Act, that provides public-private partnerships, from design-build projects to energy savings or asset agreements to sale-leaseback (and lease-leaseback) arrangements. More recently, this spring, the state Department of Transformation and Shared Services published the final PPFIA rules. Qualifying project types include state-funded colleges and universities, libraries, hospitals, even ports and water supply systems, and many others.

Many of these facilities are facing a “perfect storm” of rising needs and declining resources. Higher education, for instance, is continually budgeting for upgrades and renovations to aging structures and infrastructure even as institutions project flattening or declining state and local tax revenue, and enrollment.

What is private enterprise if not the search for a competitive market solution to a need that’s unmet? At Bernhard, we’ve been assessing the ways public institutions can address deferred maintenance and construction projects in order to move forward, and we’ve outlined a few advantages to forging public-private partnerships.

Risk transfer

By transferring energy upgrades, maintenance and other costs to a private entity, through public-private partnerships, state agencies are also transferring risks. A massive advantage in these agreements is that the private entity assumes the risk from damage and performance of these energy systems, thus removing both liability and operational forecasts from institutions’ portfolios.

Any large employer is also a large maintainer of systems, from energy to parking, that are not mission-critical and, therefore, placed as a lower priority. By transferring risk associated with these assets to a private partner, universities, hospitals and agencies can redirect resources to further their core mission and create savings along the way.

Private-sector financing

Government bonds are a major investment instrument, but when it comes to financing construction projects, they’re cumbersome. One of the major advantages of P3s for building new, large public facilities is the ability of the private sector to finance them quickly and nimbly.

P3s can help fix costs for public institutions facing austere budgets and hard decisions. Historically, bids for capital projects left institutions with lingering questions and budget unknowns around operations and maintenance costs. In P3 arrangements, costs are known and fixed over the life of the contract.

At Bernhard, we have a team deft at finding financing solutions for large capital projects, many with 20-to-50-year ROI horizons, as well as dedicated project managers who’ve saved clients millions of dollars — a vital component in today’s environment.

Meeting the backlog of deferred maintenance

P3s are uniquely suited to address deferred maintenance issues. A private sector partner is keen to perform maintenance that sustains assets for their full-service life, and any P3 contract will stipulate appropriate service levels and performance standards for the duration.

While public agencies budget on an annual cycle that often pushes maintenance off, private companies plan to implement efficiencies early and often over the life of systems. Moreover, they’ll invest in costly upgrades if it means offsetting costs later in life.

Performance-based design, operation

Simply put, P3s allow public sector decision-makers to bid projects based not on upfront costs but best-in-class systems, projecting performance out over the life of an asset. That hasn’t been a driving factor in public construction projects. Traditionally, though contractors may offer a short warranty, afterward, the building’s “performance” was the responsibility of the owner. With a P3, the building’s “performance” is now a contractual obligation of the private partner.

For higher education institutions, projects can have an educational component, or support a trend that aligns with the mission of the institution. As an example, they can offer reimagined energy systems on university campuses by way of conservation (“green”) technology. Higher education institutions can realize financial benefits from an investment that also serves as an engineering showpiece for both the university community and visiting scholars or benefactors.

Public prosperity

Some opposed to public-private partnerships ask why public administrators and elected officials would give away public assets so that private companies may profit.

Firms such as Bernhard endeavor to create P3s largely to bring such projects to market. Deferred maintenance is bad for the administrators, faculty and students of a college or university because they cannot enjoy state-of-the-art systems and technology upgrades, but they’re also bad for engineers and builders who wish to embark on such projects.

Arkansas finished its legal framework at an opportune time. As states reopen, P3s can be a way to jumpstart economies. Forging new partnerships that break ground on projects will be an essential part of our return to normal.

To learn more about Arkansas’ new P3 regulations from experienced experts, register for our upcoming webinar.

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Ryan Corrigan, PE, CEM, CxA

Ryan is a Director of Business Development for Bernhard with 12 years of experience in the industry. He is a registered Professional Engineer, Certified Energy Manager and Certified Commissioning Authority. Ryan has expertise in the analysis and retrofit of existing facilities with an emphasis on energy infrastructure. He has worked with clients to increase system reliability on healthcare, higher education, industrial, local and municipal campuses.