Context
In line with the global focus on climate change and greenhouse gasses, Canada has committed to a Net Zero Target by 2050. The Quebec Government has developed the 2030 Plan for a Green Economy aiming at reducing greenhouse gas (GHG) emissions by 37.5% below 1990 levels by 2030.
Trends include increased energy demand and price increases in the region, and the movement towards compulsory ESG responsible investments and institutional decarbonisation measures.
Problem
- There has been a lack of incentives for businesses and industry to pursue energy saving and greenhouse gas reduction investments when they have concerns about profitability and business competitiveness.
- The relatively low cost of fossil fuels has impeded development, financing, and implementation of energy transition projects.
Stakeholders involved
- Private sector sponsors: Econoler, Fondaction (CAD40 million)
- First lender: Fiera Private Debt (CAD60 million)
- Second lender: Canada Infrastructure Bank (CIB) (CAD100 million)
- Public sector: Ministère de l’Énergie et des Ressources naturelles du Québec (MERN) (CAD 5.5 million)
Innovation
- SOFIAC is structured as an investment vehicle and yet, thanks to back-to-back arrangements with Energy Service Companies (ESCOs), it provides complete turnkey solutions for large-scale energy efficiency retrofits of commercial and industrial assets.
- SOFIAC supports the full cost of retrofit projects and offers specialist technical consultant support, allowing businesses to reduce their costs and environmental impact without using their financial capacity.
- SOFIAC recoups its investment through the appropriation of energy savings from project operation over a period of approximately seven years per project, sharing at least 15% of the savings with the project owners
- The financial viability of SOFIAC is enhanced by sustainability–linked conditions on its CIB loan, where the interest rate is determined as a direct function of the reduction in GHG emissions realised by the various projects.
Timeline
Results and impact
- The first SOFIAC project in partnership with Collège Jean de la Mennais developed a large-scale energy efficiency and GHG emission reduction project to achieve decarbonisation and reduced energy consumption.
- Also planned is a partnership with Aéroports de Montréal (ADM) for energy cost and consumption reductions across airport infrastructure at the YUL Montreal-Trudeau International Airport and YMX International Aerocity of Mirabel.
- As noted above, support from CIB in the form of sustainability-linked loan conditions has enhanced the bankability and financial sustainability of SOFIAC and its projects.
- SOFIAC is targeting energy savings ranging from 25% to 40% and GHG reductions from 30% to 50% per project.
- SOFIAC projects underway and planned are estimated to reduce GHG emissions by 20,000 tons annually over the next five years.
Key lessons learnt
- Involvement of the public sector through the CIB facilty is essential to SOFIAC’s success because it mitigates the financial risk and facilitates the bankabilty of projects.
- Contractual partnering between private equity, infrastruture providers, and the public sector can stimulate demand by businesses and industry for energy trainsitions towards decarbonisation and energy efficiency.
