Industrial companies could use leasing financing bolder in energy-efficiency investments. According to Calefa’s Petri Vuori, projects with an exceptionally short payback period are still being left unrealized.
Industry and the energy sector are living under competing pressures: investment decisions are weighed for a long time, while requirements to improve energy efficiency, cut emissions, and strengthen competitiveness keep tightening.
Vuori notes that hesitation often stems both from an uncertain economic situation and from the perception that financing and practical implementation are laborious. As a result, even energy-efficiency and emission-reduction projects that pay themselves back quickly end up being delayed.
This article looks at the most common myths around cash-flow-positive energy investments and shows how a well-planned project can improve a company’s cash flow from day one.
What does a cash-flow-positive investment mean?
In practice, a cash-flow-positive investment means that the savings generated by the investment are greater than the investment’s monthly costs. The principle is simple: the solution is sized so that the achievable savings exceed the financing instalment (for example, a leasing payment).
Vuori emphasizes that, with leasing, the payment schedule can be linked to commissioning: instalments start only once the plant is in production. This way, the investment typically does not tie up capital during construction. At best, implementation can improve cash flow starting from the very first day of operation.
In this context, only cost savings are counted as “savings,” even though the investment may also deliver additional value such as lower emissions or improved factory throughput. Those benefits can materialize on top of the cash-flow-positive effect.
What holds back energy investments?
In many organizations, energy projects have long been treated as “own investments,” which easily ties the decision to investment caps and the availability of capital.
At the same time, the energy market and production methods are changing rapidly.
Solutions to improve energy efficiency exist, but for example industrial companies do not want to commit to large one-off investments. In this situation, the financing model and a modular way of implementing the project can be keys to lowering the threshold to invest.
Five myths about cash-flow-positive investments
Myth 1: A cash-flow-positive investment requires a large upfront capital outlay
Cash-flow-positive does not mean that a company needs to tie up a large amount of its own capital.
According to Vuori, one of the key benefits of a leasing model is that the customer does not need to make a large one-off investment; instead, the cost is spread into agreed monthly or annual instalments. At the same time, energy savings and emissions reductions are achieved already during the payback period.
This makes it possible to carry out the investment even when tying up capital is to be avoided for one reason or another.
Petri Vuori’s note: “It’s worth requesting, already at the assessment stage, a calculation that shows the investment’s monthly savings side by side with the financing instalment. At Calefa, the investment is sized so that the savings exceed the instalment for that period.”
Myth 2: Leasing financing puts a strain on cash flow
Many assume that financing instalments start immediately, even if the plant is still in the design phase or in delivery. In Calefa’s projects, leasing payments begin only once the plant has been commissioned.
Vuori says the difference is significant from a cash-flow perspective: during construction, the leasing financing does not need to be amortized, and the first instalment falls at the stage when the solution starts generating savings to cover the payment.
Myth 3: Energy support and leasing financing don’t play well together
Energy support can be an important part of financing an energy-efficiency investment. It also does not rule out leasing financing. Vuori points out that energy support can also be obtained for projects implemented under a leasing model (for example via Business Finland).
Vuori notes that the impact of the support can be very tangible: it can, for example, be used to cover a possible upfront fee for the leasing financing, which may be around 10% of the investment’s value.
Myth 4: It can be difficult to find a financier for an energy-efficiency project
Calefa’s solutions are implemented as modular packages, which, according to Vuori, also helps with financing.
“A leasing partner always assesses risk through the ‘worst-case scenario.’ A modular, clearly defined delivery is often a good choice for a financier.”
This opens up opportunities to carry out projects that would otherwise fall outside the investment budget.
Myth 5: The benefits of the investment don’t materialize in practice
According to Vuori, it’s important to understand the project’s full life cycle. After the leasing term, ownership transfers 100% to the customer. At that point, all benefits realized already during the leasing period also accrue to the customer: heat and energy production costs are permanently reduced, and the emissions reductions remain in effect.
“In practice, this means a competitive advantage for decades: lower energy costs, potentially more efficient production for example through improved cooling, and a stronger position from an emissions perspective.”
Petri Vuori’s note: “A typical leasing agreement might be, for example, 4–6 years, whereas the plant’s service life is measured in decades. In that case, most of the savings accumulate to the customer over the long term.”
Cash-flow-positive energy efficiency
A cash-flow-positive model is one effective way to get an energy-efficiency project moving, as pressure to reduce emissions and improve energy efficiency continues to grow.
Vuori’s core idea is that good projects should not be left unrealized if a financing solution is available. When the savings are predictable and the financing is sized against them, the investment improves cash flow starting from commissioning.
Would you like an estimate of what the site’s monthly cash flow could look like? As part of the assessment, the solution and financing structure for an AmbiHeat or AmbiSteam plant are sized according to your targets.
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