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Energy savings and resource efficiency

Business

Case study - operating lease

Manufacturer and distributor of animal health products, Virbac Australia, installed a 100 kW solar system on their production facility in Penrith. Todae Solar helped them design and install the system, which was financed through an off-balance-sheet rental agreement from Energy Lease

 Product            Rental (operating lease)                            
 Customer  Virbac Australia (Penrith, NSW)
 Project  100 kW Solar system
 Benefits  Approximately $20,000 pa in bill savings
 Retailer  Todae Solar
 Financier  Energy Lease

Virbac considered a solar system an important financial investment and in keeping with their global sustainability objectives.

They engaged Todae Solar to design and install a 100 kW solar system for their production facility in Penrith. The project costs were outside their normal capital expenditure (CAPEX) allocation, so they pursued financing options.

Virbac considered a range of finance options and chose a rental agreement from Energy Lease. Head of Treasury and Compliance Manager, Geoff Renneberg, said

We chose a rental option due to the superior post tax benefits that would flow to us as a fully tax deductible solution. It was also highly appealing as it was an entirely off balance sheet transaction that did not increase our liabilities and was also paid out of our operating budget.”

The rental agreement has only fixed monthly payments of $1,639 over seven years. At the end of the agreement Virbac have an option to buy or return the system, by which time it will have an estimated asset value of $3,278.

If purchased upfront, the system would have cost around $120,365, compared with $137,676 in total monthly leasing payments over seven years.

However the off balance sheet nature of the rental agreement allows the full costs of the equipment, interest and depreciation to be tax deductible. This leaves the total cost of ownership of the system after tax at $96,373.

 Mr Renneberg said

“It has proven to be cash flow positive with the electricity bill savings virtually offsetting our repayments.”

 Virbac’s, Engineering and Maintenance Manager, Marcelo Habibeh said

The installed system is performing to expectation and Virbac are already benefitting from a reduction in costs and of course a lesser footprint on the environment.”

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Page last updated: 27 January 2016