Performance contracts
Performance contracts are a smart way of financing water and/or energy and related greenhouse gas emissions efficiency upgrades because the savings are guaranteed by the contractor and they are paid for through future cost savings.
Because the savings are guaranteed, performance contracts are low risk. Performance contracting through the low-interest NSW Treasury Loan Fund enables government agencies to extend the payback period for the capital cost over a number of years. Once the loan is repaid, agencies keep the cost savings.
A performance contract can cover a single site or technology, such as lighting, or multiple sites and multiple technologies.
Eligibility criteria
the agency must be budget-dependent
the project must not be part of the agency's forward capital program
the Internal Rate of Return of the project must be greater than or equal to 12%, and at least 75% of the project’s gross benefits must be savings from improved water and/or energy and related greenhouse gas emissions efficiency
the maximum loan term is 10 years (with repayments every six months)
loans up to four years must be guaranteed by the contractor for the duration of the loan. Loans for longer periods must have a savings guarantee of at least four years.
Will a performance contract work for your project?
A performance contract will work if there is enough potential water and/or energy and related greenhouse gas emissions saving opportunities to interest a contractor. The contractor needs to be able to guarantee a level of savings that is at least equal to the repayments required on the capital cost.
A consultant can help agencies fully assess whether a performance contract will work for them.
Generally, funding for projects between $10,000 and $500,000 would be secured through the NSW Treasury Loan Fund’s Sustainable Government Investment Program (SGIP).
Applying for funding
Contact OEH on 1300 361 967 or email us for details on how to apply for funding.
Performance contract projects
Since the NSW Treasury Loan Fund was established in 1998, 20 projects have been funded through performance contracts, totalling $45.9 million. They include:
Greater Western Area Health Service - $2.1 million performance contract covering five hospitals and a linen service
Attorney General’s Department - $804,970 lighting and air-conditioning upgrade project at five courthouses
Greater Western Area Health Service - $1.2 million for a cogeneration unit for a hospital and lighting upgrades for 3 Community Health Facilities.
Page last updated: 04 July 2011
