Environmental Upgrade Finance

What is environmental upgrade finance (EUF)?

EUF Infographic

Environmental Upgrade Finance (EUF) is a commercial finance product that enables a financier to lend money to a building owner to purchase energy efficiency and renewable energy equipment.

The financier secures the loan through the council’s charge on the land and repayment are made through your council rates.

EUF supports projects that result in an environmental saving and can be passed on to tenants via council rates.

How EUF can help your energy efficiency project

No upfront capital or security

EUF allows energy efficiency and renewable energy projects to be undertaken without a business requiring up-front capital or using existing business assets as security. The obligation to pay becomes a charge on the land repayable through council rates.

Realising savings now

Businesses that use EUF for their energy efficiency projects can realise immediate cash flow benefits. Energy Efficiency projects can result in higher energy savings than financing costs.

Tax and accounting

As the building owner owns the asset, you may be able to claim depreciation of the asset and the debt may be deductable at the company tax rate. For a tenant, EUF finance does not appear on your business’s balance sheet. Seek specific tax and accounting advice for your particular situation.

Things to consider

Where the tenant agrees to make payments, it bears economic risks and the building owner bears technical risk as the owner of the equipment. If a building is sold, the EUA can be transferred to the purchaser.

How to get a EUF loan

  1. Undertake an energy audit: This will help your business identify actions that will improve energy efficiency and reduce operating costs. Work with your energy assessor to determine the likely kilowatt per hour (kWh) savings per year for each recommended action.
  2. Seek quotes: Seek quotes from qualified contractors for actions recommended in the energy audit.
  3. Identify annual savings: Once the kWh savings have been identified, determine your cost per kWh. This allows you to determine the expected annual cost savings.
  4. Calculate finance terms: Understand the length, repayment frequency and expected interest rate of the EUF. This will help you forecast finance costs and determine if the savings of the project are equal to or exceed the finance costs.
  5. Determine tax treatment: Discuss how to treat this loan and assets with your accountant to determine your after-tax position for the project.
  6. Seek finance quotes: Seek finance quotes from financiers (a list is available on the Better Building Finance webpage below). Understand term of the loan interest rates, the minimum and maximum loans and repayment frequency.
  7. Apply to Better Building Finance for EUF: Request and lodge application forms to Better Building Finance, which administers EUF on behalf of councils. A list is available on the Better Building Finance website.
  8. Apply for EUF: Select a preferred financier. Secure the finance and arrange the contractor.
  9. Sign EUF: Better Building Finance will prepare relevant documentation to be signed.

As part of the process with your local council, they will provide relevant documentation, including a contract, to be signed.

Download an example EUA contract

EUF lenders

Select financiers have developed EUF products which specifically targets the energy efficiency needs of manufacturers and commercial property owners.

For more information on available councils and lenders, visit the Better Building Finance website.

Finance and government subsidies

Businesses can also receive a discount on energy efficient products that are installed by accredited Victorian Energy Upgrade (VEU) providers. A list of these products and providers can be found on the ESI website.

For more information, visit the Energy advice for business page on the Department of Environment, Land, Water and Planning website.

Victorian EUF market summary

For a detailed overview and data, view our Victorian EUF market summary page.

Want to know more? Get in touch with:

Correct as at January 2018.

Sustainability Victoria
Level 28, Urban Workshop,
50 Lonsdale Street, Melbourne VIC 3000
Phone (03) 8626 8700
Published by Sustainability Victoria.
Sustainable Finance – Environmental Upgrade Finance
© Sustainability Victoria January 2018

Disclaimer: The information provided in this document is general advice only. It does not take into account your particular needs or objectives and does not constitute legal or accounting advice. Accordingly, any comments or statements made are not a recommendation that a particular course of action is suitable for you and you need to seek your own legal, tax and accounting advice in relation to your specific circumstances.

This information is true and correct as of January 2018