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M7Johnson * Controls II. Guaranteed Energy Savings Process It is recommended that the City of St. Anthony enter into a contract for infrastructure improvement measures to reduce energy consumption and operating costs. This type of contract is known as a Guaranteed Energy Savings Contract or Performance -based Contract. As its name implies, Performance Contracting is a performance- based, turnkey approach to implementing facility improvement projects that generate savings from energy and operational costs. Performance -based contracting eliminates risk in two ways. First, Johnson Controls establishes the installation price for the entire project when the contract is signed. This will eliminate the common practice of change orders on construction -type projects. Second, Johnson Controls guarantees that the projected savings will occur. If the guaranteed savings are not realized, Johnson Controls will reimburse the City of St. Anthony for the difference. This process ensures that there will be a revenue stream to cover the costs of the projects. Preliminary Analysis The performance contracting process began with the preliminary investigation and analysis of the City of St. Anthony's facilities and infrastructure with regards to energy usage, operational and maintenance expenses and planned capital improvements. The purpose of the preliminary study was to determine the viability of utilizing performance -based contracting to address concerns and to improve operating efficiencies. The results of the preliminary survey verified that on a high level, performance -based contracting could help the City of St. Anthony improve their infrastructure in a budget neutral manner. Your decision to proceed with the Project Development Agreement (PDA) was finalized when the City Council approved it on August 28, 2007. Project Development Agreement — Customer Commitment The Project Development Agreement outlined the projects that the City of St. Anthony wanted Johnson Controls to evaluate from a lifecycle cost perspective. A detailed analysis of each facility improvement measure has been completed and includes all costs associated with the development and installation of each item, operational and energy savings as it relates to the item, and rebates associated with that particular item. This analysis establishes an accurate assessment of the overall projected budget impact. Our project development process is very detailed and specific to help the City make informed decisions and also to minimize Johnson Controls' risk associated with the performance guarantee. Our unique Business Case Analysis provides you with the opportunity to select the best combination of improvements in order to meet your goals and address your challenges. Contract Approval & Project Implementation Once the Project is approved, the final agreement is signed. It includes a detailed scope of work, timeframes, savings calculations, cash -flow analysis, guarantee methods and any ongoing services requested by the City of St. Anthony. The installation will be done in a timely manner to realize expense avoidance and generate additional savings as soon as possible. Page 4 City Of St. Anthony Village Performance Contract Analysis NO CONFIDENTM NOT TO BE REPRODUCED OR OISTR BUrEO WITHOUT JOHNSON CONTROLS' PERMISSION