1 Abstract—Reduction of energy consumption in built infrastructure, through the installation of energy-efficient technologies, is a major approach to achieving sustainability. In practice, the viability of energy efficiency projects strongly depends on the cost reimbursement and profitability. These projects are subject to failure if the actual cost savings do not reimburse the project cost promptly. In such cases, refinancing could be a solution to benefit from the long-term returns of the project, if implemented wisely. However, very little is still known about the effect of refinancing options on financial performance of energy efficiency projects. In order to fill this gap, the present study investigates the financial behavior of energy efficiency projects with focus on refinancing options, such as Leveraged Loans. A System Dynamics (SD) model is introduced, and the model application is presented using an actual case-study data. The case study results indicate that while high-interest start-ups make using Leveraged Loan inevitable, refinancing can rescue the project and bring about profitability. This paper also presents some managerial implications of refinancing energy efficiency projects based on the case-study analysis. Results of this study help to implement financially viable energy efficiency projects so that the community could benefit from their environmental advantages widely. Keywords—Energy efficiency projects, leveraged loan, refinancing, sustainability. I. INTRODUCTION ROWTH in human population and economic development strain the finite natural resources such as land, water, materials, food, and energy. To maintain, and improve the quality of life, we need to develop. By enhancing sustainability, we will preserve essential, natural, economic, and social resources for the sustenance of future generations. In recent years, the priorities of building industry have come to change due to these newly-aquatinted needs, especially in terms of energy. Conserving the available natural resources by minimizing building footprints is a key driver of this. Energy consumption, due to its environmental effects such as resource shortage and air pollution, is the focal point of this view [3], [5]. Construction of energy efficient buildings is a solution to meet this objective. The Leadership in Energy and Environmental Design (LEED) program conducted by U.S. Green Building Council is an example of sustainability efforts, which pursue the integration of sustainability values in building construction. Although effective in a long term, these efforts do not address the problem of energy waste in buildings constructed prior to initiation of such programs, Zohreh Soltani is with the Texas A. & M. University, United States (e-mail: soltani_zohreh@tamu.edu). which is also crucial to sustainability objectives. The reduction of energy use in built infrastructure by using energy efficient devices to prevent energy waste is a solution to this problem, known as Energy Efficiency measures. However, there are some obstacles, especially financial ones, in implementing Energy Efficiency projects [1], [6]. Like any other projects, the financial aspect of Energy Efficiency projects is very important. In fact, a trade-off between cost and benefit of the project determines whether the project is attractive enough to be implemented. There are many governmental, state and other non-profit organizations such as U.S Environmental Protection Agency, which provide various financing options, such as tax-exempt or low-interest loans, to facilitate initiation of Energy Efficiency project. However, it is still crucial for decision makers to be aware of the potentially quantifiable benefits and opportunities from improved building energy system, especially when the Paid- From-Saving concept is implemented for the fund (loan) repayment. Savings due to lower energy consumption in the future is a justification for feasibility of Energy Efficiency projects. Nevertheless, because of long-term return on investment and uncertainty of the savings, making such a financial decision is not easy for facility managers unless a clear perspective of the project financial behavior is available [1]. II. PROBLEM DESCRIPTION The complex and dynamic structure of future savings and payments along with the ambiguity of the results prevents facility managers to start Energy Efficiency measures in built infrastructure. The big question for every facility manager is whether future savings from lower energy consumption can compensate for the start-up loan repayment. In this regard, giving a clear perspective of financial behavior of Energy Efficiency projects, and conditions and strategies under which the projects can be led to success is an essential step towards sustainability and environmental objectives. The TAMU Sustainability Fund project is a successful example of such Energy Efficiency projects. Although its success can be an incentive to initiate similar sustainability projects, it is very important to notice that it was a special case of funding Energy Efficiency projects, at which a low-interest loan was available, and the minimum amount of savings was guaranteed by a contract. Facility managers usually need to make decisions based on more complex situations in which such a low-interest loan is not always available. In fact, the managers, who seek initiation of sustainability projects, need Investigating the Effect of Refinancing on Financial Behavior of Energy Efficiency Projects Zohreh Soltani, Seyedmohammadhossein Hosseinian G World Academy of Science, Engineering and Technology International Journal of Economics and Management Engineering Vol:9, No:10, 2015 3582 International Scholarly and Scientific Research & Innovation 9(10) 2015 scholar.waset.org/1307-6892/10002971 International Science Index, Economics and Management Engineering Vol:9, No:10, 2015 waset.org/Publication/10002971