Today s Webcast starts at 11:30 a.m. Eastern. You will not hear audio un=l the Webcast begins

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1 Today s Webcast starts at 11:30 a.m. Eastern. You will not hear audio un=l the Webcast begins

2 Making energy data make sense Introducing EnergyReports TM from the makers of WebCTRL

3 Easily analyze a building s energy consump8on and demand data. Visualize building performance Compare different 8me periods Troubleshoot poten8al problem areas

4 Results: Reduce energy Improve comfort Earn an Innovation Point in the LEED certification process automatedlogic.com

5 Today's Moderator Naomi Millan Associate Editor Building Opera.ng Management

6 Richard G. Lubinski CEM, CEA, CDSM, CSDP, CEMSC, BEP Think Energy Management LLC Richard G. Lubinski is president of Think Energy Management LLC, an interna8onally recognized energy consul8ng firm. He is also a Life Member of the Associa8on of Energy Engineers (AEE) and serves as the president of the Northern Ohio Chapter of AEE. He holds several interna8onal professional cer8fica8ons including: Cer8fied Energy Manager #5866, Cer8fied Energy Auditor #18, Cer8fied Demand Side Management Professional #493, Cer8fied Sustainable Development Professional #18, Cer8fied Energy Management Systems Contractor, Cer8fied Business Energy Professional #46 and Cer8fied U.S. Green Lights Survey Ally. He was named Energy Engineer of the Year 2009 (AEE Region III), Energy Manager of the Year 2006 (AEE Region III) and Energy Engineer of the Year 2008 (AEE Northern Chapter). He writes and speaks regularly on a wide array of energy management topics. In 2009 one of his na8onal clients won the AEE Interna8onal Corporate Energy Management Award. enery.net.

7 To Ask Ques=ons Please use the ques=on and answer panel on the right- hand side of the screen and send to all panelists.

8 CREATING CREDITABILITY for Energy Upgrade Investments Richard G. Lubinski CEM, CEA, CDSM, CSDP, CEMSC, BEP Think Energy Management LLC All rights reserved

9 Learning Objec=ves DATA collec8on Understanding the CFO Need for CONSERVATIVE PROJECTIONS! Keeping score! (Need for M & V) Focus on the LONG TERM results Consider CONTINUEOUS IMPROVEMENT (and avoid slip back) = Produce award winning projects, happy clients and long term results.

10 TRUST, but VERIFY Ronald Regan

11 Data 24 months of electricity, natural gas /fuels, water sewer - cost and consump.on data All pages of the u8lity bills or detailed u8lity consump8on & cost histories Spreadsheets Charts meaningful presenta8on of data Data base (with HDD and CDDs) Data base (with produc8on, occupancy, etc.) Benchmark in terms of KWH / SF, MCF / SF Benchmark with BTUs / SF (EnergyStar Porkolio Manager)

12 Conserva=ve Projec=ons Energy savings and ROI for each ECM Accurate run hours Value of energy units saved* (average valve VS. incremental value) Measurements with data loggers and/or BAS Independent energy engineering calcula8ons (i.e. using a CEM or PE / CEM) Professionals make their numbers Measure and Verify the results Worry less about the projected payback period VS. the actual payback period. Earn and create CREDIBILITY through performance

13 Apply Proven Technology Energy Conserva8on Measures (ECMs) Energy Audits (level 1, 2 and 3) Understand the energy use in each building Common sense ECMs Avoid any ECMs with long payback periods Protect the building s comfort, look and safety Improve the building while reducing energy Force vendors to do their best work Apply best prac8ces No R&D! for manufacturers

14 Is Your EM Project D.O.A.? (dead on arrival)

15 Energy Management Always begins with finance and ends with finance

16 Do You Understand Your CFO?

17 The Normal Brain

18 The CFO s Brain

19 Understanding the CFO In order to effec=vely communicate with the CFO, you need to beoer understand his / her world What maoers to the corpora8on? What are the short- term and mid- term goals? How does the corpora8on look at opera8ng expenses? Capital expenses? Long term debt? What are the direc8ons and challenges in the opera8ng and capital budgets?

20 WHY Do Many EM Projects Not Get Approved? There are reasons why most energy projects fail to be approved and then funded. The problem is based on PRESENTATION ERRORS made using the tradi8onal methods Many rejected EM projects could have been sold, if presented in terms the CFO deals with.

21 WHO is at fault, if your energy project does not get approved? It is your fault if the CFO does not approve the energy project due to poor presenta8on of the facts

22 What Will NOT Sell an Energy Project to a CFO (alone) x SAVINGS: Expressed only in KWHs, KWs, Dths, BTUs, energy efficiency percentages x BENEFITS: Expressed improved lumens, longer life, lower maintenance cost x FINANCIAL VALUE: Expressed in simple payback terms x CASH FLOW ANALYSIS: Prepared by a party in interest such as the manufacturer of the energy savings product

23 MYTH : An Energy Project Will Sell its Self Unfortunately for the building owner, its staff, contractors and vendors, this is NOT true. The primary reason GOOD EM projects fail to get the CFO s aoen8on is the way the projects are presented

24 MYTH: C Level Execu=ves Care About Energy Costs* While u=lity costs are part of the opera8ng expense budget, their rela8ve impact on the big picture may be thought to be small. Some people have given into the idea that u=lity costs are not controllable and... not an issue C level execu8ves are supposed to deal with * CEO, CFO, COO

25 Corporate EM Excuses 1. We don t have the money for energy efficiency projects 2. We don t have the.me 3. We prefer to invest in growth and not energy savings 4. Energy Projects interrupt our process 5. I am accountable for produc.on not energy efficiency 6. We are already as efficient as we can be 7. Doing nothing - costs nothing

26 The Compe=tor Within The Alliance to Save Energy conducts ongoing research on the compe8tor within, a.k.a. organiza=onal barriers to energy efficiency. The barriers include: Misunderstanding the concept. Lack of staff and management awareness. Lack of cross- departmental coopera8on. Outdated accoun8ng techniques. Restric8ve budget and fiscal criteria. Lack of management accountability. Lack of resources. Complacency and denial.

27 FACT: You Are Already Paying For the EM Project The funds to pay for the EM projects are already in your opera=ng expense budget... but these funds are sent to the u8lity companies each year.

28 Simple Payback Period is Not Good Enough Simple payback analysis, while the most common and easy to understand, is the worse method to jus.fy an EM project GOOD BETTER BEST - Return on Investment (ROI) - ROI over the first X years - Net Present Value (NPV)

29 ROI What interest rate is your bank paying you for the use of your money?

30 IDEA: Present EM project CASH SAVINGS in terms of ADDITIONAL SALES NEEDED = to generate the same amount of cash If 10% net profit margin on sales then... $ 100,000 energy savings / year = $1,000,000 of addi8onal sales (to generate pretax profit of $100,000).. PLUS: What addi8onal expenses and 8me period are required to increase sales by $1,000,000?

31 Do You Understand the Energy Component of The Life Cycle Cost of Your Equipment? YOUR INVESTMENTS IN PURCHASE COST ENERGY COSTS LIGHTING 8% 92% MOTORS 5% 95% Beoer efficiency ligh8ng, motors, HVAC and controls pay for themselves in energy cost savings ( many 8mes over )

32 Time Value of Money

33 Understanding the CFO I would gladly pay you Tuesday for a hamburger today CFO: I will gladly pay you in the future... for almost anything today

34 Test Ques=on : EM Project Annual Energy Savings $ 4,000 # of Years in Analysis X 10 Value of the savings in the first 10 Yrs? = $ HINT: The answer is not what you think (per the CFO)

35 Net Present Value Net present value - is the present value of future cash inflows - minus the cost including cost of investment (calculated using an appropriate discoun8ng method. )

36 NPV - Defined The difference between the present value of CASH INFLOWS and the present value of CASH OUTFLOWS NPV is used in capital budge.ng to analyze the profitability of an investment or project. NPV compares the value of a dollar today to the value of that same dollar in the future, taking infla.on and returns into account.

37 NPV Basics + If the NPV of a project is posi=ve, it should be considered. - However, if NPV is nega=ve, the project should be rejected because CASH FLOW will also be nega8ve.

38 NPV - Example

39 EM Project #1: NPV? APPROVED OR NOT?

40 EM Project #2: NPV? APPROVED OR NOT?

41 Actual EM Project Investment $235,000 Annual Energy Savings $100,000 PB period 2.35 years ROI 42% Discount Factor 10% Analysis Period 20 Years U8lity Rate increases 5% / yr.

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43 NPV Calcula=ons You can do NPV calcula=ons using MS Excel The key is knowing the correct discount rate your company uses. Get help with NPV, if needed The CFO is likely to run his own NPV calcula8on but your addressing the NPV topic will at least get your project through the door.

44 NPV in Excel

45 Include a mul= year cash flow chart

46 Beyond NPV: Asset Apprecia=on The value of a real estate asset is based on some mul8ple if net cash flows. While this mul8plier will vary some, let assume it is 10 X net cash flow. Therefore an energy management project that generates $300,000 per year also increase the value of the property by $300,000 x 10 = $3,000,000 This could be more important to the owner then the NPV of the investment (If the property is going to be sold or flipped in the next few years)

47 Selling EM to The CFO Get support from a key member of senior management Include input from key staff before making the presenta8on Begin with simple projects Bring in outside support to validate your recommenda8ons & analysis Plan for the unexpected Present your project... in financial terms

48 Steps to Selling an EM Project at the C Level 1. State the purpose of the presenta8on 2. State the problem to be corrected 3. Describe the scope of the project 4. State the benefits 5. Clearly state the implementa8on cost 6. Explain any effect the project will have on opera8ons 7. Present the effect on the budget 8. Provide an implementa8on plan 9. Summarize the project and... ask for a decision Adapted from the Compressed Air Challenge, originally printed in the Winter 2003 edi.on of Energy MaXers, published by the U.S. Department of Energy.

49 Public Company? US DOE/EPA Energystar Tools Financial Value Calculator (FVC) MS Excel based CFO level analyst Actual databases of energy costs and financial performance for selected industries How does this EM project impact the corpora8on? Cost? Free!

50 M & V : Saving Performance vs. Projected Execu=ve Summary

51 M & V: Natural Gas Savings

52 M&V: Electricity Savings

53 M&V: Water/Sewer Savings

54 Crea=ng Creditability for Energy Upgrade Investments FINANCE before ROMANCE! =

55 Corporate Energy Management Program of the Year 2009 Associa8on of Energy Engineers HEI HOTELS & RESORTS Reduced corpora=on s u=lity cost by 24%

56 EnergyStar Partner of the Year 2010 HEI HOTELS & RESORTS 24 % Reduc8on in Energy Consump8on

57 Q & A Ques=ons? Thanks for aoending

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