Taiwan ESCO International Conference The business promotion experience of FESCO in Japan

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Taiwan ESCO International ConferenceThe
business promotion experience of FESCO in Japan
September 22, 2000 at Taipei International
Convention Center, Taiwan Kenzo
Tsutsumi President of
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Todays Presentation

• 1. Starting ESCO business in Japan
• 2. FESCO Corporate Structure
• 3. Business Policy Strategy
• 4. Standard Energy Service Process
• 5. Target Market (Industrial, Commercial,
  Institutional Government)
• 6. Project Examples (Energy Audit Services)
• 7. Critical Success Factors for ESCOs

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Starting ESCO business in Japan

• 2-years Consortium for start-up
• Pros Cons for ESCO business
• FESCO was started on May 1997
• Social changes strong pressure for energy
  conservation
• COP3 was held at Kyoto on Dec. 1997
• New energy conservation low on April 1999
• Deregulation of electric market on March 2000
  etc.

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FESCOCorporate structure -1

• Network alliance corporation
• 15 SPPNs PPNs for vertical integration

PPN
SPPN
Project Development
Monitoring Verification
FESCO
Construction Management
Energy Survey
Finance
Maintenance
Manufacture
Contractor
Engineering
SPPN Special performance partner network
(Shareholders of FESCO) PPN Performance partner
network (Affiliated members)
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FESCOCorporate Structure -2

• HQ only 7 to 8 employees
• 15 Satellites at affiliated SPPNs
• Engineering 4 companies
• Construction 1 company
• Air-conditioning Electricity 5 companies
• Finance 1 company
• Facility management 2 company
• Control 1 company
• Marketing 1 company

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Business Policy Strategy

• FESCO as Facility Doctor
• Comprehensive energy saving approach
• 15 SPPNs cover for different fields
• Other PPNs for the other fields
• - Swage treatment / Waste management
• - Heat insulation / Energy supply business
• Energy survey in neutral position
• Dont stick to one solution
• Dont sell one appliance
• Give sophisticated TCO solution to every client
• Flexible financial services

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Standard Energy Service Process4 Steps
Project Walk through EER
Detail Survey DES ESA
CM
MRS MO
0.5 to 1.5 yrs
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Target Market Identified3-year FESCO Experiences

• Industrial
• 70 of projects Sales US8.5 mil.
• Commercial
• 20 of projects Sales US1.0 mil.
• Institutional Government
• 10 of projects Sales US2.5 mil

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Target Maket - 1Industrial Energy Saving
Measures Needs

• Higher quality productivity
• Low costs 3 to 5-year payback
• Higher operating rate facilities preferable
  (24hrs, 365days)
• Demand side ESMs
• Facility energy Lighting / Air-conditioning /
  Motor control etc.
• Production energy Compressor / Boiler / Furnace
  / Machine etc.
• Other points Production control system /
  Maintenance etc.
• Supply side ESMs
• Co-generation / Ice storage system / Green energy
  etc.

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Target Maket - 1Industrial Barriers
Countermeasures

• Project investment horizon is short
• Select short payback ESMs / Planning is important
• Industrials have access to low cost capital
• Use their own capital instead
• They have good technical knowledge
• Work together / Support positioning
• They understand the real costs
• Break down your pricing let them choose
• They will steal ideas do it themselves
• Request a consulting fee / Letter of intent

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Target Maket - 2Commercial Energy Saving
Measures Needs

• Reduce operating costs (Higher operating income /
  profit)
• Lower energy / maintenance / water consumption /
  sewage costs
• Higher operating rate preferable Hospitals
  Hotels
• Demand side ESMs
• Facility energy Lighting / Air-conditioning /
  Motor control etc.
• Other points Total facility management /
  Maintenance etc.
• Supply side ESMs
• Co-generation / Ice storage system / Green energy
  etc.

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Target Maket - 2Commercial Barriers
Countermeasures

• Low motivation for energy saving
• Regulation promotion needed / subsidies
• Tenant occupied bldgs less concerned
• Utitily billing for energy services
• Sign ESA with each tenant
• Limit project common areas
• Focus on owner occupied facilities
• Professional real estate managers
• Do they have incentives for cost down?

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Target Maket - 3Institutional Government ES
Measures Needs

• Show the leadership for Energy Saving
• Funds to pay for the improvement
• Turnkey solution
• Increased quality safety
• Demand Supply side ESMs
• Same as the Commercial facility
• Lower operating rate / Longer payback period
• Government subsidies needed

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Target Maket - 3 Institutional Government
Barriers Countermeasures

• Will require competitive bid
• Request the turnkey bidding system (Design
  construction )
• Bureaucracy will slow things down
• Get inside the bureaucracy
• Customers are often less flexible
• Work with their problems restrictions
• Lack of technical financial sophistication
• Can be an asset for ESCO
• Simplify financial aspects (Single year
  accounting)

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Energy Audit Example - 1

• Chemical Plant
• Annual expenses for electricity fuels US 8
  mil.
• Annual electricity usage 23 GWh
• Proposed results
• Expected energy cost reduction US 3.6 mil.
  (45 of total)
• Required initial investment US 13.8 mil. (3.8
  yrs)
• Proposed ESMs
• Effective lighting system / Auto-condenser / Heat
  recovery system for exhaust air / Motor inverter
  control / Roof insulation / Co-generation /
  Effective swage treatment / Monitoring etc.

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Energy Audit Example - 2

• Semiconductor Plant
• Annual expenses for electricity fuels US 22
  mil.
• Annual electricity usage 125 GWh
• Proposed results
• Expected energy cost reduction US 4.4 mil.
  (20 of total)
• Required initial investment US 12.5 mil. (2.8
  yrs)
• Proposed ESMs
• Effective Clean room system / Effective lighting
  system / Auto-condenser / Motor inverter control
  / Co-generation / Ice-storage system / Effective
  water treatment / Monitoring etc.

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Energy Service Project Example - 1Industrial -
Computer device manufacturing

• Project scale
• Annual expenses for electricity fuels US 3
  mil.
• Annual electricity usage 17 GWh
• Contracted numbers
• Expected energy cost reduction US 150 K (5 of
  total)
• Required initial investment US 850 K (5.8 yrs)
• Installed ESMs
• Effective lighting system / Motor inverter
  control system / Renewal to Turbo compressor

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Energy Service Project Example - 2Commercial -
Office building in Tokyo

• Project scale
• Annual expenses for electricity fuels US 550
  K
• Annual electricity usage 2.3 GWh
• Contracted numbers
• Expected energy cost reduction US 76 K (14 of
  total)
• Required initial investment US 300 K (3.9 yrs)
• Installed ESMs
• Effective lighting system / Air-conditioning
  inverter control system

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Energy Service Project Example - 3Institutional
- Municipal Hospital

• Project scale
• Annual expenses for electricity fuels US 2
  mil.
• Annual electricity usage 11 GWh
• Contracted numbers
• Expected energy cost reduction US 200 K (10
  of total)
• Required initial investment US 1.5 mil. (7.5
  yrs)
• Got 0.5 mil. Government subsidy (Actual payback
  5.0 yrs)
• Installed ESMs
• Effective lighting system / Motor inverter
  control system / Automatic -monitoring system

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Critical Success Factors for ESCOsExternal

• Securing attractive projects
• Establish the Brand image for ESCO business
• Providing high quality engineering installation
  in competitive cost
• Strategic alliance partnership is must
• Providing flexible contractual scheme
• Dont stick to standard ESCO contract
• ESCO is not promoting a single fixed financing
• Performance Contracting should be adjusted to
  local situation client needs

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Critical Success Factors for ESCOsInternal

• Ability to leverage marketing, sales technical
  capability in the organization
• Management systems, software tools
• Internet Information technology maximum usage
• Energy audit process package tools
• Monitoring system software
• Entrepreneurship sprits belief
• Service is not free of charge
• ESCO is providing not for just energy saving but
  for best solutions to enhance clients value

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Thank you

• Sanbancho Sekiya Bldg 2F
• 22-7 Sanbancho, Chiyoda-ku, Tokyo
• Japan 102-0082
• TEL [phone]
• FAX [phone]
• e-mail tsutsumi_at_fesco.co.jp
• HP http//www.fesco.co.jp
• Portal Site http//www.ecube-net.gr.jp