Ecosave growth goals surpassed as energy prices escalate
Sponsored: Ecosave | 4 December 2017
In just one year Ecosave has surpassed its own growth goals in the vast energy efficiency market unfolding at the upper end of the institutional and manufacturing property portfolios, thanks to fiercely rising prices in the sector.
Staff numbers have grown from 11 to 25 and the independent energy services company is on the hunt for several more engineering and project management experts. It’s seeking candidates with 3-4 years’ experience up to those who can work at the premium level for very large corporates and can manage multiple projects that need to be rolled out nationally.
According to group managing director of Ecosave Australia and New Zealand John Harriott, the company grew 65 per cent in the past financial year.
For FY 18, based on projecting the first four months’ confirmed sales, there will be 47 per cent growth year on year.
“If we achieve our stretch target we will deliver 74 per cent growth compared to FY17,” he said in a recent interview.
The bonus structure has been reworked so that “everyone in the company has an owner mentality”, and Mr Harriott said he had a high degree of confidence the company would reach its stretch target.
The upside is that any success for the company is a boost for the environment.
Mr Harriott attributed the success to the company’s willingness to walk away from nine out of 10 potential contracts.
“If we can’t identify that we can deliver 30-45 per cent energy savings typically year on year and sometimes up to 60 per cent, then we find another opportunity,” Mr Harriott says.
The Ecosave business model guarantees the energy saving to the client.
“Obviously we have to be very careful and leverage the depth of our 15 years of engineering experience before we commit to that guarantee.”
Rising energy prices drive demand for services
So what are the business drivers urging people to take action?
Partly this is a story about skyrocketing energy prices, where at the expiry of contracts clients are facing the doubling and sometimes tripling of prices.
It’s a “compelling event” in anyone’s language, Mr Harriott says, and for many senior C-suite leaders in big corporations and government agencies it could also be the first time the energy issue has been elevated to high importance.
“There’s been a certain reluctance to invest in energy efficiency and there have been more engaging things in the corporate boardroom than saving $3 or $4 million a year,” Mr Harriott says.
“However, with the doubling of energy costs as people come off energy contracts, we’re suddenly rock stars.”
The size of the client portfolios explains why he’s talking such big energy bills. They include hospitals, such as the Echuca Regional Hospital; the NSW Department of Education; museums; aged care facilities; councils such as North Sydney and Wagga Wagga in NSW as well as Yarra Ranges, Knox and Boroondara in Victoria; plus organisations such as the Metropolitan Fire Brigade in Victoria.
Improvements, upgrades and new energy sources provide savings
Typically work has involved improvements to heating, ventilation and airconditioning to upgrading chillers, lighting, boilers and other plant and equipment, and improving or installing energy sources such as solar, co-generation and tri-generation.
Security of supply a big worry
According to Mr Harriott, another driver has been security of supply, painfully illustrated by the blackouts in South Australia last year. Manufacturers of foods such as yoghurts and smallgoods are particularly concerned. Failure of electricity causes spoilage and can force the closure of the business. However, steep price rises can do the same, and Mr Harriott says it won’t be long before the costs start to show up in economic performance.
The politicising of the energy markets and what amounts to the dismissal of the chief scientist’s solutions has also worked to sharpen the focus of the C-suite.
“So there’s been this sense of powerlessness where people know the energy market is broken at a number of levels,” Mr Harriott says.
But all this negative attention is on the supply side, he points out.
On the demand side the story can be quite different. It’s here that there is an opportunity to seize some control.
“Our clients can’t affect the supply side controversy but they can take action on the demand side and these are especially the people we’re engaging with.”
Customers are asking for guidance
So in health, insurance, real estate investment trusts, state governments and in local government, clients are taking control.
Ecosave’s chief operating officer Robin Archibald says it’s gratifying to see an emerging sense of corporate sustainability as well.
“Our approach is shared accountability with guaranteed savings outcomes,” he says.
“We want our clients to outsource their sustainability to us so that hospitals, for instance, can focus on the best possible health care for patients and museums can concentrate on how to produce the most engaging museum experience that they can bring to the market.”
It’s an approach, he says, that drives “repeatable, reportable success”.
In response to the demand from clients, the company is changing and refining its products.
“We’re increasingly asked to be that single point of contact and to leverage our 15 years of implementing these projects, to refine what our clients should be asking the market to deliver.”
As a result, Ecosave has formed a consulting service.
“Clients are saying: ‘We intrinsically feel we can save 30 to 40 per cent in our energy but we don’t know what to ask for first – lighting or solar on the roof. We don’t know what we should be asking the market to quote on,’” Mr Archibald says.
“We at Ecosave, however, do know what they should be asking for and in what sequence.
“As an example, there’s no point in starting by putting a big whopping solar on the roof and then finding the energy efficiency can save 40 per cent of consumption so most of the solar plant is unwarranted.”
The advisory business now adds to other business units – Ecosave Efficiency, to deliver efficiencies; and Ecosave Watch, a data analytics platform – to ensure the performance doesn’t drop off.
“Increasingly we’re being asked by clients to maintain the infrastructure of the solar so that we remain a single point of contact as an outsourced sustainability department.”
The funding model that’s turning heads
The last piece of the puzzle, Mr Harriott says, is to provide the funding model, developed by the business founder Marcelo Rouco, that can deliver the plant and equipment needed to produce the identified savings without the capital spend but rather as a procurement of energy business.
In practice this can mean a customer with a $2 million annual energy bill is now able to shave 40 per cent of energy costs, and using the savings to fund the capital improvement to deliver the savings with additional upside.
“That’s $800,000 that the client never sees anyway because it’s going to the utilities,” Mr Harriott says.
So the client gets the benefit of the new infrastructure – an off-balance sheet treatment because Ecosave provides and retains ownership of the infrastructure – coupled with the ability of the customer to purchase the infrastructure at the end of the agreed period at market values.
The variable costs of electricity charged to the client by Ecosave means that, taxation-wise, the new method of energy supply becomes an operational item, and remains off balance sheet, freeing up capital availability for core business investment.
Outsourcing to the experts
Mr Archibald says that, essentially, clients are outsourcing their sustainability so they can concentrate on core business.
If you’re going to step up to responsibility to the environment and stay focused on your core business, it pays to get experts to do the specialist work.”
Mr Harriott says staff bonuses have become key for the organisation.
“If you don’t look after people, they go,” he says.
“We pay at, if not above, industry averages. Our bonus schemes are tied to the success of the entire company.
“We’re trying to run a company where at the cultural level people go the extra mile to provide better service.”
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For more information about Ecosave, visit www.ecosave.com.au.