of ESGto strengthen portfolio companies
Doing well by Doing Good
Ares Management, L.P. (Ares) Private Equity Group (PEG) has a history of successfully investing in leading companies with attractive growth profiles, in part, due to its long-standing strategy of collaboratively creating value with portfolio company management. Energy-related value creation initiatives within the PEG’s portfolio of companies could also fit into this collaborative framework. Ares chose to explore the EDF Climate Corps program as an avenue for achieving this goal.
Ensuring an initial win
Smart & Final
Smart & Final wanted to explore the opportunities around a LED retrofit for refrigerator display case lighting in 37 stores, with the possibility of expanding company-wide down the road.
Given Smart & Final’s store operating hours, the annual savings for the initial 37 stores would be approximately $150,000 per year or over $1 million over the LEDs lifetime. Retrofitting an additional 117 stores would yield savings of another $500,000+ annually.
LED retrofits were installed in 37 stores by the end of 2013, with the remaining stores scheduled to be completed during remodels. LED retrofits have since been installed for sales floor lighting as well.
A scalable solution
Floor & Decor
Floor & Decor wanted to dig deeper into its options around various energy efficiency projects. The company ultimately moved forward with LED retrofits at existing older stores, LED lighting for new stores and high-efficiency HVAC units in all existing and new stores. As a result:
- LED lighting was installed in a total of 37 stores: 33 new and 4 existing.
- All new stores continue to be built with high-efficiency HVAC units and many existing stores have higher efficiency HVAC replacements
Given the results, Floor & Decor participated a second year in the EDF Climate Corps program with a goal of evaluating the potential savings to be derived from the installation of Energy Management Systems (EMS) in existing stores. Floor & Decor has since installed EMS in over 70 stores.
“We presented the project to the C-suite...the executives wanted to know how quickly we could get the EMS units installed in every store.”
Michael Meek, Manager, Facilities Maintenance and Energy, Floor & Decor
Generating more wins
Guitar Center was looking for cost-effective ways to reduce energy consumption in its 280+ retail store base. An analysis showed that an LED pilot retrofit of T8 florescent lighting in just one store could save $14,000 annually at an implementation cost of about $30,000. This would result in almost a two-year payback and nearly 50% first-year ROI.
The pilot LED retrofit was completed in 2016 in one of its California stores, with initial results exceeding projected savings. LED retrofits have since been done in 12 additional California-based stores and more are planned for the future.
The following year, Guitar Center decided to explore energy efficiency opportunities available through the retrofit or replacement of existing less-efficient HVAC units. In certain instances, installing variable frequency drives (VFDs) could result in a one and a half year payback and over 60% first-year ROI.
Guitar Center is exploring the implementation of HVAC-related projects.
“Crunching the numbers and proving out the financial ROI, EDF Climate Corps fellows brought increased awareness of new ways to drive energy-efficiency related value within our organization.”
Darcy Higa, Director, Sourcing and Procurement, Guitar Center
The way forward
Transitioning to implementation
Entering the implementation phase can be a difficult given already busy facilities managers who are usually tasked with moving projects forward. To help ease this process, accumulating and sharing qualified vendor resources and information between portfolio companies would result in a more streamlined implementation process.
Beyond the low-hanging fruit
As companies incorporate the easily quantifiable and less complex projects, opportunities to find greater savings will arise around more sophisticated energy improvement initiatives. Tackling these larger challenges will require similar partnerships and collaboration with knowledgeable stakeholders to ensure success.
Tips for successful
energy efficiency projects
Crunch the numbers
Not all projects are created equal, so choose a project that has meaningful absolute dollar savings and ROIs to create positive future momentum.
Consult with relevant stakeholders – financial analysis may not be the only factor affecting decisions.
Make it easy
Present the most compelling options even though multiple projects and scenarios have been analyzed.
Some will go the extra mile to ensure accuracy of projected savings and high service levels.
Roll up your sleeves and keep your eyes open
A simple facility walk-through with an observant eye can help identify meaningful and potentially replicable projects.
Ask around and be open to suggestions
Employees often have great project ideas, but may lack required resources.
About Ares Management
Ares, is a publicly traded, leading global alternative asset manager with approximately $104 billion of assets under management as of June 30, 2017. The firm is headquartered in Los Angeles with offices across the United States, Europe, Asia and Australia. Its common units are traded on the New York Stock Exchange under the ticker symbol “ARES”.
About EDF Climate Corps
EDF Climate Corps embeds trained graduate students in organizations to help meet their energy goals by accelerating clean energy projects in their facilities. In just one summer, fellows get clean energy projects on the fast track to accomplishment – improving the organization’s bottom line and environmental impact at the same time.