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EXAMPLE
A Draft Proposal to
Xxxxxxxxxx
for
XxxxxxxxxxPower
PURPOSE: To create a full-service energy company inside Xxxxxxx capable of buying energy wholesale and selling back retail to Xxxxxxx’s own office/hotel properties. It is estimated such a company could generate a minimum $100 million a year when fully implemented.
HOW: Given the enormous assets and purchasing power of Xxxxxxx Real Estate, a dedicated power company could buy energy off the grid and sell back to itself, creating a new revenue stream inside Xxxxxxx, benefiting Xxxxxxx as well as Xxxxxxx’s tenants so they too can enjoy the margins currently enjoyed by utility companies and retail energy providers.
WHY: In the last decade, the energy industry has become de- centralized from full-service power companies to three primary lines of energy businesses: (1) production/generation; (2) transmission; and (3) sales/marketing. Traditional full-service power companies have become increasingly scarce as companies such as Allegheny Power, Duke Power, Florida Power, etc., all specialize in one of the three primary business sectors. Deregulation has also made it possible for large companies like Xxxxxxx to negotiate reduced retail prices from power providers in several states. What we propose is to take this one-step further (i.e., Buy Wholesale). In addition, Xxxxxxx would benefit from the tax breaks and incentive packages currently being offered at all levels of government to help utility companies reduce energy demand as well as consumption on transmission grids (i.e., reducing the likelihood of Brown-outs). Finally, the tremendous improvements in technology and engineering have made it much more attractive to upgrade and retrofit buildings using conservation measures to lower energy consumption (i.e., Going Green).
WHEN: We propose to immediately create a new company inside Xxxxxxx (i.e., XxxxxxPower), which would include a full range of energy services, but most importantly, would buy energy wholesale and sell-back retail to Xxxxxxx’s own properties. As mentioned, in addition to creating a new revenue stream for Xxxxxxx’s Real Estate division, this would also lower utility prices for Xxxxxxx’s customers/tenants and could even be used as a sales/leasing marketing tool. Although the power industry may be consolidating within the three primary business sectors, xxxxxxx’s secure customer base makes it possible for Xxxxxxx to not only buy and sell energy, but become its own full-service energy company, taking advantage of these tax advantages, conservation packages, as well as the latest in technology and infrastructure improvements. Xxxxxxx would even be in a position to offer financing (shared-savings programs) to tenants as well as to other governmental and non-governmental institutions in these same “Xxxxxxx Communities” who would benefit from Xxxxxxx’s ability to finance energy improvements off balance sheet (i.e., innovative shared-savings programs financing energy improvements for schools, hospitals and other non-profit organizations that might not otherwise be able to afford new conservation measures/technologies). So a Xxxxxxx-backed power company could finance energy improvements off balance sheet and be paid-back through the guaranteed energy savings, creating yet another revenue stream for Xxxxxxx. Finally, this new energy business would have the added benefit of making Xxxxxxx’s properties more attractive for resale and leasing by having discounted energy and more energy efficient buildings, making happier tenants who are able to buy energy below market rates and enjoy lower utility bills.
WHERE: We propose to build this full-service power company inside Xxxxxxx with the help of some of the best names in the business (e.g., Trane, Sempra, ECM, etc.). So rather than selling retail energy, new equipment or engineering services to Xxxxxxx, we are proposing a business strategy as strategic partners, not vendors. In short, Xxxxxxx would own the business and reap the rewards currently enjoyed by the middlemen (i.e., utility companies, retail energy providers, equipment vendors, energy engineering firms, etc.).
BENEFITS:
–Lowers up-front utility costs for Xxxxxxx Real Estate.
–Creates new revenue streams for Xxxxxxx.
–Takes advantage of tax benefits/incentives offered by federal, state and local governments.
–Makes Xxxxxxx’s properties more attractive for leasing and resale.
–Lowers energy costs for Xxxxxxx’s customers/tenants.
–Provides financing options for tenants and possibly even non-Xxxxxxx customers (e.g., local hospitals, schools, etc.).
–Reduces demand on the power grid; benefiting the environment.
–Provides positive PR/government relations at a time when private equity firms and commercial real estate firms could use help on Capitol Hill.
CONTACTS: Michael Kaiser or Eugene Garcia: (202) 745-2900