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

Taiwan ESCO International Conference The business promotion experience of FESCO in Japan. September 22, 2000 at Taipei International Convention Center, Taiwan Kenzo Tsutsumi President of. Today’s Presentation. 1. Starting ESCO business in Japan 2. FESCO Corporate Structure

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

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

  2. Today’s 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

  3. 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.

  4. 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)

  5. 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

  6. 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 • Don’t stick to one solution • Don’t sell one appliance • Give sophisticated TCO solution to every client • Flexible financial services

  7. Standard Energy Service Process4 Steps Project Walk through EER Detail Survey DES ESA CM M&RS M&O 0.5 to 1.5 yrs

  8. Target Market Identified3-year FESCO Experiences • Industrial : • 70% of projects Sales US$8.5 mil. • Commercial : • 20% of projects Sales US$1.0 mil. • Institutional & Government : • 10% of projects Sales US$2.5 mil

  9. 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.

  10. 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

  11. 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.

  12. 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?

  13. 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

  14. Target Maket - 3Institutional & 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)

  15. 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.

  16. 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.

  17. 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

  18. 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

  19. 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

  20. 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 • Don’t stick to standard ESCO contract • ESCO is not promoting a single fixed financing • Performance Contracting should be adjusted to local situation & client needs

  21. 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

  22. Thank you Sanbancho Sekiya Bldg 2F 22-7 Sanbancho, Chiyoda-ku, Tokyo Japan 102-0082 TEL : +81-3-3288-4228 FAX : +81-3-3288-0102 e-mail : tsutsumi@fesco.co.jp HP : http://www.fesco.co.jp Portal Site : http://www.ecube-net.gr.jp

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