Private Equity and EDF Climate Corps: A Growing Relationship

By Lillias MacIntyre, Corporate Partnerships, Program Associate

Mutual benefit is an essential characteristic of a successful relationship. At EDF – and especially within Corporate Partnerships – we continue to merge and strengthen the relationships within our networks to form alliances that work.

In May, I wrote about the increasing synergies between our Green Returns and EDF Climate Corps projects.  Both initiatives tap into important networks that make the business case for improving environmental management. To boot, in 2011, nine of the 49 companies participating in the EDF Climate Corps program were owned by private equity (PE) firms:

  • Booz Allen Hamilton (Carlyle)
  • Dunkin’ Brands (Carlyle)
  • Diversey (CD&R)
  • ServiceMaster (CD&R)
  • QTS (General Atlantic)
  • HCA (KKR)
  • SunGard (KKR)
  • Dave & Buster’s (Oak Hill)
  • ViaWest (Oak Hill)

Below are some examples of potential savings and reductions from projects identified by EDF Climate Corps fellows at PE owned companies:

Dunkin’ Brands – Tasked with identifying store-level energy efficiency projects and analyzing their financial potential, the fellow determined that a 15% reduction in electricity usage at 2,700 free-standing stores could result in collective savings of 80 million kWh, $12 million in energy costs and 47,000 MT in associated CO2 emissions annually.

Diversey – Four primary infrastructure improvements were proposed: on-demand hot water heaters, direct-fire space heaters, lighting sensors/controls, and a new compressed air system that could generate savings greater than $200,000 and 900 MT of CO2 annually over the life of each project.

Service Master – The fellow built on work from the previous year and found ways to reduce fleet fuel consumption and corporate electricity use by developing business cases for hybrid and electric vehicles in addition to identifying lighting upgrades.  These projects could reduce CO2 emissions by 143 MT, cut 114,000 kWh of electricity and save $15,500 in electricity costs annually.

QTS – With energy initiatives already in place, the fellow validated and improved those practices.  The company was enrolled in demand response programs, alternate energy solutions were implemented, and recycling and e-cycling plans were developed.  If rolled out to a few facilities, these programs could cut 60 million kWh of electricity, 40,000 MT of CO2 emissions and 15 million gallons of water use annually – saving QTS $4.3 million in net operating costs over project lifetimes.  QTS plans to invest $10 million to implement the identified projects – a solid indication the company understands the value these initiative will add to its operations.

HCA – HCA participated in the program in 2010 and is also part of the KKR/EDF Green Portfolio Program, but despite this, the 2011 fellow was able to identify and evaluate two project ideas: the installation of Variable Refrigerant Volume (VRV) heating and cooling systems and modular boiler systems.  Both projects could yield reductions of 2.3 million kWh of electricity and 81.5 million kWh of natural gas, saving $2.3M in energy costs and more than 16,000 MT of CO2 emissions annually.  This could potentially save the company $16M in net operating costs over the 20 year project lifetime.

SunGard – In addition to being a part of the KKR/EDF Green Portfolio Program, this company participated in the EDF Climate Corps program last summer.  To build on current initiatives, the fellow developed a framework for establishing office Green Teams and Energy Treasure Hunt campaigns to identify additional opportunities.

ViaWest – The fellow focused on recycling, water efficiency, employee engagement and energy efficiency.  Recommended projects included corporate-wide electronic and cardboard recycling, PUE (Power Usage Effectiveness) reduction targets, energy efficiency financing and lighting maintenance projects.  These projects could help ViaWest recycle approximately 75 MT of computers and cardboards and save 7 million kWh in annual energy use – cutting roughly 4,400 MT of CO2 emissions and generating$500,000 in cost savings.

The entire group of 2011 EDF Climate Corps fellows (including those placed at cities and universities) identified $650M in potential net operating cost savings; potential reductions in energy use equivalent to what 38,000 homes use per year; and opportunities to avoid CO2 emissions equivalent to the emissions of 87,000 passenger vehicles annually.  (Complete results and highlights can be found on our website.)

Host companies pay fellows $1,250/week for 10-12 weeks and reimburse for travel expenses to the EDF Climate Corps training and end of summer network event.  With an 86% implementation rate for energy savings over the first three years, the IRR of an EDF Climate Corps fellow can be greater than a top quartile PE fund.  Furthermore, by hiring a fellow, firms can jumpstart their environmental management programs and generate momentum for implementing the program throughout their holdings.

After this year’s results, we expect to have even more PE firms and portfolio companies involved in 2012.  Companies are signing up now as the February 23rd deadline approaches, so I encourage you to visit our website and learn more!

EDF Climate Corps places specially-trained MBA and MPA students in companies, cities and universities to develop practical, actionable energy efficiency plans. Sign up to receive emails about EDF Climate Corps, including regular blog posts by our fellows. You can also visit our Facebook page or follow us on Twitter to get regular updates about this project.