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.

Taking the Temperature at HCA: EDF Climate Corps fellow checks-up on the company's HVAC systems

By Nozomu Nagai, 2011 EDF Climate Corps Fellow at HCA, MBA Candidate at Washington University’s Olin Business School

This summer, I have a unique role as the only EDF Climate Corps fellow seeking energy efficiency opportunities particularly in hospitals and surgery centers. I’ve been tasked to seek out energy savings at Hospital Corporation of America (HCA), the leading healthcare services provider in the U.S. operating 165 hospitals and 105 surgery centers. And the opportunity is huge. Healthcare buildings consume 9.1 percent of total fuel consumption in U.S. commercial buildings, according to the U.S. Energy Information Administration.

Last year’s EDF Climate Corps fellow at HCA, Nick Fassler, focused his efforts on lighting retrofits. As many hospitals use over 100 types of lamps and fixtures, the project entailed scrutinizing the results of lighting audits at four different hospitals representative of the company’s portfolio. He ultimately recommended lighting retrofits at facilities nationwide that could cut 82 million kilowatt hours of electricity per year, saving $7.8 million in electricity costs and 52,000 metric tons of CO2 emissions annually. Over the lifetime of the project, this could save the company $14.7 million in net operating costs. Based in part on Nick’s contributions, HCA’s sustainability board and executive team is developing a staged lighting retrofit program across the organization. The program is expected to begin rolling out in late 2011.

Aware of the success of last year’s lighting retrofit project, I set out to find savings elsewhere. The folks at HCA helped me identify some projects around HVAC and water heating.  According to the U.S. Energy Administration, HVAC and water heating systems consist of about 52% and 15% of total energy consumption in typical healthcare buildings respectively.

Shortly after arriving at HCA, I began gathering the historical energy data of all HCA facilities and several pilot projects as well as data for weather normalization. I’ve found a couple of interesting opportunities so far. The first entails looking at how modular boiler heating systems can save energy and lower costs. And the second involves examining a new concept around a Variable Refrigerant Volume (VRV) system HCA installed into a warehouse application. This project is particularly exciting, as it’s one of the first times VRV has been used in a warehouse setting.

Moving forward, I will partner with HCA’s Energy and Water Taskforce to analyze the potential reduction in energy consumption by installing these two advanced systems and quantifying the cost and benefits for each. HCA has provided superior direction in helping me make the most of my time here so far, and I’m looking forward to further exploring my unique opportunity in the growing healthcare industry.

EDF Climate Corps matches trained students from leading business schools with companies 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.