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| Friday, November 20, 2009 |
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ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
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June 23, 2008 12:01 AM ET
Utility cost savings in so-called green buildings, those that minimize their use of energy, are expected to climb significantly from their current level of 10% a year. “I think people are giving more credence to the idea that energy, particularly electricity, is going to continue to rise, so they're being more aggressive in their buying of energy and more aggressive in their management of its use,” said John McGinley, senior vice president of property management services at Grubb & Ellis, which manages a portfolio of about 9,000 office properties nationally. Recent corporate efforts to trim energy use have ranged from tweaking office thermostats to adding solar panels. But more frequently they include downsizing office and manufacturing space and managing the energy needs for the remaining facilities better by retrofitting older heating, cooling and lighting systems with the latest technologies, or locking in utility rates through long-term contracts with suppliers. Consumer goods manufacturer Procter & Gamble has earmarked about 5% of its budget for capital expenditures this year, or about $5 million, for energy-saving projects. These include downsizing its office and technical center facilities and then remodeling and upgrading those facilities to more energy-efficient standards, said Larry Bridge, a senior manager in the company's workplace and infrastructure solutions unit. Mr. Bridge said P&G targets several projects each year that apply new technologies and alternative energy sources, citing as examples a co-generation project in Mexico and a solar project at the company's Phoenix plant. He noted that the objective is to reduce its “environmental footprint” by 10% within four years. That footprint includes energy and water use, waste production, and CO2 emissions. John Schinter, president of energy and sustainability services for the international property management firm Jones Lang LaSalle, said tenants bearing the brunt of higher utility rates are more frequently asking for energy audits and then formu-lating plans to better manage usage. Mr. Schinter noted that lighting is 40% of the utility bill in a typical office building, with total utility rates averaging $2 to $3 a square foot annually. As a result, “lighting technology has changed significantly in the past three to five years,” he said, citing technologies such as light-emitting diode (LED) bulbs that can help cut the expense by half and produce a return on investment within two years. Other possible improvements include a technology, known in consultant speak as “IP-addressable ballasts,” that enables a facilities manager to program specific light fixtures to turn on or off to mirror occupancy at any given time, rather than having to light entire floors for one or two workers, as is frequently required in older buildings. And those systems can also be programmed to perform simpler cost-saving tasks, such as turning lights on or off at preset times or adjusting them in a section of a building that gets a lot of natural light as the amount ebbs and flows. Heating and cooling management is another area where companies can quickly harvest savings through new technology, Mr. Schinter said. For example, programmable controls can be added to an air conditioning system so that instead of a building running two “chillers,” each at 30% power when demand is low, as is typical with older systems, it can set one to run at 60% power and turn off the other. (It's much more efficient to run one machine at twice the speed of two together.) The system can also be programmed to cool down the building when rates are lower, say before 8 a.m. and after 7 p.m. A system that takes into account lighting, heating and cooling could save as much as 20% to 30% on utility costs annually and pay back its cost within three years, Mr. Schinter said. Landlords are also looking at ways to save on energy costs, since many now must squeeze more cash flow from their properties as lease rate increases slow and they're forced to hold on to buildings longer since the resale market is also slow, said Mr. McGinley. Those that don't have leases that make utilities the responsibility of tenants are installing sub-metering systems to monitor tenants' usage to more accurately bill them and collect a service fee as well, said Mr. McGinley. And finally, big users of electricity are trying to hedge the risks of higher costs through long-term contracts, he said. Where one, two or three-year contracts were once considered extreme, Mr. McGinley said, he's heard of several lately in the three-to-five-year range, as more companies are comfortable betting that energy costs are not likely to come down soon.
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