electroroof tm managing energy risk: are you ready for a crisis? december 8, 2005 barry swenson...
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ElectroRoof TM
Managing Energy Risk: Managing Energy Risk: Are You Ready for a Crisis?Are You Ready for a Crisis?
December 8, 2005
Barry Swenson Builder
MCM Diversified
ElectroRoof TM
A looming energy crisis
ElectroRoof TM
A looming energy crisis
ElectroRoof TM
A looming energy crisis
47%
17%
21%
12%1% 1%
California Energy Production
ElectroRoof TM
A looming energy crisis
Electricity Rates 2005 - 2015
??6%
10%
15%
ElectroRoof TM
Managing Energy RiskManaging Energy Risk
Energy crisis: the big picture
Risks to building developers and owners
Strategies for managing energy risk
The ElectroRoof solution
Proposed projects
ElectroRoof TM
Key drivers of rising electric rates
Growing demand
Tightening supply
Vulnerability to supply disruptions
ElectroRoof TM
Growing demand
OWN SUPPLY
DEMAND
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Oil production is peaking
Source: ASPO
Oil production has peaked
Oil production can be increased
China 2003India
2004
US 1971
Australia 2000
Indonesia 1977
Canada 1973
Venezuela 1970
Argentina 1998
Ecudador 2004
Columbia 1999
Mexico 2002
Congo 2001
Libya 1970
Sudan 2005
UK 1999
Norway 2003
Uzbekistan 2003
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Oil production is peaking
Source: ASPO
Oil production has peaked
Oil production can be increased
Brazil
Boliva
Russia
Nigeria
Algeria
Angola
ChadIran
Iraq
Saudi Arabia
KazakhstanAzerbaijan
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?
01920 1960
World100
80
60
40
20
2000 2040
When will global production peak?
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Vulnerability to supply disruption
Natural disasters?
Human error?
War?
ElectroRoof TM
Managing Energy RiskManaging Energy Risk
Energy crisis: the big picture
Risks to building developers and owners
Strategies for managing energy risk
The ElectroRoof solution
Proposed projects
ElectroRoof TM
Energy risks for developers and owners
Reduced income, resulting from:
• Tenant turnover
• Higher vacancy rates
• Increased operating expenses
Lower property values
ElectroRoof TM
Energy risk by type of building
Warehouse: 2-5 watts per square foot
Office Building: 5-10 watts per square foot
Low Risk Medium Risk
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Energy risk by type of building
Manufacturing: 10-50 watts per square foot
Data Center: 50-100 watts per square foot
High Risk High Risk
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Rising energy costs erode property values
Source: BOMA
22%
11% 67%NOI
Energy Costs
Other Operating Costs
ElectroRoof TM
Rising energy costs erode property values
Source: BOMA
22%
31%
48%NOI
Energy Costs
Other Operating Costs
ElectroRoof TM
Property value based on income capitalization:
Annual expected gross revenue $ 3,000,000Less operating expenses - 1,000,000
Net operating income (NOI) $ 2,000,000
Capitalization rate (Ro) 0.085
VALUE (NOI/ Ro) $ 23,529,412
Rising energy costs erode property values
ElectroRoof TM
After 10 years, assuming a 10% annual increase in electric rates:
Annual expected gross revenue $ 3,000,000Less operating expenses - 1,000,000 1,778,122
Net operating income (NOI) $ 2,000,000 1,221,878Capitalization rate (Ro) 0.085
VALUE (NOI/ Ro) $ 23,529,412 14,375,035
$9,154,377 (39%) net decrease in calculated building value
Rising energy costs erode property values
ElectroRoof TM
Managing Energy RiskManaging Energy Risk
Energy crisis: the big picture
Risks for building owners and developers
Strategies for managing energy risk
The ElectroRoof solution
Proposed projects
ElectroRoof TM
Strategies for managing energy risk
PhotovoltaicsEnergy efficiency
ElectroRoof TM
Managing energy risk: case study
120,000 sq. ft. class A office
building in Syracuse, NY
Bank REO commissioned an
appraisal in preparation for a
bankruptcy auction
ElectroRoof TM
Managing energy risk: case study
Results of initial REO appraisal:
Total annual energy costs $ 517,000Cost per sq. ft. 4.46
Property value $ 4,300,000Value per sq. ft. 37.13
ElectroRoof TM
Managing energy risk: case study
Appraisal was revised to reflect the results of an energy analysis:
Total annual energy costs $ 517,000 227,000
Cost per sq. ft. 4.46 2.35
Property value $ 4,300,000 5,500,000
Value per sq. ft. 37.13 47.50
$1,200,000 (28%) net increase in appraised building value.
ElectroRoof TM
Risk management ROI
Lower operating costs
Higher net operating income
Increase in building value
Better financing opportunities
ElectroRoof TM
Managing Energy RiskManaging Energy Risk
Energy crisis: the big picture
Risks for building owners and developers
Strategies for managing energy risk
The ElectroRoof solution
Proposed projects
ElectroRoof TM
Integrated energy solution
ElectroRoof TM
Who we are
Contractor
Insulated Roofing
Marketing and Project Development
ElectroRoof TM
Who we are
ElectroRoof TM
Waterproof insulated roofing
ElectroRoof TM
Managing Energy RiskManaging Energy Risk
Rising electric rates: the bigger picture
Risks for building owners and developers
Strategies for managing energy risk
The ElectroRoof solution
Proposed projects
ElectroRoof TM
• GSA Building – Salinas
• CIS Building – Monterey Avenue, San Jose
• 7th and Alma, San Jose
• 13000 Depot Street, San Martin
• 696 E. Trimble Road, San Jose
• 2930 Pacific Avenue, Livermore
Potential solar development projects
ElectroRoof TM
CIS Building, Monterey Avenue
System Cost
Total gross price $ 1,533,000Incentives - $ 1,297,000Installed cost after incentives $ 236,373
Cost Savings
Year one cost savings $ 50,000Percent of electrical expenses 51%
Economic AnalysisPayback in years 6.7Internal rate of return 11%
ElectroRoof TM
CIS Building, Monterey Avenue