Financial Value Calculator
Doug Gatlin NASEO 2002 Annual Meeting
How do you screen investments?
Payback? Life cycle cost or net present value? Internal rate of return? Increased earnings per share? Shareholder value? What about your facility engineers?
Fundamental Disconnect
Earnings per Share, Shareholder Value
Facility Speak
Payback, Life Cycle Cost, NPV, IRR
Financial Speak
Differences in approach often challenge justification of corporate investments at the building level.
Critical Communication
Earnings per Share, Shareholder Value Payback, LCC, NPV, IRR
Common financial language increases decision-making and expands comfort zone for investing.
Compelling Reasons to Play
For most sectors, financial messages are stronger than traditional energy industry metrics…
A 10% Reduction in Energy Costs is Equivalent to…
• Increasing profit margins by…. • Increasing earnings per share by… • Increasing sales per square foot by… 6% 7% $60
Supermarket Costs
• Energy is a surprising cost component that is seldom adequately controlled. • Every dollar saved can have the same impact on your bottom line as increasing sales by $85.
7% 34% 5%
3%
51%
Leases Utilities People Maintenance/Repair Other (Supplies, taxes, etc.)
Financial Value Calculator (FVC)
• Combines top-down and bottom-up financial metrics (payback, NPV, IRR, EPS, Shareholder Value). • Allows early analysis of corporate-wide potential for investing in reduced operating costs.
Financial Value Calculator (FVC)
• Helps you assess opportunity across your entire portfolio, where your initial decisions need to be made. • Builds critical intuition regarding the power of your ENERGY STAR commitment.
FVC’s Simple Approach
Inputs: • Annual Energy Cost • Total Portfolio SF • P/E Ratio • Earnings per Share • Outstanding Common Shares Variables and Output: • Total Investment • Percent Savings • Payback Period • NPV • IRR • Increased EPS • Shareholder Value
After refining the tool’s assumptions and specifying goals, you can quantify the link between energy performance and financial performance.
After choosing the savings and investment goal, the tool will calculate total investment and link savings to overall corporate financial performance.
Sample Results - O&M
Variables and Output: • Total Investment = $3,214,353 • Percent Savings = 5% • Payback Period = 0.8 Years • NPV = $19,505,530 • IRR = 125% • Increased EPS = $0.017 • Shareholder Value = $42,771,479
Sample Results – Aggressive Upgrades
Variables and Output: • Total Investment = $25,714,827 • Percent Savings = 20% • Payback Period = 1.6 Years • NPV = $66,333,564 • IRR = 62% • Increased EPS = $0.061 • Shareholder Value = $156,197,030
Results...
State Logo
• Low risk, quick returns. • Fiscal and environmental responsibility. • Stakeholders are increasingly interested in your leadership in this arena. Motivates building benchmarking as next step…