Fort Lauderdale-based Future Energy Solutions works in the commercial lighting sector using an unusual business model.
The privately held firm finds businesses — like auto dealerships, malls and chains of restaurants, hotels and gas stations, whose inefficient lighting systems are big electricity users — and supplies them with new, energy-efficient fixtures, thereby generating significant savings. At no cost to the businesses.
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Customers do not pay anything for the upgrades, which can cost hundreds of thousands of dollars or more for large installations. However, they pay Future Energy Solutions a fixed percentage of the savings they obtain under 15-year contracts. Before signing a contract, FES conducts a survey of a customer’s current lighting usage, estimates its real needs and reviews the lighting share of electric utility bills. It then calculates current and future savings and works out the percentage of future savings that will be paid to FES.
“I am totally different from other lighting companies,” said Daniel Gold, the company’s founder and CEO. “We spend the money on your lighting upgrades, and provide free maintenance under our 15-year contracts. You pay us back over time out of your energy savings and free up capital to invest in your business,” said the British entrepreneur, who moved to Miami in 2009.
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Customers working with other lighting supplies must pay for an upgrade up front, and pay to maintain and replace fixtures after that.
Future Energy Solutions, which must finance the upgrades itself, ended 2015 with contracts that would pay the company an estimated $90 million over the course of 15-year agreements signed since 2014. In 2014, it had contracts worth about $60 million over 15 years. The company signed up its first client — a car dealership in northern Florida — in 2013. The company’s new systems use long-life light emitting diodes, or LEDs, and induction fixtures (like a fluorescent light without electrodes), and are custom designed for clients, providing improved lighting and immediately reducing their electric light bills. Customers usually turn on their lights from dusk to dawn, and sometimes use them for 24 hours.
The company manufactures its own high-quality equipment and fixtures, mostly in China. It has grown rapidly since it began offering its new business model in 2013 and has clients in the United States, Europe and Australia.
Getting Started
Future Energy Solutions was originally set up by Florida businessman Kenneth Katz in 2009 as a traditional commercial lighting firm. Katz, like others in the business, offered to sell and install energy-efficient lighting to companies with big lighting bills to save them money. It was a hard sell, and companies often preferred to keep their existing systems rather than make a big capital outlay. Gold, who was working with Katz, his father-in-law, had an idea: Offer to install new, custom lighting systems at no cost to customers. The firm would earn back its investment and make a profit when customers paid Future Energy Solutions a percentage of their savings over time. Gold and his two partners, Simon Conway and Anthony Lyons, pooled their resources and raised new funds to start the company. Gold, who took over the original FES after his father-in-law died, also employed some resources from Katz’s lighting company.
The Difference
Other lighting companies charge customers upfront for changing their lighting fixtures, which can run into millions of dollars for big users. Future Energy Solutions makes the entire investment in new equipment and provides free maintenance for the life of the contact. The customer pays nothing for new, energy efficient lighting, obtains savings on electric bills, and pays part of those savings to the company.
Sales: Future Energy Solutions obtains revenues in the form of fees customers pay based on a portion of their energy savings for the length of 15-year contracts. In 2015, the company had contracts expected to pay the company $90 million over the life of the 15-year agreements. This year, the aggregate revenue is expected to reach $120 million, and in 2017, $210 million.
Competitors
“There’s nobody in the world who does what I do,” Gold said. Nevertheless, there are other companies that supply traditional lighting upgrades for businesses, charging them upfront for new installations and for maintenance (service and parts). Some of these companies are GE, Sylvania, Phillips and the contractors who sell their products.
Analyst
LEDs magazine, an international publication covering the lighting sector, published a feature article on the Future Energy Solutions’ contract with National Car Parks, the leading operator of parking garages in the United Kingdom, calling it a “massive” and “unique” project. Starting in early 2014, FES replaced almost 100,000 lights at the car company’s 500 facilities throughout the U.K. with LEDs.
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Jo Cooper, the parking operator’s CEO, told the magazine that the project would save nearly $42 million over the life of the lights.
The Florida Automobile Dealer Association, a trade group, praised the company’s lighting upgrades at dealerships.
“The lighting project upgrades are installed by FES at no cost to the dealer and financed through the energy cost savings over time,” the association said in a statement. “In addition to the benefit of zero capital expenditure, the dealer has further benefits as FES assumes responsibility for all lighting maintenance.”
What Customers Say
“We’ve saved thousands of dollars on our FPL bills since [Future Energy Solutions] changed the lighting at our school,” said Richard P. Jean, principal at Archbishop Edward A. McCarthy High School in Southwest Ranches. The company started by installing LED lights at the school’s parking lots and gym about two years ago and eventually replaced internal and external lights all over the campus, which has 14 buildings. “There’s a big difference,” Jean said. “The new lights are brighter and illuminate the whole area. All the dark spots are gone, which is important for school safety.”
Jean met with other companies that wanted to upgrade the school’s lighting, but “it would have been very expensive. FES changed our lighting at no cost, and provides free maintenance,” something other companies won’t do, he said.
Savings and maintenance of parking lot lights are critical issues for Anthony Greenwood, who owns six McDonald’s franchises in Miami-Dade and Broward counties.
“I’ve worked with [Future Energy Solutions] for over three years and everything with them is top shelf,” Greenwood said. The McDonald’s franchisee said that maintenance is his biggest concern, since he has a lot of outdoor lighting and is worried about workers being hurt by falling off ladders. “I hardly ever see one of their lights out, but when I need them, they provide a very quick turnaround.”
Challenges
Convincing some potential customers that the company’s model is in fact far better than what traditional lighting companies do. “It’s about simple maths,” Gold said.
Outlook
The company’s goal is to have about 2.5 million light fixtures under management over the next five years, up from the current level of about 50,000 fixtures.
Source: Miami Herald