Investment Opportunities in the Global Energy Management Systems Industry

Transcription

1 Investment Opportunities in the Global Energy Management Systems Industry Integration of Technology Providers with Service Companies and Development of Smart Applications to Disrupt the Market April 2015

2 Contents Section Slide Numbers Executive Summary 3 Research Scope, Objectives, and Methodology 5 Introduction 10 Technology Landscape 15 Market Overview and Business Models 19 Competitive Landscape and New Market Entrants 26 Transaction Analysis 32 Funding Patterns 38 Conclusion 44 The Frost & Sullivan Story 48 2

3 Key Findings Frost & Sullivan identified some interesting trends and developments in the energy management systems (EMS) industry. Convergence of service oriented EM companies and technology producers will disrupt the energy management (EM) market. Supportive regulations, development of smart cities, and rising energy costs will all usher in a high growth era for EM services. Shorter payback periods and supportive legislation are attracting investors. Building dynamic, real-time EM solutions on the cloud is gaining popularity. Strategic partnerships, acquisitions, and innovation in service business models will enhance customer value. 4

4 Key Objectives EM service providers Who Will Benefit? Energy efficient lighting solution companies EM software companies Private equity investors Venture capital investors Fund managers Retail investors Sovereign wealth funds Hedge funds Insurance funds and other members in the investing community Sources Frost & Sullivan in-house research expertise Established business and financial databases, such as Capital IQ Annual reports of companies Published news Press releases Consistency of Charts While all efforts have been made to ensure that data are presented for the entire study period of , the focus remains on analysing trends and understanding the key strategies for each sector. Keeping this in mind, time periods for charts might not match. Also, the analysis includes EM service companies with revenues of at least $ million. 6

5 Key Terms Growth Capital/Private Equity (PE): A private placement investment made in a mature stage or middlemarket stage company with the intent of enhancing its growth Venture Capital (VC): Private placement investments in an incubation or start-up firm made with the intent of growing the business rapidly and deriving short-term returns EM: Energy Management BEM: Building Energy Management ESCO: Energy Service Company EPC: Energy Performance Contract BAC: Building Automation Control DSM: Demand Side Management PIPE: Private Investment in Public Equity IPO: Initial Public Offering CFO: Cash Flow from Operations M&A: Merger and Acquisition 7

6 Scope and Definitions Aim and Objective of the Study To provide an investment analysis of the EMS industry over the course of the next decade and beyond. To provide insight into growth opportunities with a crisp analysis of what constitutes excellence in financial management strategy in the global EMS industry. Study Period 2008 to 2024 Transactions Analyzed Geographic Scope: Global Applications Covered Home energy management systems (HEMS) Building energy management systems (BEMS) 102 transactions Companies Analyzed 35 companies Base Year

7 Methodology Investment Opportunities in the EMS Industry: Methodology, 2014 Financial journals Annual reports Market research reports Industry Web sites Industry-related databases Thought-leader briefings 1. Secondary data analysis Define objective and scope Secondary Research Primary Research CEOs/CFOs General partners Limited partners Board members Research heads Strategic decision makers Financial advisors Other investors Research process 2. Interview participants Stakeholder insights,, perspectives, and strategies 3. Analyze and collate diverse perspectives Assess the financial ratios Compute industry benchmarks Outcome: Key trends/events that can impact the industry in the next 48 months Research Methodology Research Process 9

8 Introduction to Energy Management Systems EMS consist of one or more energy conservation measures (ECMs) through load reduction and/or enhanced efficiency of building system operations. The primary ECMs are highlighted below: o Industrial heating, ventilation, and air conditioning (HVAC) ECMs may include boiler replacements, chiller plant upgrades, and high-efficiency HVAC fan motors and pump motors. o Lighting ECMs may include upgrades to compact fluorescent lamps (CFLs) or light emitting diodes (LEDs). o Water ECMs may include rainwater harvesting, solar water heaters, heat pump water heaters, and installation of low-flow aerators for showers and faucets. o Building automation control (BAC) ECMs may include installations of EM software, motion detection sensors, and integrated control of various building systems. o Other ECMs relate to onsite co-generation, renewable technologies (e.g., solar panels, solar water heaters) and building envelopes (e.g., window glazing, improved insulation). An EMS contract typically includes investment-grade energy audits, project design and engineering, assistance in acquiring project financing, equipment identification and acquisition, commissioning, measurement and verification (M&V), and training for facility personnel. 11

9 Energy Management Systems Industry Analysis 1 Capital costs are high for installing energy efficient designs. 2 Financing and maintenance of energy efficient solutions will be a key competitive factor. 3 Holistic end-to-end solution providers are likely to win major projects Brand visibility, pricing, and product warranty are decisive factors in the mass consumer market. Increased R&D support is needed from larger companies who would rather invest on expanding their customer base. Residential energy audits are rare and customers often do not understand the impact of energy savings due to adoption of energy efficient designs. Strong ties with channel partners, architects, and electrical vendors will go a long way in promoting the EMS industry. 12