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Service Customer Offerings

Dallas, Texas 1/31/13

Agenda
Customer Purchase Criteria Customer Economics Potential Service Offerings Testing of Offerings Immediate Plan Potential Add-on Offerings Budget Implications

Customer Purchase Criteria


Services Offerings

Service Customer Purchase Criteria


Perceived Need
Escalating operating costs Sustainability agenda Operating personnel capabilities Management knowledge of plant equipment Increasing equipment maintenance issues

Budget Constraints
Limited capital Annual time horizon

Value Proposition
Risk vs. reward

Customer Economics

Customer Economics
Most customers looking at the payback Payback calculated as upfront cost divided by electrical savings Electrical savings calculations consist of
Kwh rate Assumed improvement Ton hours produced Starting efficiency measurement

Current EffTrack Economics


Larger systems are the only ones that are viable Large upfront cost to get equipment installed Upfront cost based on number of chillers Annual cost based on tonnage Must assume at least 15% improvement Need utilization rates over 24% Situations where electric rates are below $.07 kwH are very difficult to justify

Plant Scenarios Typical EffTrack Installations


Tonnage Initial Cost Annual Cost Electrical Rate Utilization Improvement Payback (Months) $ $ 2000 2000 2000 2000 70,000 $ 70,000 $ 70,000 $ 70,000 12,000 $ 12,000 $ 12,000 $ 12,000 $0.060 $0.070 $0.080 $0.090 20% 24% 28% 32% 5% 10% 15% 20% 153 55 27 16

Tonnage Initial Cost Annual Cost Electrical Rate Utilization Improvement Payback (Months)

4000 4000 4000 4000 $ 112,000 $ 112,000 $ 112,000 $ 112,000 $ 18,000 $ 18,000 $ 18,000 $ 18,000 $0.060 $0.070 $0.080 $0.090 20% 24% 28% 32% 5% 10% 15% 20% 121 43 22 11

Tonnage Initial Cost Annual Cost Electrical Rate Utilization Improvement Payback (Months)

8000 8000 8000 8000 $ 170,000 $ 170,000 $ 170,000 $ 170,000 $ 30,000 $ 30,000 $ 30,000 $ 30,000 $0.060 $0.070 $0.080 $0.090 20% 24% 28% 32% 5% 10% 15% 20% 94 34 17 9

Potential Service Offerings

Potential Service Offerings


EffTrack EffTrack Lite ChillSmart Analysis Ongoing ChillSmart Analysis Assessment Offerings Modified Shared Savings Arrangements

The Hudson Services Funnel


Go for the Full Monte first!
Earn an upfront margin and secure high margin recurring revenue ie. Sell the traditional EffTrack equipment and monitoring service

Take less upfront margin but secure monitoring service of the chillers, ie. EffTrack Lite Go for some recurring revenue, ie. Ongoing ChillSmart Demonstrate our Brilliance, ie. Assessment or ChillSmart
Use the Assessment as our foot in the door and refund some of the cost if we can later up sell to a full monitoring solution Try to get some remediation work

Make sure customer understands all Hudson Services

EffTrack
Install components on chiller
4 temperature sensors 2 differential pressure sensors (flow) 2 refrigerant pressure sensors Electrical CT to gather volts, amps power factor Data gathering panel at each chiller, Master for each 6 chillers Calculate efficiency Review for alarms Generate reports Advise customer of operating issues

Transmit data in 15 min. intervals to Tulsa


Costs
Upfront ~ $25K per chiller Ongoing ~ $5 per ton per year Payback between 1 and 3 years

EffTrack Lite
Lower upfront cost to customer by using customer existing equipment Have customer recalibrate existing sensors and have customer add any additional sensors Gather information from BAS systems and/or existing energy management systems Charge customer a one-time set-up fee, a quarterly fee per plant and a quarterly fee per ton

Plant Scenarios EffTrack Lite


Tonnage Initial Cost Annual Cost Electrical Rate Utilization Improvement Payback (Months) 2000 2000 2000 2000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 9,000 $ 9,000 $ 9,000 $ 9,000 $0.060 $0.070 $0.080 $0.090 20% 24% 28% 32% 5% 10% 15% 20% 46 11 6 3

Tonnage Initial Cost Annual Cost Electrical Rate Utilization Improvement Payback (Months)

4000 4000 4000 4000 $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 18,000 $ 18,000 $ 18,000 $ 18,000 $0.060 $0.070 $0.080 $0.090 20% 24% 28% 32% 5% 10% 15% 20% 46 11 6 3

Tonnage Initial Cost Annual Cost Electrical Rate Utilization Improvement Payback (Months)

8000 8000 8000 8000 $ 20,000 $ 20,000 $ 20,000 $ 20,000 $ 30,000 $ 30,000 $ 30,000 $ 30,000 $0.060 $0.070 $0.080 $0.090 20% 24% 28% 32% 5% 10% 15% 20% 33 7 4 2

ChillSmart
Use stand alone ChillSmart product if we cant sell other recurring service Charge for ChillSmart in three tier format based on size of chiller (prices per chiller)
700 tons or less charge $3,500 700 to 1,000 tons charge $5,000 Greater than 1,000 tons charge $6,000

Use one free refrigerant and oil analysis for a multi site client demonstration of service

Plant Scenarios ChillSmart


Tonnage Initial Cost Annual Cost Electrical Rate Utilization Improvement Payback (Months) $ $ 2000 2000 2000 2000 10,500 $ 10,500 $ 10,500 $ 10,500 $ $ $ $0.060 $0.070 $0.080 $0.090 20% 24% 28% 32% 7% 7% 7% 7% 12.2 8.7 6.6 5.1

Tonnage Initial Cost Annual Cost Electrical Rate Utilization Improvement Payback (Months)

$ $

4000 4000 4000 4000 20,000 $ 20,000 $ 20,000 $ 20,000 $ $ $ $0.060 $0.070 $0.080 $0.090 20% 24% 28% 32% 7% 7% 7% 7% 11.6 8.3 6.2 4.9

Tonnage Initial Cost Annual Cost Electrical Rate Utilization Improvement Payback (Months)

$ $

8000 8000 8000 8000 36,000 $ 36,000 $ 36,000 $ 36,000 $ $ $ $0.060 $0.070 $0.080 $0.090 20% 24% 28% 32% 7% 7% 7% 7% 10.5 7.5 5.6 4.4

Ongoing ChillSmart
Contract for 2 years of basic ChillSmart analysis Analysis includes full chemistry tests every six months, and reports once a quarter Manual data sheets sent in once per week that include at least 3 readings if the chiller was operating Annual charge in three tiers (prices / year / chiller)
700 tons or less charge $4,500 700 to 1,000 tons charge $6,000 Greater than 1,000 tons charge $7,500

Scenarios Ongoing ChillSmart


Tonnage Initial Cost Annual Cost Electrical Rate Utilization Improvement Payback (Months) $ $ 2000 $ 13,500 $ $0.060 20% 10% 11 2000 2000 2000 $ $ 13,500 $ 13,500 $ 13,500 $0.070 $0.080 $0.090 24% 28% 32% 10% 10% 10% 7.9 5.9 4.6

Tonnage Initial Cost Annual Cost Electrical Rate Utilization Improvement Payback (Months)

$ $

4000 $ 24,000 $ $0.060 20% 10% 9.8

4000 4000 4000 $ $ 24,000 $ 24,000 $ 24,000 $0.070 $0.080 $0.090 24% 28% 32% 10% 10% 10% 7.0 5.2 4.1

Tonnage Initial Cost Annual Cost Electrical Rate Utilization Improvement Payback (Months)

$ $

8000 $ 45,000 $ $0.060 20% 10% 9.2

8000 8000 8000 $ $ 45,000 $ 45,000 $ 45,000 $0.070 $0.080 $0.090 24% 28% 32% 10% 10% 100% 6.6 4.9 3.8

Assessments
Offering includes 5 task process
System Overview and Data Collection Fluid Chemistry System Modeling & Energy Assessment Engineering Optimization Analysis Final Presentation & Report

Objectives of Assessment
Show customer that we can save them money Introduce customer to Hudson capabilities Create a recurring revenue stream

Modified Shared Savings


No upfront cost to customer Charge customer a monthly fee that roughly equates to our costs plus 20% profit over first two years (no term to agreement) Year three and beyond charge is $6K per year per plant and $3.00 per ton per year Customer agrees to pay 20% of identified or actual electrical savings over 4 year period (whichever is larger) providing payback is less than 2 years Applicable for EffTrack and EffTrack Lite services Circumvents the annual budget cycl

Scenarios Shared Savings


Tonnage Initial Cost Annual Cost Electrical Rate Utilization Improvement Payback (Months) $ $ 2000 2000 2000 2000 $ $ $ 33,380 $ 33,380 $ 33,380 $ 33,380 $0.060 $0.070 $0.080 $0.090 20% 24% 28% 32% 15% 15% 15% 15% 36.3 25.9 9.7 7.6

Tonnage Initial Cost Annual Cost Electrical Rate Utilization Improvement Payback (Months)

$ $

4000 4000 4000 4000 $ $ $ 64,520 $ 64,520 $ 64,520 $ 64,520 $0.060 $0.070 $0.080 $0.090 20% 24% 28% 32% 15% 15% 15% 15% 35.1 25.1 9.4 7.3

Tonnage Initial Cost Annual Cost Electrical Rate Utilization Improvement Payback (Months)

$ $

8000 8000 8000 8000 $ $ $ 86,880 $ 86,880 $ 86,880 $ 86,880 $0.060 $0.070 $0.080 $0.090 20% 24% 28% 32% 15% 15% 15% 15% 11.8 8.4 6.3 4.9

Testing of Offerings
EffTrack Childrens Hospital of Phil., Honeywell EffTrack Lite Aria Health, Hershey Medical, Toyota ChillSmart Teva Ongoing ChillSmart None yet. Assessments P&G

Immediate Plan
Resurrection!!!
Customer EffTrack reports caught up Derrick Get JL&L satisfied with the Honeywell account - Jim Re-engage CBRE Jim

Formalize simplistic data gathering format for ChillSmart analysis Fully define the Ongoing ChillSmart offering Sell one/two accounts each from the agreed services to iron out the operational details Train existing Hudson employees on EffTrack offering
Riyaz and Charlotte person to go to Rocky Mount Senthil and Steve to go to Tulsa

Send legacy EffTrack employees on a reclamation job Hire one dedicated customer service engineer Put one more distributor/rep in mid-Atlantic region

Potential Add-on Sales


Refrigerant sales Reclamation work Consulting services Additional chemistry tests Additional Assessments Increased device monitoring (later)
Boilers Air compressors Pumps Electrical equipment

Budget Implications