Communicating the Positive Impact of Energy Savings to Improve Market Prospects of Performance Contracting.

PALO ALTO, Calif. -- For performance contracting (PC) companies to improve their market prospects, they have to educate end users on the positive impact of energy conservation initiatives on their bottom lines. End users have to be convinced that energy savings are as valid as any other operational savings.

New analysis from Frost & Sullivan (http://www.buildingtechnologies.frost.com), North American Performance Contracting Markets, reveals that the market was worth $3.44 billion in 2004 and expects to reach $6.26 billion in 2010.

If you are interested in a virtual brochure, which provides manufacturers, end-users and other industry participants an overview of the latest analysis of the North American Performance Contracting Markets -- then send an email to Melina Gonzalez -- Corporate Communications at [e-mail] with the following information: your full name, company name, title, telephone number, fax number and email. Upon receipt of the above information, an overview will be sent to you via e-mail.

Energy-related management projects do not rank very high on most Canadian and U.S. business' list of priorities, as the returns on investment are not immediate. Moreover, the risk, expense, and time are huge deterrents to installing energy service equipment in companies.

"Many companies are concerned about the long-term viability of energy efficiency savings," says Frost & Sullivan Research Analyst Sapan Agarwal. "This is especially true when weighed against the downtime caused by installation and their reluctance to give up control of the environmental conditions in the facility."

Once end users are more knowledgeable about energy savings, not only performance-contracting companies see increased revenue, but also the traditional concept of buildings as liabilities is likely to change. In addition, they will be recognized as assets.

Both building owners as well as PC companies have received a boost with the Governmental Accounting Standards Board (GASB) issuing a guideline, which states that buildings older than 20 years cannot report it as a financial asset. However, the GASB allows a second consideration, if a plan for reinvestment is present in the building and creates tremendous opportunities for PC.

Other federal programs that expect to affect the PC market are the Energy Policy Act (EPAC) of 1992, Executive Orders 12902 and 13123. These legislations mandate a 30.0 percent reduction in energy-related expenditure for all federal buildings by 2005 and a 35.0 percent reduction by 2010.

These laws have generated a windfall for energy management strategies, which are fast becoming popular ways to achieve significant energy savings.

"However, certain legislative uncertainties in the federal sector are also limiting the PC market," notes Agarwal.

The Senate has not reauthorized expired projects such as the Energy Savings Performance Contracting (ESPC), which is expected to conserve enough energy to heat and light 200.0 million homes in a year and save $4.00 billion in energy bills. There could well be a surge in the ESPC market when the bill is reauthorized, especially due to the huge backlog of projects on hold since the project expired.

With business and technological advancements, there will be a greater need for skilled personnel to maintain quality and productivity. Unless PC companies find experts for both energy management as well as standard IT practices, it could be difficult to expand operations without mergers and acquisitions.

"The challenge of maintaining a pool of employees is more severe in the small to medium organizations," observes Agarwal. "However, as companies grow, particularly after mergers with utility companies, success in recruiting and retaining qualified employees tends to increase."

North American Performance Contracting Markets, a part of the SVC9343; SVC9449; SVC9450 subscription, provides an overview of and outlook for the PC markets. The study is segmented into markets for contracting, federal, state, and local municipalities, industrial, K-12, universities, healthcare, commercial, and others. This study enables companies to align their competitive strategies to exploit marketing gaps and maintain revenue growth. Interviews and executive summaries are available to the press.

Frost & Sullivan, a global growth consulting company founded in 1961, partners with clients to create value through innovative growth strategies. The foundation of this partnership approach is our Growth Partnership Services platform, whereby we provide industry research, marketing strategies, consulting and training to our clients to help grow their business. A key benefit that Frost & Sullivan brings to its clients is a global perspective on a broad range of industries, markets, technologies, econometrics, and demographics. With a client list that includes Global 1000 companies, emerging companies, as well as the investment community, Frost & Sullivan has evolved into one of the premier growth consulting companies in the world. For more information please visit www.frost.com.

North American Performance Contracting Markets

A839

Keywords in this release: performance contracting, PC, North America, K-12, Governmental Accounting Standards Board, GASB, energy service companies, ESCOs, Energy Policy Act, EPAC, Executive Orders 12902, 13123, Energy Savings Performance Contracting, ESPC, research, information, market, trends, technology, service, forecast