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Hamsa Ramesha/Medill



Green gets local energy company out of the red

by Hamsa Ramesha
Dec 02, 2008


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Hamsa Ramesha/Medill

Lime Energy Co.

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Hamsa Ramesha/Medill

Lime Energy Co.

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Hamsa Ramesha/Medill

Lime Energy Co.

A troubled economy couldn’t have come at a better time for Elk Grove Village, Ill.-based Lime Energy Co. With businesses tightening their belts and cutting their losses, going green and saving green are obvious solutions. And Lime is perfectly poised to help companies make the change.

Lime has helped businesses reduce energy costs and create faster returns on investment by evaluating a company’s “energy leaks,” such as lighting and heating, said Lime’s president and COO, Dan Parke. According to the Web site, the company has “managed nearly one billion square feet of successful energy efficient projects.” Its clients include New York University, Kaiser Permanente, AmerisourceBergen Corp., Duane Reade Inc. and Naked Juice Co.

“A weak economy is probably better for Lime,” said analyst Craig Irwin of Merriman Curhan Ford & Co. “This is when companies look for ways to save costs… These are opportunities that companies jump on.”

The company nearly tripled its revenues in the third quarter ended Sept. 30, but it's been unprofitable for the past two years because of expansion costs. Its third quarter loss widened by 22 percent, driven by expenses of hiring and restructuring to “grow their capacity,” as Irwin put it, as well as the acquisition of Applied Energy Management Inc.

Irwin expects the company will gain traction in 2009 and foresees rising profits in the future.

Lime stock has generally declined since its peak in June 2007 at $14.70.  It closed at $4.90 Tuesday.

In October, Lime announced a deal with three major financial institutions in an effort to upgrade the lighting systems in 1,200 banks across the nation. The contracts, totaling $8 million, are expected to be completed by year-end and yield a 30 percent return on investment for the customer “after securing over $650,000 in utility incentives,” according to a press release.

On Nov. 17 Lime stated it will raise $12.5 million in cash from investors and sharply reduce debt, paying off $3.6 million and converting $14.7 million of debt to preferred stock.

Parke said he wants to tap into the present economic opportunity, and sees “no indication of slowdown” for Lime.

“Really what we sell at the end of the day is a reduction in operating expenses,” he said. “Customers enjoy buying it, it makes them feel good.” 

Responding to the demand, in June Lime marked a major transition with the acquisition of Applied Energy Management for $3.5 million in cash, 882,725 shares of Lime common stock, and the assumption of $5.9 million of AEM’s debt.

“Lime and AEM will be able to cross-sell each other’s clients,” Irwin said. He pointed out AEM’s experience in water efficiency and heating, ventilation and air conditioning (HVAC) services, while Lime specializes in energy- efficient lighting. Combining their skills will increase their customer base.

Parke also added that AEM serves Lime’s largest client, the federal government. He said the company is a sub-contractor to the government, constituting half of Lime’s government business.

“Smart companies today are focusing on their bottom line, not their top line,” Parke said. For him, waiting and building Lime to capacity was more of a strategic move.

“The plan in a wait was to not make a lot of money, but to build an infrastructure,” Parke said. “We invested a lot of money in our future.”

Parke believes Lime now has the capacity has the capacity to double its size. He said it takes approximately $100 million in annual revenue to break even, and hopes to blow through that to $150 million and beyond.

“We believe there is a $200 billion market opportunity and we are building our company to be [a part of it],” Parke said. “Our infrastructure allows us to double the $100 million without too much additional cost.”

The challenge for Lime is not educating people about energy efficiency, but pointing them towards Lime as the solution to that problem. Right now, Parke explained, Lime is focusing on services that have a faster short-term return on investment, with the idea that customers will stick with Lime and invest in bigger projects like renewable energy which have only a long term return on investment.

“This industry and what we do is one of the things that will get the American economy stirring again,” Parke declared.