by Luke Jones
Posted 10/7/2013 12:00 am
Updated 6 months ago
An Arkansas lighting company is looking to gain municipal clients by offering a special no-money-down financial plan for converting cities’ lighting infrastructure to an energy-efficient model.
NextGen Illumination Inc. of Fayetteville was established in April 2008 and makes solid state lighting, which generally consists of LED bulbs.
LED lighting typically lasts several times longer and uses less energy than traditional modes, making it desirable for towns and cities with big electric bills.
For example, NextGen is currently installing 46 LED heads at a parking lot at Northwest Arkansas Community College in Bentonville; 42 had previously been installed there.
Steven Hinds, a spokesman for the college, said the lights save the college about $160 per fixture annually, so once all 88 lights are installed, the college is expected to save $225,000 over about 13 years, the expected life of each head. Energy expense is reduced by about 70 percent, and each 128-watt LED replaces a 460-watt bulb.
“We feel like these lights are far superior,” Hinds said.
Because of the superior quality of LED lights, government entities like the Arkansas Public Service Commission have been working to persuade municipalities to make the switch by way of endorsements from utilities and incentives.
“The commission has improved energy-efficient programs and is encouraging energy-efficient programs, and has for several years,” said John Bethel, executive director of the PSC. “There are programs where customers can receive incentives or rebates associated with light, including LED lighting. Municipal lighting programs are a part of those energy-efficiency programs.”
But there’s still one big problem: While LED lights save lots of money over time, they can be quite expensive up front.
A small-scale example: A four-pack of 60-watt General Electric light bulbs costs about $5. A single General Electric LED bulb to replace a 60-watt incandescent costs about $24.
Here’s where NextGen has taken the initiative. This year, it will begin a financing plan that will let cities install a new lighting infrastructure without any upfront cost.
A bit of background: The company traditionally has targeted the commercial and industrial agriculture industries, particularly in the poultry sector.
“We can honestly claim to be pioneers in that area,” said Patrick Rush, NextGen’s chief legal officer and spokesman. “We started with a study conducted at the University of Arkansas of broiler house chickens. We approached them to see if they were interested in including LEDs in the study. That was five years ago, and we still work with them.”
Rush said the company is still relatively small, but it has grown since its founding.
“Our biggest news lately is that we’ve been in the process of re-shoring manufacturing from Asia to the U.S.,” he said. “There are several reasons we’ve done that. One of them is that costs are becoming more competitive. Labor is still cheaper over there, but transportation, duty and taxes, they add up. When we take that out of it, we’re getting a little closer to parity in the costs, plus we have a greater control of what’s going on, and we don’t have to wait all that time for the products to get here. If something needs to be done or adjusted in the process, it can be done quicker.”
Rush said the company’s factory is located in Stillwell, Okla., in the heart of the Cherokee Nation, with which NextGen partners.
“A lot of the people there are familiar with the gaming industry,” Rush said. “The Cherokee Nation does a lot of high-tech work, so they were a natural fit since our products are technology-based.”
Rush said the partnership and the local factory makes NextGen eligible for government contracts that it wouldn’t otherwise be eligible for.
“We’re at a bit of an advantage to say we’re made in the U.S.A.,” he said.
The company has done some outdoor lighting before, but its new municipal services aren’t being offered quite yet. NextGen will make that announcement at an energy reform conference in North Little Rock on Oct. 15 at the Wyndham Riverfront Hotel in North Little Rock (see end of article for more details.)
So how is NextGen’s financing plan going to work?
According to Jerry McCormick, vice president of operations, part of it involves a bank partnership.
“We’re using local banks that are getting more and more engaged in energy efficiency,” he said.
NextGen now has two banks backing up the plan — McCormick said he couldn’t yet identify them — and cities are authorized for projects costing up to $20 million.
“It costs no money up front,” McCormick said. “Zero down.”
The model is intended to allow cities to start recognizing the savings from LED lighting instantly. Payback is projected over three years maximum.
“The finance terms are all very low — prime, or just over,” he said. “The term is very short.”
He said the model is different from the typical financial model provided to municipalities: Traditionally, the payback terms are much longer. NextGen’s is short, just far enough to pay the note back.
“In terms of a longer-term performance contract, you may save a thousand [dollars] a month, but that thousand goes to pay the note, and you end up with energy-efficient lights and are basically paying the same as before,” McCormick said. “This gives an opportunity for cities to actually get ahead.”
NextGen provides all lights and installation. Rush noted that NextGen is prepared to address a municipality’s needs all at once, rather than focusing on a single building. The job includes everything from city offices to streetlights.
“By being able to address multiple levels — interior and exterior lights — we draw down the overall ROI of the project,” he said. “That enables you to do the whole thing.”
It sounds like a good deal for cities. But what about NextGen?
McCormick said it’s all about finding a niche.
“We’re in an arena where we’re [competing with] companies like Philips and Sylvania,” McCormick said. “We have to have something that differentiates us. … We wanted to create an entire service package. We try to work every part together and find out what would be the best solution. Doing it this way seems like really doing it as no one else is offering.”
He said the idea is to extend NextGen’s reach beyond just cities. Also, the $20 million project ceiling means NextGen isn’t limited to any particular size of city. McCormick intends to expand his boundaries outside of just Arkansas and Oklahoma.
“This is not just supporting the municipalities of Arkansas but of local corporations,” McCormick said. “We can reach into Mississippi, Tennessee and other places where there are large, corporate entities with strict, limited budgets, who want to do upgrades but can’t get there.”
But he also said the move isn’t just part of NextGen’s business model; it also has to do with its philosophy.
“We believe in the adoption of energy efficiency first and foremost,” McCormick said. “That’s our goal. What comes with that is obviously higher sales and higher creation of our product domestically.”
NextGen Illumination Inc. will present more information about its financial plan for municipalities at Thrivability, a summit for leadership in sustainable communities.
This summit will take place from Oct. 15 to 17 at the Wyndham Riverfront Hotel in North Little Rock.
Cost for the summit is $125; discounts are available for students and parties of three or more. The ticket price includes lunch, breaks, reception, keynote presentations, breakout sessions, city showcase and a networking reception.
NextGen will be presenting at “Show Me the Money: Financing Energy-Efficiency Projects,” a breakout session on the energy track.
A full schedule and registration details can be found at RegOnline.com/ASCSummit.