Case Study: Maximizing Returns on Surplus Equipment

Case Study: Maximizing Returns on Surplus Equipment
By
/

Global Power Supply, LLC
136 W Canon Perdido
Santa Barbara, CA 93101

Rob Hansen
Director
Mission Critical Facilities Division
Phone number (805) 683-3828 x353
Fax number (805) 683-3823
E-mail address rob.hansen@globalpwr.com

The Used Equipment Problem

In a time of slow economic growth and a newfound propensity to consolidate facilities, getting value back for used infrastructure assets is important for both large and small companies alike in the United States. But how can businesses be assured they are getting maximum value back for their assets? Many turn to their contractors or offer their equipment online via auction websites. But contractors may only offer scrap value or attempt to "flip" the equipment to other resellers. Online auctions are hit and miss since they are patrolled rampantly by bargain shoppers also looking for quick flips. Finding another end user to buy the equipment will lead to higher equipment sale prices. But most companies don't have ways to reach end-users and often are not set up to execute end-user-to-end-user deals, which can involve financial risks and legal liabilities. It is also conceivable that the best target customers for used assets are direct competitors to the company attempting to sell the asset, further complicating potential transactions.

Case #1:

Industry: Financial Institution
Number of employees: over 200,000
Annual revenue: Billions

Financial institutions are one of many companies that have recently been in a facility consolidation mode with their data centers and administrative buildings. Their goal was to maximize their return on their used equipment, but they also wanted a turnkey decommission solution from a single organization responsible for all the work.

Project Information

Project Start Date:
May 14th, 2012
End Date:
June 22nd, 2012

Scope:

  • Provide 40-ton crane
  • Provide rigging truck with four man crew
  • Provide A/C technician for glycol removal
  • Provide electrician for work as needed
  • Remove MGE UPS, battery cabinet, batteries
  • Remove ATS switches, panel boards, transformer
  • Terminate electric to building base source
  • Remove raised flooring and all cabling
  • Provide removal 2-Crac units from data center 2-ceiling mounted units 3rd floor
  • Replace ceiling and floor tiles
  • Bus duct taps will be left in place and capped.
  • Site will be broom swept
  • Drain and disposal of diesel fuel
  • Disconnect & prep generator sets for removal.
  • Remove generator sets from base tanks for removal clearance height.
  • Prep generators and load onto trucks provided by Vendor.
  • Terminate cable from building base.
  • Remove all cable and associated conduit and cap at building entry point.
  • Remove exhaust systems from ceiling,
  • Terminate all pipes used for exhaust & fuel fumes.
  • Allowance to repair brick wall where exhaust pipe exit building.

Solution

The financial institution solicited bids from a number of different companies to perform this turnkey decommissioning job. GPS won the bidding process and was awarded the contract to perform the work. GPS wrote a check based on the agreed-upon value of equipment that was being removed, and then invoiced for the decommissioning work once it was performed. Through the direct management of GPS's production team the project was executed with tremendous quality and efficiency. In the end, the work was finished more than a week ahead of schedule. The equipment that had been decommissioned was then refurbished by GPS so it could be resold to end-users on the secondary market.

Benefits

By turning to GPS for this turnkey service, the financial institution was able to ensure that the return it received on the equipment was maximized and that it had a competent partner managing all aspects of the project. GPS owns a database containing hundreds of thousands of end-user contacts to whom it can effectively market decommissioned equipment. GPS accomplishes this through a combination of targeted mailers, email & telephone marketing, and online though its website. The unique ability to reach so many end users often gives GPS the ability to put a greater value on used equipment than other entities that may be looking for quick flips or providing only scrap value. GPS also has a dedicated production team with in house logistics and project managers who are experts at managing sub contractors in conjunction with decommissioning projects.

Case #2:

Atmos Energy
Number of employees: 4,632
Annual revenue: Billions

Atmos Energy had a 10 year lease on a peak shaving plant which included a 20 megawatt prime diesel power plant consisting of 11 Cummins generator Sets. The units operated at 4160 volt and were tied together with a Square D paralleling switchgear lineup. The 10 year lease ended at the end of 2011 and the utility decided not to renew, leaving them with the need to quickly liquidate the power plant.

Project Information

Project Start Date:
December 19th, 2011
End Date:
January 20th, 2012

Scope:

  • Provide fair market value offer for the following equipment:
  • 11 2MW Cummins generators @ 4160 volt with exhaust systems
  • 11 diesel fuel "day" tanks
  • 11 Neutral Grounding resistors
  • Utility grade Square D Paralleling Switchgear w/ PLC
  • Related accessories
  • Supervise rigging crew and crane lift
  • Supervise contractors to in disconnecting equipment.
  • Supervise A/C technician for glycol removal
  • Supervise electrician for work as needed
  • Drain and disposal of diesel fuel
  • Prep generator sets for removal.
  • Prep generators for shipping.
  • Remove exhaust systems from ceiling
  • Terminate all pipes used for exhaust & fuel fumes.
  • Label all switchgear and connections for reconnection later
  • Palletize switchgear and accessories for storage
  • Ship all items to GPS's Yard for storage in Texas

Solution

Atmos Energy was in a tough situation. Their power plant was specifically customized for their peak shaving application and it was rated at an 4160 volt, a rather uncommon voltage. They wanted a fair market value back for the equipment but also needed to part with it quickly. Finding a buyer who could utilize such a system in such a short timeframe would have been an exercise in futility. A partner in the industry referred them to Global Power Supply. GPS listened to the customer's goals and uncovered the price they were hoping to achieve for the generators. At this point GPS began an extensive research project to appraise the generators in an effort to determine what a fair market value of the equipment was. The research determined that the customer's price expectations were realistic and a purchase order for their desired amount was submitted and approved.

Benefits

By turning to GPS for this project Atmos Energy was able to get a fair market value for their entire power plant. GPS is one of the few companies in the United States that could have met their price for a number of reasons. No company could have given a fair market value for the equipment without having the financial flexibility necessary to stock the equipment and exercise patience in waiting for the right customer, especially given the fact that the equipment was rated at a voltage that is used by only a small number of industries. Since GPS owns a vast data base of end user customers to whom the equipment could be marketed to, GPS's risk in finding the right customer that could use such a customized plant was mitigated compared to a company that lacked the ability to reach such a large number of potential buyers. GPS's flexibility in how it buys surplus assets was also a key component that made the deal work. GPS offers multiple avenues to buy equipment, including quick cash, trade-ins for new equipment, and consignment agreements for customers who have more time to liquidate their assets. In this case, the utility needed to go the "quick cash" route, which is generally not the best way to maximize returns. Regardless, GPS's years of experience, aggressive marketing abilities, and their research-driven, flexible approach prevented the utility from the need to accept an undesirable price for their assets.

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