Orion looks toward a cost-savings future

By: Thomas Content, Milwaukee Journal Sentinel

A transition from a venture-capital darling to publicly traded company is never the smoothest transition, but it's even harder in the midst of a brutal economic downturn and stock market plunge.

Orion Energy Systems Inc., which is in the process of moving its headquarters to Manitowoc from Plymouth, went public at $13 a share in late 2007 and quickly soared to more than $20 a share. The IPO raised more than $78 million for the company that Neal Verfuerth founded, giving his team capital to invest in expanding its product line beyond its staple: high-efficiency lights used by Fortune 500 companies in warehouses and factory floors.

Orion had a rough start. Wall Street balked at the company's desire to invest the cash raised from going public in long-term growth, and prodded the company to pay closer attention to quarter-to-quarter results.

But Orion has been winning accolades for its technology innovation, including a global award from Platts, an energy information division of McGraw-Hill Cos., which cited Orion for sustainable technology innovation.

After seeing his company's shares fall 75% in 2008, Verfuerth, Orion's president and chief executive, talked with Journal Sentinel energy reporter Thomas Content about the first full year as a public company and Orion's prospects:

Q. How rocky was the transition to public company for Orion?

A. You could categorize it as a learning experience - the perfect storm of the worst things that could happen taking the company public, given where the market is today and just what's led up to where the market is today. And getting to really understand how to communicate with the Street and provide the financial metrics that they're looking for. But I'm still pleased with the decision. The intent was to get the capital we needed to grow the business.

Q. What kind of challenges does the recession pose for Orion and its markets?

A. In the early days of the recession, we didn't see anything different than what we've had in the other recessions I've lived through in the past 20-plus years. But when they started in the media, once in a while, saying depression as opposed to recession, then I saw (capital spending budgets) get tightened up, especially given the fact we do so much with the Fortune 500.

Q. So cutting costs in tough times has become more of a selling point?

A. Yes, but you've still got to figure out a way to pay for it. Many of the other (capital spending) projects are slated for increases in production or a new product line, and obviously when the economy slows down you're not going to do these things. But saving money - it's never a bad time to do that, especially when you're looking at the kind of dollars that we're talking about.

Q. What kind of cost savings are your customers seeing from Orion lighting systems?

A. I would say the low end would be 50% and the high end, the other extreme, would be 70%. As we changed our business model, taking advantage of technology and optical and thermal efficiencies, we're giving people more savings. Like the Cessna aviation plant in Wichita, a large facility where they make jets: We (provided) an average savings of 62% and still increased the light levels by more than 30%.

Q. Energy efficiency doesn't have the glam or the sex appeal that is sometimes attached to wind turbines and solar panels and other parts of the alternative-energy world. What's your take on that?

A. I couldn't agree more. I believe the reason it hasn't gotten the kind of the cachet that the others have is most of it's been earned. In my 25 years in this business, many of the technologies I've seen come and go delivered but delivered it with compromise... We not only deliver the savings but, we do it without compromise... That's why we continue to have the confidence of the Who's Who of the Fortune 500.

Q. What are you looking for from policy-makers in Madison or Washington for the energy-efficiency sector?

A. Just to get recognized for what we deliver to the grid. Our technology, it's hard to beat, given the fact that every fixture will reduce a ton of carbon annually...   It's cost-effective, it's just hard to beat...

Just give us the same consideration that the photovoltaic (solar) folks get.

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