Can Infrastructure Be a Profit Center? How Ken Bernhard Turned Central Plants into Cash Flow

Joshua Wilson: Good day everybody. Welcome to The Deal Podcast Powered by FA Mergers. Uh, I'm here with a, a friend, a new friend, but known these guys for a while. Uh, Mr. Ken, welcome to the show. Tell us who you are and what do you do. So, Ken Bernhard, and it's, uh, it's, it's great to meet you and to be with you today or, and spend some time.

Ken B: Uh, I'm a developer. I'm an energy developer, but, uh, not in the sense of oil and gas. Yep. So energy developer, not in the sense of oil and gas. Now we're here in Lafayette, Louisiana. I do a lot of work in, in Texas, and if you're in Texas people go, what do you do? They expect oil and gas or, or something else like maybe, you know, involved in the Dallas Cowboys, which we've got some stories.

To, to share maybe later on, but energy, not oil and gas. Explain what that is. Yeah, I, I don't know much about oil and gas. I know I have a lot of friends that grew up in it. Um, I know very little about it, but we're on the energy conservation side. Um, we do something called energy as a service where we take infrastructure that's primarily, um.

An expense and we turn it into a revenue source. So these large central plants that run hospitals and, and higher education, big universities and smart manufacturing for like Intel and Johnson and Johnson and, uh, car, uh, manufacturers and the such, they have, uh, very, very large central plants that they're forced into, into building, right?

Mm-hmm. But they're not a revenue source for them. So growing, growing up in the mechanical construction business, we built those plants. Mm-hmm. And so we were the experts in those and we, uh, we found a clever way to finance 'em off balance sheet and, uh, to shift the risk onto the concessionaire. And, um, so we did that and, um, we, we, we sold that company and that was good.

And we found a better way to do it. And so I'm back a second time. To do it the better, smarter way, a way that, um, is focused on the long term relationship and, uh, utilizes AI because that's where we are. Interesting. Okay. So. Let, let's walk us through one of those deals. This is the Deal. The Deal podcast, right?

So we're, we're gonna talk about deals, walk us through the deal. Uh, two things that I kind of want you to go over is taking an expense to a revenue. So that's an interesting approach that, you know, we haven't seen much of. I'd like you to kind of, how did you get, how did your family get that idea? How did you guys execute on that?

You know, where, where did that light bulb go off? Energy, light bulb. I, I try to connect the dots there, but taking, taking an expense turn into revenue. And then, um, the clever way to, uh, finance stuff, an off balance balance sheet. Like you guys had a, an interesting approach to the, the financials as well.

Walk us through those. So I guess to, to get there, we have understand a little bit of the background, so, um. I was a fourth generation in a mechanical construction business, started by my great-grandfather. Um, my grandfather expanded it and then my dad took it over and, uh, expanded it more. I have an uncle who, um, was not a part of the business and, uh.

Took a construction company from three folks to 30,000 and they built and maintained nuclear facilities and they, uh, built and maintain other chemical facilities and built, um, military bases and the such. That's my dad's brother. Um, when he sold his company, he came back to the mechanical company and said, we've done something interesting in the past, built a big co-generation plant for LSU and for Louisiana Tech.

And we were looking at one for, um, Texas a and m. They, and his question to us was. How do we do that again? And why did you ever stop? Right? And so the answer to that was the price of natural gas had had skyrocketed after Katrina. And so it was no longer, uh, advantageous for the universities to go that route.

But the universities have very high utility bills, right? Mm-hmm. Because of the size of their campuses, you know, 1, 2, 3, 7 million square feet, right? And so. We explained the business model to him, and, and he, he understood it, you know, because of his, his past business and he was involved in the LSU project himself, his company was, and so we explained how it works and naturally he understood that and he said, well, what stops you from doing it now?

And it was easy money. He says, well, I'm starting a capital company, so we'll eliminate that. What else stops? And so we realized that nothing really stops it. It is just that people didn't understand how to do it. And we set out on a mission to finance energy plants differently, right? Um, being a third party concessionaire, a third party company that will come in.

And what we do is we'll long-term lease an asset. So we'll come into, let's just say big pharma and we'll see our, let's do non-profit healthcare. We'll go into a big healthcare organization we'll long and we will long term lease their central plant as consideration for that lease. We'll do a large energy conservation project inside their facility.

Right? And so what that does is that re-ups the infrastructure because we're at a turn now in, in, uh, where we are just in history, where, you know, a central plant and the infrastructure needs to be. Reimagined and reconstructed probably every 30 years. Sure, right. And in healthcare, um, money's tight. You know, margins are razor thin.

I'm not sure if anybody's paying attention to the political climate and, and what's going on, but there's a lot of movement and a lot of change. Not necessarily a bad thing, but there's a lot of change. And so. We have to reinvent how we do things and how we go about, uh, supporting healthcare, supporting higher ed and supporting these large institutions.

So the way we went about it is we long term lease the asset, we may turn around and do a $25 million infrastructure refresh. Okay. And then we sell back the chilled water, the heating water, and the steam that's made by that central plant. Mm-hmm. To the user as a commodity, the same way you would natural gas.

At your house the same way that you buy water and sewer. And so in there, the, the auditing firms have found that, that to be off balance sheet, as long as you know, several tests are met, one of which is that you can sell that same commodity to the neighbors, right? So neighboring properties, so all things that receive chilled water, you don't have to sell it to 'em, you just have to have the ability to sell it to 'em.

So maybe within three miles, because a typical pumping situation can extend about that far right. And as long as you do that in a number of other things, then the auditing firms will find it off balance sheet. And what that means for the hospital or for the end user is that they can leverage themselves for things that are revenue generating.

For healthcare, that's gonna be more operating suites and a bigger, you know, emergency room. Those are, that's revenue generating, op, you know, opportunities. Building a hundred million dollar central plant to create air conditioning and to dehumidify the facilities is not revenue generating. Right. It's an expense, but it's revenue generating to us.

And so we have, uh, a central plant that will. Basically own, operate and maintain for a term, call it 20 to 25 years. Right? And so there was opportunity in that and that's what we set out to do and that's what we ended up doing. And uh, it was wildly successful. So we're back doing it similar but different.

Okay. Similar, little bit different. So before the different, let's talk about, yeah, let's talk about that, that first, that first bite of the apple, they long-term lease, 2025 years capital project goes in. Give an idea of the, the range of dollars it it takes to do that and how long so. The range of dollars depends on the size of the facility.

Okay. And the, what you can, you can value the project in a couple of different ways, but just to keep it simple, right? The way you would value a central plant is not the replacement value. A lot of people think that it's not that, it's, it's more like real estate. It's, and it's, and, and it's also, you can look at it from what is the output mm-hmm.

Of that central plant. What can those large, you know, commercial industrial equipment, what, what, what can it create and for how long and what can you sell it for? Output, right. Output, right? Yeah. And so you take that valuation and you go in and you do, you know, a study on the inside of the building and you ask yourself, you know, one question that you know most people ask me is that.

Why would you do an energy conservation project inside of a building that you're serving with a central plant, right? 'cause you're only gonna sell 'em less. Don't you want 'em to sell more? That was, that was our business thesis is that that's the way to do it is, you know, as some people, you know, they talk about wine.

I'm not a wine drinker, but they talk about it being fruit forward. We're energy conservation forward. Okay? Right. We believe in, in doing more with less. And so we competed against larger companies like the Andes of the world. That had the typical mindset, right? Mm-hmm. Which is we're gonna be selling chilled water, we're gonna be selling a commodity, so let's sell a maximum amount.

But the way that we look at is every central plant. That runs these large facilities is built 30 to 40% larger than it needs to be. So there's stranded capacity, right? Right. If you go inside of a facility and you further trim down the thermal appetite, if you will, of the, of the, uh, facility, then you're creating even more stranded capacity.

You can then you margin in there. That's right. Yeah. Take that stranded capacity and you sell it to the neighbors. So, man, this is fascinating. So you knock on their door, Hey, we, we have, you know, we have this ability to, you know, do some energy conservation, turns out expense to, uh, a revenue producing activity for you guys, you know, help you maybe lower your cost in the future, offset balance sheet, buy a new stadium, whatever the case may be.

Right? So that's the initial pitch that gets them interested in the the project. Right? Right. Did I miss anything on that? No, that's, that's pretty much. Now look, it's revenue generating for the person that's creating it. What it'll do, what is available to the host customers. One, it's not on their books anymore.

And two, we're gonna sell them back to chilled water at the same rate or less than they're already paying for. And so it gets really intense and complicated. But the most difficult part about this is not explaining necessarily the, the finance mechanisms or the engineering solutions that tie back to these and how they come together.

It's really trust. Right. It's the foundation of every business relationship, and when you innovate and you walk in with a different solution that outperforms the past, right? Then instantly you're on the defense. Right? For sure. You know, you're instantly on the defense. This is the way we've always done it.

That's right. Right. Why? Why are you smarter than me? We're not necessarily smarter than anybody. I mean, we have a good way of going about it. We now have an AI enabled software, um, to support the efforts. Yeah. But it's just doing it differently. Right. And so, yeah, we can get into it, but it's, um. It created an, it took an expense off the books.

Yeah. You know, now naturally the host customer is still paying for it. Mm-hmm. You know, through a, a utility charge. But that's how we pay for electricity too. Yeah. And it's a leased asset rather than, you know, on their books and they have to maintain and all that other stuff. So I'm sure there's, there's some benefits there.

Let's move to the new way of doing this. You said you learn, you built it. Had an exit. Congrats. Ah, thanks. Now you're, you're approaching this as a new way leveraging ai. Uh, kind of walk us through what does that look like? What, what, what's exciting there? So let's talk about the past a little bit. So that company was named Bernhard.

It was named after our family. It's since moved on and, and changed names since we sold the company. Um, what we did there, we were a vertically integrated, uh, design build. Uh, firm. Mm-hmm. Meaning that we would design it and we would construct it. Right. And we learned how to finance it in a clever way. And, you know, it, it still hasn't been repeated in healthcare just yet.

Um, what we were focused on was doing more work. Right. So why finance the projects so we could build more of them? What we saw is that higher ed in healthcare sure. Were not re-upping their infrastructure because they would find a higher rate of return on other projects. Yeah. And so what happened is the bandaid effect.

Right. And so they would just bandaid things until they couldn't anymore, and then they would eventually pay more than they should on a fix. Right. So we wanted to, we, we wanted to change that. We wanted to unlock, you know. The ability and the desire to move forward and to do the right thing and to re-up the infrastructure.

Right. Make it stable. Mm-hmm. Um, and so that's what we did. But our focus was on design and construction and the finance piece. What came of it is to be off balance sheet. We would have to take control of the asset. Right. There's a number of ways we can do that, but this is the beginning of the conversation.

We had to take control of the asset mm-hmm. From the term. Mm-hmm. And so we said. Yeah, sure we can do that. We'll, we'll operate your facilities if you allow us to do the construction project. So our focus was really on the design and the construction. The 25 year tail was good, but it was a necessary evil to achieve for sure, the balance sheet treatment that we wanted.

Yeah. When we go about it this time, what we found is a, a small software company that was in Seattle that, um. What they do is they really, they really drive down the cost of the operations of that plant and the, the utilities necessary to run that plant. And it's not that people can't do it. They can, you know, but you, you would be hard, hard pressed to put it nicely mm-hmm.

To do it at scale. Sure. And so what this company came out to do in its optimum energy. When they started their company, um, optimum Energy thought it was a true software player. Meaning that this was like in the gateway days, right at the beginning of two thousands. Right. Everybody had a gateway computer.

It came in Yeah. Looking like a cow. Yeah. So those were the days I remember. And so they thought they were gonna put this software on a CD and they were gonna ship it out, you know, to the end user and he was gonna upload it. And the software was then gonna take control and it was going to run different algorithms and learn the equipment next to it, make adjustments, and go on with life, right?

Mm-hmm. It was a huge software company, and it was gonna do all, it was gonna run all the central plants in the country. The problem is every central plant's a little bit different. The way it's configured is different. The equipment that's attached to it's different, whether it has variable speed drives, which imagine a dimmer switch that increases and decreases versus a starter.

Let's say this, the central plant has to be prepared to receive the software. Sure. And the software company wasn't prepared to refresh the hardware, and so they, while they did very, very well, um, they ended up being a tool for big ESCOs energy service companies. Right. And, and the largest one in the country, Johnson Controls attached to it.

They saw this little company as an opportunity, so they white labeled it. And they called it central plant optimization, 30%. Because on average they would sell you the client 30%. And utilities. Why is that important? A couple of reasons. One, the utility plant utilizes 40% of the electricity are the utilities on a campus.

Mm-hmm. Which is a big number. Right. And if you can save 30% of that with a relatively inexpensive software, that's what you do more. So ESCOs are in the business of taking down as much scope of work as they can at large institutions that have a payback. Right. So the, the contract will be, let's say 10, 12 years, which means that everything has to have a payback of, you know, five, six years or faster.

Mm-hmm. It's a very good way to re-up infrastructure as well. Except that it doesn't take care of the longer payback items that are necessary. You know, think of, um, inside of a building, air handlers, they have no payback. Very important in healthcare, right? You're on the surgery suite. Mm-hmm. Um, on the surgery table, I should say.

Um, and, and other items, elevators. Roofs, things that have little to no payback, right? You could, you can't leverage that transaction to do so. But what Johnson saw and what others saw is that they could leverage the transaction to do a lot of things. It was their fastest payback, right? And so they did over 140 projects with it across the country until we walked in and, you know, and having our experience, you know, with our past company, we saw the opportunity that this little software company's not a software company.

It just doesn't know it. It's an energy as a service company, it is the differentiator. It was the differentiator on the market. It's gonna continue to be the differentiator because our focus is, is always gonna be, you know, on the front end of smart engineering and construction. That's always ne it's necessary.

Mm-hmm. But what's equally, if not more important is the term of the relationship. You know, you did something great for me. You asked how long does it take the construction and, and this is more or less the finance companies, you know, insist needs to be done in two years. Wow. It's pretty fast. Yeah. So you may have a hundred million dollars project.

It needs to be from design to operation within two years. You have a 25 year deal. The savings are generated. You know, with new engineering and new construction, but how are they maintained? Mm-hmm. Right? The, the folks that do operations and maintenance, the, the talent pool is shrinking. It's not growing.

People aren't going to school to be operators. At least not in that sense. Right? And so the software helps to augment. We don't wanna replace people. We just wanna help them. We wanna give 'em the tools necessary to do a good job. And so at its baseline, this software will equal, if not outperform any operator on the planet.

'cause it's gonna drive down the use of utilities and, and that's cool, right? But you may have a guy that does that inside your central plan, so you don't need the software. That's great. You may have a hundred locations, could that one person manage a hundred locations? Exactly. Right. And can they do it at a cost that's reasonable.

And so software is easy to scale, right? Sure. We're on almost every continent doing this for, you know, the biggest players in the world. Um, but the software itself in the way that we found, it wasn't solving infrastructure problems. Right. And it wasn't renewing infrastructure, it was just driving down costs.

We leverage those savings to refresh the infrastructure that's at the facility. And so we're taking a tool and we're re-imagining it to, to have a greater impact on facilities. So that's essentially what we're doing is we're focused on the operations and maintenance on excellence for a 25 year period.

'cause if you do a good job in the first 25 years, they'll hire you for the next 25 years. Right. So that's a 50 year plan right there. Right? So you have four generations of family, Bernhard's, great-grandfather. Yep. Grandfather, father, you, right? And you're, you're already in your mind thinking of a 50 year plan, 25 years of the, the, the service and then hopefully a renew a re-up for the next 25 years when it comes to building businesses.

Your family's been building businesses for a long time when it comes to building business. Why is it important to have that? Multi-generational view, and then that 50 year plan in the future. Well, look, we're, we're owned by a, a family company, but it's a capital company, right? Yeah. So Bernhard Capital Partners owns the company that, you know, um, I'm working with.

And, um, we're looking, it's really a, a, a different utility. It's a different, it's a utility company, right? Mm-hmm. I mean, we're sitting in Lafayette, Louisiana, my hometown, great place, uh, Cajun food, nice people. And we in Lafayette owns its own utility, uh, LUS Lafayette Utility Systems, and that was something that was pretty common for mid-sized cities.

Mm-hmm. Uh, at the turn of the last century. Right. Um, it's not as common anymore, right. Because things change. There's, there's more efficient ways to do business sometimes, and, you know, innovation happens, right? But it's still, it, you know, LUS still does a great job for the community here, but innovation happens.

So the same is happening with large scale infrastructure. You know, people look at air conditioning and they, you know, because we're all kind of new to this space, meaning, you know this planet, right? I woke up. Same way you woke up in an air conditioned facility. We don't know anything different, you know?

And so, but you know, how did we get here? And it wasn't that long ago, you know, that air conditioning really was new. When you think about it, I'm sure if you talk to your parents, either they were brought up in a house with little to no air conditioning or their, or their parents were, so we're just two generations removed.

Over time, things are built and then things have to be rebuilt, and we're in the business of rebuilding and building smarter. Yeah, it's pretty simple. So with the use of. I mean, we have data centers, dcis, we have, uh, the electric vehicles, we have, you know, all the, the bitcoin mining and crypto mining, uh, going on and technology in the, the poles for energy on people would say on the grid.

Right? Like, how do you envision where this project, this plan could play in that and, you know, benefit from it? Um, I mean, in lots of ways, I mean. Conservation, you know, it's, it's much cheaper to create, um, more power through conservation than it is to build out a larger plant, right? Mm-hmm. Much, much, much cheaper.

Right. And I think it's the responsible and right thing to do. I mean, let's just look, our resources are limited. We may feel like they're unlimited until they're not there anymore, right? Right. So we all, you know, in our, and our limitations here in the United States may be different than other places in the world.

We're so blessed. But at the same time, we don't need to use more than we need. Right? Because eventually one day you run out, you just do. It's just the way it is. And there'll be innovation for those times as well. But to your point, the, the, the hunger for power has never been stronger. Everything that we're doing is utilizing power.

So how do we. How do we appropriately scale? Well, first thing you do is you pull back, right? Because you can only build a grid so fast, practically speaking. You can only build it so fast. You can only invest in it so fast. And at the rate that we're going now with these data centers and whatnot, we can't scale fast enough.

I mean, that is just outpacing us. And you know, in a lot of grids in the northeast and elsewhere, they're, you know, um, they have brownouts, you know, they're right, fragile. I think the right thing to do, you know, and, and we're in the right place in time where we, we use technology not to have less, but to do more with less, you know?

I mean, it wasn't long. I mean, when you were a kid, all the cars had carbureted engines. They were strong. They were great. You know, they were doing eight miles to the gallon. I mean that eight gallons to the mile man mean my truck did. Yeah. Zero to 60 and two quarts of oil, you know? Yeah. And so, but times are different.

I mean, now look at the vehicles, you know, I mean, they've got diesel trucks that are getting almost 30 miles to the gallon that you take your, you know, take vacations in. They've got electric cars that, that do much better, especially if you're not trying to travel across the country too quickly. But you know, there's.

There's different ways and better ways of doing things. There's different tools, right? Yeah. And so we have to use our tools differently, you know, to satisfy where we want to go. And so while we're building out a, a bigger, maybe a more resilient power grid, we need to take energy conservation into account to buy us time for sure.

To do more with less. If you could create that margin, that reserve, and then sell it, man, it's, it's, it's just a, a very great way. You could be ecologically friendly, eco-friendly on the, on the world, but also, hey, man, it could, it could be a benefit. That's one of those things that we look at when, when interviewing like a impact investor, right?

It's, it's do good but also do well. Right? So as you're building this, um, you know, what does your day to day look like as a, as a deal maker? Day to day. Um, so I work within a team of developers, um, and we, we look for opportunities and, but you know, you look for opportunities and what does an opportunity look like?

Right, right. You know, so I get that question a lot. And for us, it's kind of a unicorn, really. The, the clientele that we serve right now don't need us, and that's the way it needs to be. Right. Because you have to be, you know, while this is still a, um, an emerging market mm-hmm. And although I've done this for a little over 10 years now, um, you have to, the finance companies have to wanna be involved, right?

And so what does that mean? That means that you have to, you know, work alongside credit worthy, uh, counterparts, right? So large institutions, so large healthcare, large, higher ed, you know, these big manufacturing companies, these, these names that are known in the household, right? Because they will, as long as that institution is backstopping.

Project because essentially they are, I mean, they're the offtaker, right? Um, then they wanna be involved, right? So we look for institutions that are growing or that have a reason to re-up their infrastructure or have a sustainability goal. And then we look at their size. Um, we, uh, we look at the health of their balance sheet to see if this may be something they're interested in.

Somewhat, we look to see if they have sustainability goals. We look for all the things, and then we look for the most important thing. Relationship business doesn't happen without relationships. Yeah. You know what? Who makes, who signs our deals, our CFOs. Right. And to your point, you know, doing good and doing well, right?

Mm-hmm. You know, when I first got into this, they called it green. Going green. Right, right. And you know, it matured a few times and now it's sustainability. But the CFO was okay with green as long as it made green for sure. You know, you can do good, but you have to make financial sits. There has to be a business case for Right.

And so that's where we find ourselves. So an opportunity looks like, um, let's say a large university. Mm-hmm. That, um. That has to re-up or is looking to expand and has a higher and best, better use for their endowment. Right. And they don't want to use it on pipes under the ground. And you can't find donors that wanna donate a million, 2 million, 50,000, whatever it is that goes towards something they can't.

You know, they want their name on the library. They want their name on the, the gym. They want their name on the stadium, on the business school, but on pipes under the ground, not so much. Yeah, not so much. So there has to be an answer and we look to be that answer. Yeah. Very cool. So let, let's switch gears for a minute.

Yep. Before hitting record, uh, there was a, there was a conversation about, you know, investing in other stuff like sports, like. Um, in the world of entertainment. You know, what, what else, what else do you invest in? What else, what else has your attention, your focus, your, your interest? Well, we cut our teeth on nonprofits, right?

So we cut our teeth on healthcare and higher ed. And in, in the pursuit of that, I got an interesting phone call one day, um, from an agent and he said, look, I need, Ken, I need you to take this next call. And, uh, I said, all right. Um. I was on a business development at a, at a convention at the time, and I said, sure, Jim, I'll, I'll take the next call.

So I took the call and ended up being a fellow on the other side of the call that says, you know, I'd like to learn more about your business and I'd like you to come down to Frisco, Texas. I said, you know, I said, I wasn't too keen on that. Um, but I said, okay. So I explained the business model to him. He says, I'd like to introduce you to the mayor of Frisco.

I think this, you know, this is one of the fastest growing cities in the country, and I think we could. Utilize some of the things that you're saying, right? So what am I looking at? Um, I'm looking for emerging markets and I'm looking to be, you know, a player inside of that. And so I said, naturally. I said, yes.

And he says, look, do you ever come this way? And at the moment, I was in Denver, right? Mm-hmm. And I was dating my now wife, and we were on, I think, day number four. Yeah. And I had convinced her somehow to come up and meet me for this, uh, business development because it was beautiful in Denver. It was, yeah.

Denver springtime. It was low humidity. It's, it's beautiful. She's, and she agreed to, with one, with one catch, she had to go back to Dallas like some four days later to give a presentation at at and t Stadium. Um, she was pretty successful in what she did and she had that opportunity, right? And so I said, okay, so when the fellow's talking to me, he says, do you ever come here?

I said, no. In fact, I'm routing through Houston to come back to Lafayette, come home to Cajun country, right? Mm-hmm. And then it hit me. I was like, wait, my girlfriend's coming up and she's gotta go back. Maybe two birds, one stone, man. That's it. I said, maybe I can go watch her do her thing if I just change my flight.

He says, look, you change your flight, and if this all goes well, I'll introduce you to the Joneses. I said the Joneses, I don't know who the Jones are. And then it hit me again. I was like, wait, Frisco, Frisco, Jones, Dallas, Jones. Yeah, I get it. Yeah. There's no way you can introduce me to them, but I'll come down.

Heck, I'm gonna go watch my wi my soon to-be wife, give a speech. And so I went down and met some really interesting guys, good people. And one thing led to another and they said, look. We like everything that you're saying. It makes a lot of sense. There's a new stadium that, that was built here at at and t Stadium.

Mm-hmm. You know, there's, the Joneses are building 7 million square feet, you know, at, uh, the star at Frisco. You know, if I could get a conversation, would you come back? And I thought to myself, I'll take that call. Yeah, man. You get me that, uh, meeting. I'll show up. Yeah. And so I laughed and I left and about 10 days later I got that call.

And I ended up at, in Frisco and I, I met some really good people. Um, the Jones family was, was kind enough to get all of their, I guess you'd say chiefs of staff, you know, everybody who's in charge of every facility, the every their CFO and the head attorney and everyone head of at and t stadium, everyone into this little room.

Mm-hmm. I showed up, you know, I was like, oh, here we are. And so one thing led to another and ended up, um, doing the deal and, um. Doing a big project at at t stadium, which is an interesting story, but we can rabbit trail there in a second. And then later, um, from that success, you know, made a business, um, a business, uh, partnership, people say with the Dallas Cowboys, but it was really the Jones family, right?

And, um, and one of their companies, uh, called Prostar, uh, who also did energy conservation. They looked at solar and LED lighting and mm-hmm. And such and, and. And power procurement, right? Because they're in a deregulated market for sure. And so we went on and we were able to, um, to leverage relationships, you know, because they have a lot of them.

You do. And nothing is built without trust. And so if Jerry Jones did it, and it was advantageous for him, and he went from, you know, spending a million dollars a month on utilities, 12 million a year down to spending, I think more like, I think it's. I don't, I don't know. I think it's 600 grand. Something like, I, I forget what it is, but it's, it's a fraction of a fraction.

Wow. Right. So he, you know, he did three, he did three energy conservation projects before we showed up. Wow. And even after, so we were able to sell, save him another million dollars. But that's not why they entered into the business arrangement as their CFO. Tom Walker told me cannot, I can't get outta bed for a million dollars.

The Joneses won't get outta the bed for a million dollar savings. I said, okay. So we had a, a further conversation on what the tra trajectory of the, the company is and, and how it is that we made money and what problems we were looking to solve. And, uh, after having a conversation with a very honest conversation with him like that, he said, well, now that's something we can get behind.

And the rest is history. My friend Chris over here, he says, um. And I don't know where he got this from, but I'll repeat it. So it's a, it's, it's like the game of operator was one person says something and by the time it gets to me, I might mess it up. But your vision has to be so big the other person sees themselves in it.

So the million dollars, you know, I, I work with some groups for a million dollars, doesn't, you know that it, it'll cost them more to go after that million dollar deal than it does the actual million dollar deal. Your vision had to, had to be. Recalculated or reshared in a way where the Joneses could see themselves being a part of that.

Talk to us about that, because, you know, a million dollars, to me, that's, that's, that's a good chunk of change, right? That, that, that, that would get me outta bed. Right. I, I'd fly to Lafayette for, for that. Right. But for the, you know, for the Joneses group, you know, it needed to be something bigger. What, what, what was that and how did you, how did you reframe your thinking to hit a bigger vision?

So Tom Walker's a great guy, the CFO, right? Yeah. And, uh, shout out to Tom. Yeah, no, super great guy. Um, and my response to Tom was, Tom, I'm not mad at you. I just wanna be in a position where I can look at some young man across the table from me and tell me, tell him that I don't need that million dollars. I don't even want it.

And we laughed about that. But yeah, so I shared the vision with them, you know, and I, I explained to 'em, you know, there must be somewhere north of 6,000 hospitals, acute care hospitals across the United States, right? And that infrastructure renewal, you know, is gonna be a real issue, especially with reimbursements on the decline.

And that we're able to support these hospitals in such a way that, um. We can re-up their infrastructure, we can get them to continue to focus on healthcare. Mm-hmm. And not on, uh, power and, and infrastructure. And we can even in, in some cases, help that reimbursement because part of that reimbursement is based on experience.

You know, if you have a poor experience that's reported back and, and that impacts the reimbursement. And so when I explained the overall vision for healthcare and for higher ed and for, um. For big manufacturing companies. He instantly understood it. He wanted to know, quite frankly, and, and pointedly. He said, Ken, where do you make your money?

And I said, well, Tom, since we're not doing a deal together, I can't see why I wouldn't tell you. And uh, so, you know, you, we, we make our money in volume, right? Um. And everything that we do is a service. So you make money in engineering, you make money in construction. Uh, you make money in operations and maintenance, you know, and at that time we thought, you know, if you really wanted kind of an exit strategy, you could pull together several, several of those developments and sell the, the stream of money that comes off of it mm-hmm.

While still holding on to the long term operations and maintenance. Right. And that's when the light went off. He said, so let's just say you make a million, 2 million bucks a year on every development. You take 10 12 of 'em and you sell 'em for a multiple. Right? Right. Whatever that could be, just depending on what the term is.

Say you have a 25 year, 30 year term, you might sell it for 15 times after year three, and so he understood that. He understood that he understood that infrastructure is gonna be a real issue going forward. Mm-hmm. We ended up not doing business that way, selling revenue streams or anything like that, but he wanted to know where could you make money?

How could you make money? Is there money in this? And the answer is yes, but more than just money, you're doing the right thing. Like, sure. A lot of facilities won't exist without it. Like rural hospitals. They, they, you know, where they have very, very little and they serve a very small population that some of them just won't exist if they don't have an innovative way of staying in business and doing better.

Not just staying in business, but staying in business and doing business better. Yeah, I could, I could envision a time where, and I don't know, you might be doing this already, but an emerging market. Where they're shipping power to them, and it's super expensive to, to get that power to them where you guys could come in and, and make that power more easily accessible for an emergent market or a, you know, maybe in the future, a third world country or something like that.

Uh, it's really cool where you're, where you're going. So I guess with that, are you, are you guys. Working alongside of smart cities or, uh, municipalities or townships. Like how, how does this work with, with government focus? So right now, as close as we get to that is, it's usually a P three arrangement.

We're looking at one, um. One very large development in Colorado. Mm-hmm. In Greeley, Colorado, which is kind of a meat packing. Yeah. You know, town. It's, um, and so they're looking to use, you know, a very large mixed use facility. They're gonna have a, an arena there. They're gonna have shops, they're gonna have, you know.

Retail as obviously shops and then hotels, and it's an entertainment district as well as a business district. Mm-hmm. And they're looking for the most responsible way and most efficient way, cost efficiency, construction efficiency, all the things to build out their. Thermal assets, they're chillers, they're heaters, you know, they're all the infrastructure and, and I wanna mention this, you know, for the for-profit world, especially these really large developments that are anchored by, you know, really credit worthy tenants, when you think about it as a developer, it makes all the sense in the world.

You get paid twice, you know, when you think about it, and you don't have to pay to construct it. Right. You don't have to, then you can spend more money constructing the actual facilities. And then when you sell those facilities, well, I'm not sure if you're aware of this, but you know, they come in and they audit your facilities and they ding you for equipment that has to be replaced on a timeline.

Mm-hmm. Right? But if you don't own the equipment, can't ding. They can't ding you, so you make money by not having to raise the money to build the facility, and then you make money when you sell it because you're not responsible for the infrastructure that serves the facility. Central plants are not new, the best of my knowledge.

The first big chilled water central plant was built in the early seventies in San Diego. Right. And they serve a district. It's just the technology has evolved. It's far more efficient. Mm-hmm. And how you finance it. Has changed. Yeah. How you could finance it and, and how you refinance it is changing. Right.

And so we were lucky enough or are bullheaded enough to be a part of that change. Mm. And we look to continue it, but not just in the finance, but in the o and m because you know what's most important, you know, and I, and I, if, if you're married is. You know, it's one thing to find your wife and to date her.

That's the fun part, right? So that's like the, the engineering and the construction, that's, you're making the change, right? Mm-hmm. But the health of your marriage is all based on the relationship for the next 50 years. Mm-hmm. Right? And keeping that relationship strong and thriving and improving. And that's the way that I look at this, you know, so there's the dating aspect and convincing her mm-hmm.

That you know, you might be better than you are. Mm-hmm. And then, you know, what do you do after you get married? And our focus is really on that marriage and it's, it's, it's maintaining. So as we, I, I think that there's gonna be more content in the future. Our, our audience could, uh, expect to hear more from you.

We'll, we'll include your links in the, in the show notes. So if someone wants to connect, especially that CFO or the developer who, who this absolutely just makes sense for, right? They should reach out and connect with you, right? Like that's a no-brainer. That's the purpose and mission of this the Deal podcast is to, to one is we wanna learn, and as we learn, we wanna share.

That's why we, that's how knowledge is passed on generationally. But two, man, we love deals. We love deals for our guests. We love deals for our community. So that's the, that's, that's why we created this show. So before we end. Today's, which would be take one. Um, you said you had an interesting story about the at, at and t stadium that, uh, kind of loop backs into, you know, as you guys were doing that deal with, with the Joneses and, and building out that stadium and, and doing the work there.

You said you had an interesting story. Is that, is that something we should talk about now or maybe in take two in the future? Um. There was a lot of interesting stories around that and, and maybe that's, maybe that's for take two. Okay. But, you know, suffice to say that re relationships in business are the most important part.

Mm-hmm. You know, um, you, you cannot put a dollar dollar value on trust. So never, never take advantage of someone's trust. Right. You know? But when somebody is able to leverage their trust to help their friends, then you wanna be a part of that. You, you definitely, definitely wanna be a part of that. But at and t stadium was, was a lot of fun.

The people, um, that, that run the facilities. Scott, um. He's a great guy and, and, uh, and the facilities is just phenomenal. I mean, they call it the eighth Wonder of the world, and, and being a part of that was fantastic. Look, whether you're a Cowboys fan or not, you know, whether you're a Cowboys fan or not, but I will leave you with this, you know, never did.

I think that I would go and be an infrastructure developer and wake up one day with a cheerleader as my assistant. That was wild. That was wild. They're, you know, very smart, you know, uh, smart people that, uh, that go on to be a part of in a phenomenal organization and they go out to do great things after they, you know, cheer maybe for five years.

But, uh. I was newly married. Like I told those guys, I said, look, I'm gonna have to sit down with my wife and, and have a conversation. I said, she's the decision maker here. She's gonna have to, that's right. Okay. This, y'all just sprung this one on me. But, uh, but anyway, but that's, that's kind of, you know, funny.

But it was true. But, uh, no, the most important thing in business is relationships. And we were just fortunate enough to make a very, a very tight relationship with very good people. Yeah. Well, Ken, it's been absolute pleasure. Um. Fellow deal makers in the audience. As always, reach out to the guests, say, Hey, thanks for being on the show.

Find a way to connect with them and, and maybe even do a deal. Now, if you have a deal that you'd like to talk about, uh, specifically man, midmarket, mergers, acquisitions, like we love having those conversations. If you'd like to talk about that here on the show, head over to the deal podcast.com. Fill out a quick form, maybe get you on the show next, but till then, we'll talk to you all on the next episode.

Cheers, everyone.