Working from a sparsely decorated office suite in a nondescript building in Henderson, Johnny Thomas and John Francis are trying to build a clean-tech empire.
They're well on their way. The men have acquired two subsidiary firms for more than $17 million combined and locked up several project deals.
It's far from their first crack at building a business: the veteran entrepreneurs previously grew a seed company into a billion-dollar enterprise.
Through their current company, Blue Earth, Thomas and Francis have acquired firms that retrofit heating, ventilation and air-conditioning systems, snapped up clean-energy projects and contracts and teamed with a Greek company to land even more.
If all goes well, they could grab a big slice of a lucrative and growing clean-tech industry. In North America, revenue from energy retrofits to commercial and public buildings is expected to more than double by 2020, to $35 billion, according to Pike Research.
The rural New Mexico natives are not energy specialists by trade, and they’re not looking to develop their own products or services. Rather, they run a holding company similar to Warren Buffett’s Berkshire Hathaway. They acquire businesses, finance their expansion and hope for profits.
Blue Earth said it expects to earn about $11 million in revenue this year and $100 million in 2013. It did not predict potential profits or losses. In 2011, the pair's first full year at the helm, the company lost $14 million on $5.3 million in revenue.
Thomas and Francis have known each other for 30 years and led other companies together, including the Henderson-based AgriBioTech, which filed for bankruptcy a year after they left. At that company, Thomas and Francis acquired 34 subsidiaries in less than four years and turned AgriBioTech into the world’s largest forage and turfgrass seed producer, with a stock market value of $1.2 billion.
“It’s a lot like an artist's canvas to us,” Thomas said of growing a business.
They joined Blue Earth in September 2010, with Thomas as president and CEO and Francis as vice president of corporate development and investor relations. The company formerly was known as Genesis Fluid Solutions Holdings and developed water remediation technology, but the business didn’t advance as quickly as owners had hoped and the board of directors shifted gears, Thomas said.
They chose to focus instead on energy efficiency and acquire companies and technologies in that sector. The board hired Thomas and Francis to implement the plan and spun off Genesis to its original shareholders.
When researching the energy-efficiency sector, Thomas and Francis found a number of small contractors that offered heating, ventilation, air-conditioning or refrigeration upgrades, but none provided all of those services together. They also came across business owners who wanted to sell their companies and retire, but Thomas and Francis weren't interested. They need management in place to fit their business plan.
“We need their expertise, we need their licenses, their passion,” said the 71-year-old Thomas, who grew up in a farming family and has a master’s and PhD in genetics.
In January 2011, he and the now 63-year-old Francis — who hails from a family of cattle ranchers and New Mexico politicians — closed a deal to buy Castrovilla. Founded in 2004, the Mountain View, Calif., company serves thousands of clients by performing energy audits and commercial-refrigeration retrofits. It earned about $3.5 million revenue in 2010, more than double from 2008, and saved customers tens of millions of dollars in utility costs, according to Blue Earth.
Expansion plans for the new subsidiary soon followed. Blue Earth announced in May 2011 that Castrovilla would seek customers in Nevada, Utah, Arizona, Southern California, Oregon, Idaho and Washington.
Castrovilla President John Pink had wanted to continue growing his business, but the company’s bank would not expand its credit line, Thomas said. Pink did not return a call for comment.
In September 2011, Blue Earth acquired Xnergy, a company in Carlsbad, Calif., that designs, builds and maintains energy-savings projects. Xnergy was unable to finance projects before it was acquired, Blue Earth said. Xnergy President Jason Davis did not return a call for comment.
Through Xnergy, Blue Earth signed an agreement with Biosar Energy to pursue large-scale solar projects. Biosar is a subsidiary of Ellaktor, a Greek holding company with real estate, waste-management, energy and mining operations.
Biosar had built several large projects in Europe and wanted to expand to the United States. But it didn’t have the licensing or market understanding it needed to break in, Francis said. Biosar executives found Xnergy while looking for an engineering and construction firm with which to partner.
Over the past few years, Blue Earth also has secured project rights and contracts in California and Hawaii. In one deal, Blue Earth obtained the rights to build seven solar projects totaling almost 3.5 megawatts on the Hawaiian island of Oahu. The projects are valued at about $15 million.
Despite the progress, Blue Earth’s headquarters leaves the impression that it’s a tiny company.
Thomas and Francis work in a 2,500-square-foot suite on Horizon Ridge Parkway near Green Valley Parkway in the Horizon Ridge Professional Centre. The office is decorated with paintings by Thomas’ wife, Helen, and the only other person who works with them is corporate administrator Edith Vasquez.
Blue Earth is similar to Berkshire Hathaway in that respect, too. The storied Omaha, Neb.-based holding company is worth about $220 billion and employs 271,000 people worldwide — with only 24 staffers in its headquarters.