Craig: Hi everyone, welcome to Solar Tea Time. I’m Craig Noxon, VP of Enterprise Sales and today we have a special guest and that is our REC Solar CFO, Gary Morris. In this week’s Solar Tea Time, you’ll be listening directly to our beloved CFO, Gary, and getting some advice from the C-suite. Gary, welcome to Solar tea time. I hope you have a cup of something wonderful.
Craig: Gary, you’ve outlined seven different tips that people could use when pitching a project to a CFO. It’s exciting for us to hear directly from you and so let’s just jump into it. But before we do, our listeners are from different types of organizations; big, small, medium.
Can you calibrate us before we get started about how these seven tips might be applicable to different types of organizations?
Gary: Yeah, sure Craig absolutely. First of all, I’d like to say thanks for having me on Solar Tea Time. I’ve seen the previous ones and they’re great and I’m excited that that you asked me to join you here today. So, I think that these tips are very applicable regardless of the type of organization that you’re in. It will be company specific, or project specific as to which one’s apply more than others. I would say that generally in larger companies, you must require engaging more stakeholders versus smaller companies where you have a smaller set of stakeholders who are all still looking at the same types of items that we talk about here. I’ve seen that firsthand. I come from Duke Energy which is REC’s majority owned parent company so I’ve seen the large company aspect of getting projects approved and then I’ve also worked at smaller companies as well. Overall, I think that they all apply and it is interesting for folks to kind of think about exactly how it works for their organization
Craig: Let’s set the stage here. We’ve got a project and the stakeholders have agreed to go to the CFO as one of the last steps. We’re about to pitch to you and you outlined seven things that we should be thinking of.
The first of which is cash situation. What do you mean by that Gary? What should people be thinking of from a cash situation perspective before they talk to the CFO?
Gary: I’ve always said and heard cash is king, right? You know that is the first thing to start with whenever you’re talking to a CFO. He or she is a finance professional who is going to want to know what the economics are. Does it make financial sense from an investment standpoint? Projects won’t get done and approved unless they make straight financial sense. I’m also thinking about whether this is a strong economic project or are we doing this project for other reasons and other benefits?
Craig: Okay, good, the next one probably follows on the cash situation. You want to talk about the investment structure.
What do you mean by that investment structure and what should people be aware of?
Gary: Yeah, 1 & 2 really go together. One is how do the economics look and then the other is how are we from a savings standpoint? Does this project make financial sense? The second one with the investment structure is how are we going to invest them so it saves us money. Especially with solar, there’s really two main approaches to investing or participating in a solar project. You can either own the project outright which means I’m investing cash in the project and building it or paying a company to build it but then I own that project long term. Or I can do a power purchase agreement where effectively I’m paying another company a rate for electricity but I don’t own the facility and so it really comes down to, as the CFO, how do I want to use my cash? What do I want my balance sheet to look like? Do I have the cash available to invest? Do I have the tax appetite to take advantage of the tax benefits that come with solar and come with ownership or do I view electricity as an expense that I just want to sign a contract and pay a lower rate for that power? So that’s where I think it’s important in dealing with solar how I would structure that investment and depending on the outcome of that, it also has an impact on our financial statements. There’s accounting implications regarding which direction we choose from an investment standpoint. I think those are important things that I would consider whenever deciding about which approach. How are we going to do the project and then which approach we would take once we think about the economics from the start.
Craig: Yep, okay. Great.
The third one you have is a time commitment and tell me what you mean by the time commitment when you’re talking to a CFO?
Gary: I think we’re all looking for workforce productivity, so we kind of look at this as the economics. We’ve looked at the investment decision. How are we going to structure from a cash standpoint. Now its is this the best use of time for the organization to focus on this type of project? Most organizations are not in the power generating business and so they have other areas of focus for their organization. Is this the best use of our time both from an initial investment standpoint as well as an ongoing operational standpoint and I think that’s it’s critically important. Something that people may not think about necessarily directly related to the CFO role but, at our organization, the effectiveness and productivity of that workforce is one of the key areas that I think about and focus on and so that’s something I think would be helpful to address as you have that conversation with what your CFOs.
Craig: Gary when you talk with that, are you basically translating time into money? Is that kind of what you’re looking for?
Gary: That’s exactly right Craig. Time does mean money with the CFO. I don’t know if you need to do a direct calculation of that but within my head that’s kind of the map that I’m doing and then similarly it makes the decision as to what approach that I would want to take. Do I want to invest the time commitment into owning a facility that comes with operational aspects or do I want to go with an energy partner that owns and operates and I pay for that power the same way that I do my utility bill today? I’d be getting the benefits of solar but without the operational aspects. That’s just some of the mental math that that I’m doing as I’m thinking about this project.
Craig: Great. So that dovetails into risks, which is number four.
What should someone be prepared for on the topic of risk when they talk to a CFO?
Gary: In addition to being the chief financial officer, we’re also chief risk officers. We are responsible for risks of the company. I think it is critically important for anyone having a conversation with the CFO to be upfront and transparent with the risks of the project. It’s very important to articulate those and also have a mitigation to each one of those risks. whenever you as a stakeholder in this project presented to me as the CFO. As a decision maker, it really gives me confidence that you’re being transparent, you’re being upfront, you’re being clear that these are the economic benefits of this project, these are the risks that are associated with it, and this is how we would mitigate these risks.
Craig: Makes total sense. What does the CFO really care about?
Gary: You know; the vendor you choose. I mean, this might be a softball response for you but who am I getting into business with with my dollars?
Craig: Tell me about vendor due diligence.
Gary: The vendor that we go with is a key risk item. This is a solar facility. A thirty-year power plant that is potentially going on a roof, ground mount or carport and will be at our facility for 30 years. 30 years is a long time and so you really want the quality and the standards of a true energy partner that you’re going into business with. Again, whether that is from a construction standpoint, I want to ensure that its built with the quality and standards that it’s going to last for 30 years and provide me that benefit because I’m investing my capital upfront with the expectation of long-term savings coming off that project or I’m going with the PPA structure. It’s critical that I feel confident in the person I’m going really going into business with.
Craig: You talk about alternatives. Is this presenting different alternatives to the CFO?
Gary: I would just be prepared for this question. Did you look at anything else other than the type of project? The CFO may have saw something on the news talking about some other type of technology or some other company or something else. Be prepared and again it instills the confidence in me as a decision maker. Did you look at anything else other than just this one project that you’re selling me? Yep we sure did. We looked at X, Y, Z. We think this project makes the most sense because this reason and that reason. You’re not going to be going into the full detail into exactly all the analysis that you performed on your other alternatives but it gives me the confidence that you at least thought about other approaches to this project and that this is the best one out of the other ones that you looked at.
Craig: Finally you talk about corporate mission.
Tell me what the CFO is looking for in terms of how this fits in with the corporate mission.
Gary: As I mentioned, step number one is cash savings, the cash situation of a project. Some projects do get do get done because of sustainability missions or employee benefits. There could be carports that provide shade for employee’s vehicles, provide, hail protection if you’re in a hail zone. There are employee benefits that are not necessarily monetized but that engage the workforce.
Craig: Tell me Gary, how would you want this presented to you?
Gary: Yeah. It’s interesting actually. I’ve seen it be successful in a couple of different ways. I’d say one is a simple PowerPoint presentation that outlines each one of these. I do think it’s important to have some type of written material that a CFO can look at. Time is scarce for everyone so have some prep material that they can preview ahead of time. What REC does is create a brief white paper. Nothing too long. It could be just a couple of pages long but a white paper that lays out each one of these areas in a brief and succinct way that gives me the ability to clearly wrap my head around that project before we have the interaction.
Craig: I’m going to give you one of my little sales tips. Speak in the same language of the person you’re talking to. If your CFO uses certain phrases, or talks some certain way, take on their point of view and mimic that back to them to speak their language and you will better be able to get your message across.
Gary, thank you for baring your soul to us. This has been great and I think our listeners appreciated it. Feel free to email us at email@example.com if we didn’t get to your questions or if you have anything additional for us. Cheers!
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