NEWS

July 31, 2007

E3 Consulting is the subject of Denver Business Journal article

DENVER, CO – There's no doubt that energy is a hot market, and E3 Consulting LLC has ridden the wave over the last eight years to become a 19-employee firm with 2007 revenues expected to hit more than $8 million.

The company, based in Englewood with a second office in Houston, represents big financial institutions and banks looking to finance major energy projects–mostly in the United States.

The projects range from $150 million to $1 billion and run the gamut from transmission lines to power plants to natural gas storage facilities to biofuel refineries. They can follow a project for years -- from proposal through construction and operation until the loans are repaid.

They also look at existing operations that may be for sale, and need a solid understanding of what may change in regulation or the marketplace that might require additional investment.

"We need to know what's the situation now and what's coming down the hill," said E3 CEO Don Hurd. "If you buy this, will you have to add equipment to it?"

The three principals–Hurd; Jim Short, senior vice president and chief operating officer; and Paul Plath, senior vice president and chief technology officer–started the company out of a desire to "do things the way we thought they should be done," Hurd said.

They also wanted the flexibility "to see your child's once-in-a-lifetime third-grade thing. That's also very important," he said.

The biggest challenge in the last eight years wasn't simply getting the company started and off the ground, Short and Hurd said.

"Starting a business is easy. Running a business is the hardest thing about being a business," Hurd said.

"It got hard when we became successful and we had to keep it going," Short said.

For instance, as E3 grew and added people, each new employee brought with them their own method of tracking a project and communicating with clients.

"There was a time when we had 13 people and had 13 different ways of doing things -- and everyone was happy with that, except Don and me," Short said.

It was clear the company needed some kind of official system for doing things, Short said.

"Putting in a project management system, even conceiving of the need for a project management system -- it's something that you wake up thinking about," he said.

Hurd turned to an outside consultant, who helped involve all E3's employees in building a system that worked for everyone.

"Now we're invoicing 60 to 70 projects a month and reporting on all those projects to our clients every week," Hurd said.

The principals decided early to grow the company organically, not through outside investment or debt. And they also decided against a marketing campaign to promote E3, instead relying on good word-of-mouth in the relatively small community of energy project financiers and owners.

And longtime clients speak highly of the firm.

"They've done a number of independent engineering studies for many of our plants that we've developed, and they've done an excellent job," said Michael Lawler, vice president of finance and treasurer at Tenaska Inc.

The private Omaha, Neb., company has interests in power plants generating some 7,400 megawatts of power–enough to support 7.4 million homes.

Many of E3's clients are foreign-based banks looking to invest in the U.S.'s booming energy market, Hurd said.

Daria Pishko, vice president for Frankfurt-based DZ Bank's New York City office, said she's worked with E3's principals for years.

"They do due diligence for projects that we'd be a proposed lender to," said Pishko.

"They've always provided good, sound reference information," she said. "And they're willing to be forthright in their opinion on whether something is feasible, regardless of whether it will benefit them or not. They give a straight answer."

The company's reports are also read by Standard & Poor's, said Peter Rigby, director of corporate and government ratings for the firm, which uses a range of information to assign credit ratings to bonds and debt.

"When there's a transaction, such as a power plant, in the market, as part of our due diligence we require the sponsoring firm to engage an independent engineering firm such as E3 to do a complete analysis of the project," Rigby said.

E3 is one of a handful of independent engineering companies that are accepted by the Wall Street bankers who are underwriting these bonds, Rigby said.

Hurd and Mick Gavrilovic, an E3 executive director and a mechanical engineer with a background in hard rock mining, recently returned from a trip to South Africa to take a look at that country's ability to turn coal into liquid fuel.

"Coal gasification is a hot topic right now, and the projects we've seen are very complex," Hurd said.

The duo spent time with executives from the Johannesburg-based Sasol Limited (NYSE: ADR) company and toured its Secunda plant, which has converted coal to fuel for 20 years and makes 30 percent of the transportation fuel for South Africa, Hurd said.

The plant gasifies 90,000 tons of coal every day, the equivalent of 9 fully loaded trains of coal, each train pulling 100 cars.

"We got a better understanding of the complexity of these projects and how successful projects in the U.S. might work," Hurd said. "They're capital intensive, about $2 billion, and they require a lot of coal and contracts for all the production of fuel and chemicals."

E3 is also expanding. It recently bolstered its oil and gas team focusing on the Rocky Mountains, and by the end of the year plans to open offices in New York City, to be closer to its banking clients, and in Charleston, W.Va., to be nearer U.S. coal operations.