In His Element

first_imgBy Muhammed El-Hasan STAFF WRITER Employees entering Shaun Lee’s office open the door carefully lest they hit a guest sitting across from the company’s CEO. At about 8 feet by 8 feet, the room is smaller than some closets and most CEO offices. Faded wood-panel walls surround two fold-out tables pushed together to serve as a desk. Lee, who runs El Segundo-based Element Service Inc. and also serves as director of operations, has a utilitarian manner followed by the rest of his staff. “I’ve never felt I needed a big office,” Lee, 39, explained. Yet, his pragmatism belies grand ambition. Lee, who employs more than 30 workers in his heating and air conditioning business, plans to take his company public in January. He said that 2007 revenue “probably” will reach $3 million, up from $1.8 million last year. For 2008, Lee said he expects sales of $24 million. Element generates nearly all its revenue from installing and repairing heating and air conditioning units. The company emphasizes energy-efficient products. But Lee has bigger plans. He sees revenue in the hundreds of millions of dollars in coming years as his firm rolls out a new program similar to one that had been offered by – of all companies – Enron Corp. For a brief part of his long career, Lee did technical consulting for Enron, the failed, scandal-ridden Houston energy company. Enron had a profitable unit that used energy-efficient heating, air conditioning and lighting appliances to reduce clients’ electricity bills. That unit profited from a share of the savings. Three years ago, Lee tried a similar business model. Two years later, he added electricity-generating solar panels to his plan. Lee said he is negotiating with 10 national retailers to institute this energy-saving program. “We’re starting the initial proposal process now,” he said. If just one signs on, Element Service could dramatically raise its revenue. The El Segundo firm could make a profit of 40 percent on a client’s original electricity bill, Lee said. If accurate, that would represent staggeringly high revenue, considering the amount of electricity consumption at giant retailers and their distribution centers. “The revenue stream is massive,” Lee said. “The customer pays the money to Element, and Element pays their bill. And it’s up to Element to lower the electric bill further and make money on the difference.” Lee has not given this program a name yet. But it is the centerpiece of a larger Element growth plan that also includes the recent purchase of a majority stake in FridgeCare Inc., a Culver City maker of panels that reduce energy use in walk-in refrigerators by lowering humidity. Lee said he has secured $140 million in project financing. But he also plans to help finance his growth through a reverse merger with a public company called Utilisource Corp. Utilisource is a former power company dormant for the past seven years. Yet, Utilisource retains its public status and its shares are traded over the counter. So merging into Utilisource will allow Element to become public without the traditional complex and time-consuming process of going public. “It’s like an empty shell and I’m the snail crawling in,” Lee deadpanned. Although Utilisource exists only on paper, anticipation of the planned Jan. 1 merger has caused the stock price to fluctuate wildly, peaking at 35 cents recently before returning to the mid-teens. After the merger, Utilisource would issue more shares to the public to raise capital for his expansion plans. Element already is expanding. In 2005, Lee started the company in Van Nuys. Needing more space, Element relocated to Playa del Rey for about six months before finally ending up at its El Segundo location in April. Element originally had 4,000 square feet at its El Segundo headquarters, but has grown to 6,500 square feet by moving into adjacent space. The company recently opened an office in Clovis near Fresno. In November, another office will open in Camarillo. An additional office will open in January near San Diego. That will give Element coverage of a giant swath of California from Tracy, east of San Francisco, to the Mexican border. “The thing that’s setting us (apart) in our industry is I’ve been doing energy conservation since I was a teenager for my stepfather’s company 25 years ago,” Lee said. Lee began work in the heating and air conditioning industry even earlier than that. Starting in the fifth or sixth grade, Lee would help his grandfather on service calls for the elder’s company Can Do Heating & Air Conditioning. When Lee entered the seventh grade, his mother secured a work permit for him. “So I was legal,” he recalled. Lee then worked for his stepfather’s business installing air conditioning units. In 1986, Lee’s grandfather retired. So Lee, 18 at the time, asked if he could take over the company name. His grandfather said yes. “I got the name and a crate of pipe parts,” Lee said. “That’s all he had left, and that’s how I started the company.” Lee grew his new company to include about 30 employees. In 1997, he sold Can Do to a Chatsworth firm. Lee became executive sales director of that company. Lee left that business three years later, and began to do consulting work for other air conditioning companies. That work had him traveling throughout the U.S. For two years, he worked for Chatsworth-based Sanyo North America Corp., several times visiting the firm’s parent company in Japan. “It was always my dream to fly around the world, and here I was doing it on someone else’s dime,” Lee said. Lee has “always been a go-getter,” said Jason Zenter, Element’s service coordinator, who has worked with his boss on and off for two decades. “He’s always been beyond his years since I’ve known him. He grew up pretty quick,” said Zenter, who is the brother of Lee’s ex-wife. “He’s always finding ways of doing something new.” Despite 80-hour work weeks, Lee found time to race cars. From the age of 17 until 31, he participated in numerous races including Baja off-road competitions and the Long Beach Grand Prix. This workaholic, with big dreams and a small office, hopes business success will allow him to eventually achieve a less utilitarian goal: ownership of a private jet. muhammed.el-hasan@dailybreeze.com 160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!last_img read more