Enercare (TSE:ECI) rents water heaters in Canada and reduces landlord exposure to commodity-price fluctuations through its submetering business, a high-growth business for the company which allows it to have one of the best credit ratings in its group and a low payout ratio, says John McIlveen, Senior Vice President for Research at Jacob Securities Inc.
“They [have an] interesting high-growth business, submetering, which is really beginning to take off. What they’re doing in that business is going to an existing apartment or condo buildings and retrofitting electricity and water and heating meters to the individual residential unit level. They’re also installing them into new builds. Landlords and condo boards like this because it takes the commodity price risk right out of their picture,” McIlveen says.
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McIlveen says not only do landlords benefit from Enercare‘s submetering business, but builders stand to benefit from the rental model because it reduces total house prices by including a rental heater instead of a new unit with the purchase of a house.
“Enercare is a different company altogether because it rents water heaters. “People in the U.S. always are amazed that people here in Canada actually rent their water heaters. Someone who already owns a water heater is not going to switch to a rental. However, if you’re talking new construction, Enercare will provide heaters for a whole subdivision, the contract is assumed with the purchase of a house, and that enables the builder to lower the selling price by $1,000. That’s why builders like it,” McIlveen said.