NOVARTIS AG will conserve enough electricity at a research and manufacturing center in Emeryville, California, to power 29 homes for a year by following advice from the world's largest military contractor, Lockheed Martin Corp.
According to Bloomberg News, companies such as the Swiss drug maker are cutting energy use after crude oil prices gained 77 percent in the past year and as countries around the world move to curb emissions of gases that contribute to global warming.
Novartis hired Lockheed to install more efficient lighting and modify heating systems so steam and hot water can be recycled at the center near Berkeley.
Lockheed more than doubled sales of conservation services to private companies in the past year, said Joseph Cipriano, president of business-process solutions.
The Bethesda, Maryland- based company, which gets almost US$3 billion of annual revenue from managing military nuclear programs, is gearing up to provide engineering for solar power plants and take over administrative functions for utilities.
"If Lockheed can do it for the military, I would hope they could do it for others," said Louis Navellier, chief executive officer of Reno, Nevada-based Navellier & Associates, which holds 1.2 million Lockheed shares among the US$5.5 billion it manages.
"Hopefully, Lockheed can continue to diversify because the defense industry can be cyclical."
Lockheed is counting on expertise it has acquired over two decades of managing government and military energy programs, including running the US Energy Department's Sandia National Laboratories in Albuquerque, New Mexico, since 1993.
The labs monitor the safety of the nation's nuclear-weapons stockpile and perform research on the security and reliability of electricity, oil and gas distribution systems.
The commercial energy-conservation program gives Lockheed a chance to expand services to a private sector that contributed three percent of its US$39.6 billion in 2006 sales.
The maker of F-22 stealth fighter planes and Hellfire missiles gets 84 percent of revenue from the US government and 13 percent from foreign nations.
It's too early to forecast profit from the commercial energy push based on the contracts Lockheed has won, said Eric Hugel, a New York-based analyst with Stephens Inc who rates the shares "equal weight" and doesn't own any.
More than US$20 billion a year in commercial energy-services sales is up for grabs, including conservation work for companies and engineering and administrative contracts from utilities, Cipriano said in a telephone interview. He declined to say how much Lockheed aims to seize.
"Energy efficiency is core to our principles at Novartis and integrated into how we do business," Meghan Leader, head of global business operations for Basel, Switzerland-based Novartis's vaccines and diagnostics unit, said in a statement.
Lockheed started offering companies advice last June, when chief executive officer Robert Stevens approved a plan proposed by Cipriano, 60.
The program, which draws on the company's four divisions, has brought in US$25 million over the past year. In November, the company won a US$9 million contract from Pacific Gas & Electric Co to help customers such as Novartis reduce consumption.
"We're a global security company, and we see energy as a growing national security concern," Cipriano said.
"Energy prices are high, and people are thinking, 'How can I use energy more efficiently, or use forms of alternative energy?"' said Cai Von Rumohr, a Boston-based analyst with Cowen & Co. He rates Lockheed "neutral" and doesn't own the stock.
Lockheed fell 95 cents to US$105.86 yesterday in New York Stock Exchange composite trading. Thirteen analysts tracked by Bloomberg recommend buying the stock, while eight have a rating of "neutral" or the equivalent.