Betting Big On Energy Auctions | Growth, recent acquisitions help boost stature of Worcester's World Energy Solutions
Photo/Brandon Butler
Philip Adams, president and COO of Worcester-based World Energy Solutions, has been busy recently. The publicly traded energy management and auction company spent $17 million purchasing three businesses over the last two months.
It’s been a busy few months at the Worcester headquarters of energy auction company World Energy Solutions.
On the 14th floor of the Sovereign Bank building in downtown Worcester, about 40 employees work feverishly at their trading stations, each with a double-monitor display watching the latest energy auctions the company has run.
The company, founded in 1996, decided at the beginning of this year that 2011 would be a growth year.
Between mid-September and early November, the company purchased three businesses for close to $17 million, nearly doubling the size of the staff. Company president and COO Philip Adams predicts revenue will grow 40 to 60 percent next year, up from the 15-percent to 20-percent increases it achieved in each of the last three years.
Energy e-Bay
World Energy is an energy management company that specializes in running energy procurement auctions. Large consumers of power, such as government agencies, Fortune 500 companies and universities, use enough power that they can solicit requests to buy power directly from any supplier in deregulated markets — not just their local utility companies. World Energy helps these clients achieve the best price for their energy through an auction format.
Traditionally, this process has been done on paper, with energy procurement officers soliciting requests for proposals and getting bids from the energy providers.
World Energy has automated the system, making it more efficient for both the end user and energy provider. It’s almost an “eBay for energy,” Adams said.
Since the company’s founding, it has now run 16,000 auctions for 500 customers and suppliers.
In 2008, when the Regional Greenhouse Gas Initiative, the first carbon cap-and-trade model in the country, needed a firm to run the auction, it chose World Energy, which continues to run the auction.
Recently, the company expanded its services and is not just helping end users buy energy, but also manage it. The company now oversees energy efficiency upgrades and demand response management, and helps small and medium-sized businesses apply for various state and federal incentives.
The city of Worcester is even a recent customer. World Energy helped city officials procure a new two-year, $8- million-plus contract to buy electricity. John Odell, the city’s energy efficiency manager, said the new contract will allow the city to save more than $4 million over the city’s old contract if it had been renewed.
“The entire auction and process went even better than we had thought it would,” he said, noting that the city expects 20 percent of its energy to be made from renewable energy sources, which World Energy was able to help arrange.
Success stories like that one in Worcester have been adding up for the company. It collected $855,000 in profits during the third quarter on $5.6 million in revenue, up from a $147,000 profit on $4.6 million in revenue in the same quarter in 2010.
Through the first three quarters of the year, the company turned a $1.2 million profit on $15.1 million in revenues, a rebound after losing $480,000 during that time period last year.
But officials at World Energy say they’re just getting started.
Addition By Acquisition
Richard Domaleski, founder and CEO, said World Energy has spent the last few years establishing itself as a positive cash-flow company and building brand and market share to create opportunities.
“We knew if we executed successfully internally we would be well positioned, even in tough economic times,” he said.
With solid footing, the company has now been able to expand through acquisition. In mid-September, it purchased Co-eXprise, a software firm in Wexford, Pa., that specializes in energy procurement, for $4 million.
A month later, it purchased Northeast Energy Solutions, a Cromwell, Conn.-based energy efficiency management firm, for $4.75 million. That company will allow World Energy to help customers manage energy efficiency upgrades for lighting, heating and cooling systems, for example.
And on Nov. 1, the company announced it purchased the energy procurement division of GSE Consulting, a Dallas-based operation with additional offices in Houston and Fort Worth, Texas, for $8.6 million.
Jeremy Hellman, an investment analyst with New York-based Divine Capital, isn’t surprised by the company’s recent aggressive acquisition strategy. The company is cash-flow positive, has strong upside and earlier in the year built up cash reserves to make purchases. The company is executing its previously outlined strategy, he said.
“There is a lot to like about this company,” he said. “It’s a good, fundamental, profitable company that has a lot of attractive characteristics with respect to being an equity investment.”
But, he said, there are some issues that are holding the company back, particularly, the low volume of trades of the company’s stock. Hellman said it’s just simply not on the radar screen of major investment firms, which creates a classic chicken-and-egg situation. For World Energy to be recognized by the wider investment community, it needs the institutional investors: To get institutional investors, it needs to be recognized.
The issue, so far, has not hindered the company, Hellman said. It was still able to raise capital in the first half of the year, and Hellman is bullish on the company moving forward. He’s buying into predictions that revenue and profits could grow more than 50 percent by next year. If that happens, Hellman predicts more investors might start paying attention.
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