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January 6th, 2015

Fewer Energy Companies to Compete For Your Business in 2015: Review of 2014 M & A Activity

by Andrew Price, President & COO

2014 ended with a rash of mergers and acquisitions in the energy sector. In this blog, I will highlight a few that will be of interest to CES clients.

  • Constellation acquires Integrys Energy Services

Two prominent electricity suppliers, Constellation Energy and Integrys Energy Services, announced that they were joining forces on July 30th 2014. As discussed here, Integrys Energy Group had already announced that it was looking for a buyer for its retail marketing division as part of its deal to be acquired by The Wisconsin Energy Corporation. Wisconsin Energy Corporation wanted only the regulated utility delivery businesses operated by Integrys in the Midwest – not the retail supplier that sells electricity and natural gas to consumers – like you - at competitive market rates. It is our job at CES to maximize the competitive bid process, getting the best combination of price and contract terms for our clients. We are always concerned when two prominent retail energy commodity suppliers join forces. The Constellation / Integrys merger follows Direct  Energy’s purchase of Hess in 2013. As a result of these mergers, consumers lose two of the largest competitive supply options available in certain markets. Thankfully, there are still a large number of highly qualified suppliers of retail electricity and natural gas in the marketplace. We do not anticipate any lasting impact on CES clients due to this union. 

  • Comverge acquires Constellation’s Demand Response Unit

Sticking with Constellation…Comverge and Constellation announced that they had formed a new, stand-alone demand response company called Cpower on November 4, 2014. Demand response programs pay consumers to be available to reduce their electric load during times when the electricity grid is strained. Cpower will be majority owned by Comverge, but will operate as an independent unit. Constellation, which a few of you may remember purchased CPower in 2010, will retain a minority ownership in Cpower. The demand response market suffers greatly from a lack of competition in many parts of the US. In additional to Constellation, Comverge and CPower, only a small handful of demand response providers, including Enernoc, compete in demand response program offerings. Enernoc pulled out of formal demand response in New England in 2013, as discussed at length here, leaving only the newly re-formed CPower, as an option in New England. Constellation is based in Baltimore and owned by energy giant Exelon. Comverge is owned by H.I.G. Capital, a Miami based private equity firm.

  • EnerNOC Buys WorldEnergy

Sticking with Demand Response providers…EnerNOC purchased World Energy in November 2014 for $76 million. World Energy is an “energy technology and services firm” with a “cloud-based auction platform.” EnerNOC, based in Boston, and World Energy Solutions, based in Worcester, are both publicly traded companies. World Energy, which focused on energy procurement and energy efficiency for “commercial, industrial, institutional, governmental and utility customers” is a sometimes-competitor to us here at CES. EnerNOC indicates that it will integrate World Energy’s software into its technology platform. In my (totally unbiased!) view, our service offerings at CES are very distinct from those provided by World Energy and there will be no significant impact on the market or CES customers. 

  • SunEdison Buys FirstWind

FirstWind, a prominent wind energy developer based in Boston Massachusetts, agreed to be acquired by SunEdison for about $2.4 billion in upfront and deferred/conditional payments. FirstWind, with wind projects in Maine, Vermont, New York, Utah, Texas, Washington, and Hawaii, had recently developed a portfolio of solar PV projects in Massachusetts. CES has advised clients, including the University of Massachusetts, on the purchase of outputs from almost 18 MWs of FirstWind owned solar projects to-date—more on this topic can be found here. SunEdison, with headquarters in Belmont California, purchased FirstWind to diversify out of solar and gain access to the wind market. FirstWind benefits by gaining access to international markets; SunEdison is a global developer with a strong presence in Europe and Asia.  SunEdison is majority owner of a publicly traded “yieldco” named TerraForm. More than 500 MW of wind projects, currently owned and operated by Firstwind, will be added to TerraForm once the merger is closed. It is too early to tell what impact, if any, this merger might have on CES clients.

  • Sprague Purchases Metromedia

Two retail natural gas suppliers in the Northeast joined forces in a deal that closed on October 1, 2014. Sprague purchased Metromedia’s natural gas and power marketing business for about $22 million plus assumption of liabilities. CES has advised many clients on natural gas transactions with both companies throughout the Northeast. We have no concerns about continuing to work with Sprague – which is consistently among the best natural gas suppliers in business – but we regret the loss of a competitive supplier. This is especially true in regions that had four or fewer competitive supply options already and that also lost a supply option when Hess joined with Direct Energy.

Thanks for reading! Let us know if you have any concerns or questions about any of these mergers and acquisitions. We are looking forward to helping you navigate energy markets in 2015!  

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