EnerNOC Buys Baltimore Firm, Expands Energy Procurement Services

5/5/08Follow @wroush

As more states have deregulated their energy markets—giving corporations, city governments, and other organizations more choices about where to buy their electricity and gas—a new group of consulting companies has sprung up to help these organizations make wise decisions. And in the space of eight months, Boston-based EnerNOC has gone from being a non-player in this “procurement services” market to being one of the country’s single largest providers.

EnerNOC, which we profiled in February here and here, is mainly known for aggregating commercial and industrial companies into “demand response” pools that agree to help utility companies manage power loads by dialing back their electricity use during times of peak demand. But last September it bought MDEnergy, a Stamford, CT, energy management company that helps clients gather bids for energy contracts. And today EnerNOC announced that it has purchased South River Consulting, a Baltimore procurement services firm that provides similar services to about 200 clients, including Johns Hopkins Hospital and the City of Baltimore.

The South River consultants’ existing relationships with energy suppliers and their skill at soliciting and managing energy bids—together with EnerNOC’s own reverse-auction software for managing competing bids—will give EnerNOC customers access to the cheapest available power, says CEO and chairman Tim Healy.

“The South River acquisition makes sense [for EnerNOC] because it’s consistent with our strategy to be the market’s best full-solution provider,” says Healy. “Energy procurement services help customers navigate the nuances of moving from their incumbent supplier to a competitive supplier, which can be a complex thing. We’ve found that it’s something our customers want.”

Healy says South River’s mid-Atlantic location will give EnerNOC access to new customers for its core demand-response service. “We like the fact that we saw so much success with our first acquisition, MD Energy, in terms of the cross-selling opportunities,” Healy says. “South River has a couple hundred customers, and these customers are ripe for us to talk to about demand response, and vice versa—we have many demand-response customers in the mid-Atlantic region who are asking if they can get help with competitive energy procurement. We think the strategy has proven successful [with MDEnergy] so we said, ‘Let’s do it again in another region.’”

EnerNOC acquired South River in a cash-and-stock deal initially valued at $4.75 million, including $3 million in cash and $1.75 million in EnerNOC common shares. South River’s stockholders could earn additional payments over the next 24 months if the division hits certain revenue targets.

Wade Roush is Xconomy's chief correspondent and editor of Xconomy San Francisco. You can subscribe to his Google Group or e-mail him at wroush@xconomy.com. Follow @wroush

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