EnerNOC, the biggest U.S. demand response provider and an important player in energy software, has found a buyer to help with its financial difficulties -- and to put its business to work on a global scale.
Italy’s Enel announced Thursday that its U.S. subsidiary, Enel Green Power North America, will acquire Boston-based EnerNOC for about $7.67 per share, or a 42 percent premium over yesterday’s share price. Enel's press release calculates the offer's value at about $250 million, excluding debt, while EnerNOC’s press release added this debt to yield an enterprise value of more than $300 million.
The premium may be surprising, but the fact that EnerNOC is being acquired is not. The company, which went public in 2007, announced in March that it was reviewing strategic alternatives, including selling some or all of its businesses, to manage its current financial challenges.
EnerNOC has been struggling on multiple fronts. In its core U.S. demand response business, it has had to contend with legal threats, market changes, and increasing competition. Meanwhile, its Energy Intelligence Software business -- its name for the stable of software products built or acquired over its lifespan -- hasn’t taken off with customers as fast as hoped.
But EnerNOC CEO Tim Healy said in a Thursday interview that the sale to Enel is “a validation of our strategy in the marketplace. We’ve built a cutting-edge software platform, a cutting-edge go-to-market engine, and an unparalleled opportunity to connect customers with energy opportunities across the globe.”
“They want everything -- and most of all, they want our people,” Healy said of Enel’s acquisition plans. Under the terms of the acquisition, EnerNOC expects to continue in all its current lines of business, and to incorporate its software and services into Enel’s growing suite of customer-facing energy services.
Specifically, Enel intends to put EnerNOC to work as a “foundational element” of the E-Solutions business it launched last month. This new business unit, headed by former Enel Green Power chief Francesco Venturini, has set its sights on “electric mobility, vehicle-to-grid projects, recharging infrastructure, energy-efficiency management, batteries and energy optimization platforms, public lighting and distributed generation systems.”
Enel is one of the energy giants making serious investments in the emerging world of customer-owned and -controlled energy assets, from smarter building energy management systems and rooftop solar to batteries and plug-in electric vehicles. Enel has been acquiring companies to get there, starting with Demand Energy in January, and now EnerNOC.
"I see this not as Enel being eager to take on a turbulent wholesale demand response business and an underperforming SaaS business, but rather as Enel looking for a global platform for growth in C&I energy management,” Andrew Mulherkar, GTM Research senior grid edge analyst, said of Thursday’s news.
Despite its financial difficulties, EnerNOC has an established presence and brand in the U.S. market and in parts of Europe, and continues to grow its presence in the Asia-Pacific region. What's more, its combination of demand response with software for energy procurement and management covers both utility-facing and customer-facing parts of the revenue equation.
Enel is looking to stay competitive with global peers that are investing significantly in the C&I energy management market, added Mulherkar.
Engie, Centrica and EDF have already acquired solar, energy efficiency and other distributed energy companies serving this market. In the U.S., rival demand response provider Comverge was recently acquired for $100 million by smart meter giant Itron for $100 million.
GTM Research analyst Elta Kolo noted that Enel’s 2017-2019 strategic plan pointed to a customer focus, specifically highlighting the future offerings in demand response services. EnerNOC’s global access to an estimated 24 gigawatts of C&I load resources across North America, Asia, Europe, Australia and New Zealand could certainly help it on this front.
There may be more to come from Enel as part of its strategic plan for new customer services, Kolo added. The company has highlighted e-mobility and recharging infrastructure as a high-potential arena, which could signal an acquisition opportunity for an EV charging company, as with EV-Box, which was bought by Engie earlier this year.