Summary:

EnerNOC spent a lot of money on acquiring companies in the first quarter, and it showed in the U.S. demand response leader increased revenues and growing losses for the first quarter.

PowerGRid

U.S. demand response leader EnerNOC spent a lot of money on acquiring companies in the first quarter — and it shows. The Boston-based company on Wednesday reported both increased revenues and an increased loss for the first quarter of 2011.

EnerNOC reported a loss of $19.3 million, or 76 cents per share, on revenues of $31.8 million in the first quarter, compared to a loss of $14.2 million, or 59 cents per share, on revenues of $28.1 million in the same quarter in 2010.

It’s important to note that EnerNOC reports the majority of its revenues in the second and third quarters of the year, when its biggest demand response contracts pay out. Its overall trends have been toward profitability, however, and in February EnerNOC reported a profit of $9.8 million for 2010, compared to a $6.8 million loss in the previous year.

Beyond those seasonal earnings factors, EnerNOC also spent a lot of money on acquisitions in the first quarter. That included the completion of the $26.5 million purchase of California-based Global Energy Partners it first announced in December, as well as the January purchase of M2M Communications, a company that specializes in agricultural demand response, and the purchase of an unnamed “small international demand response provider,” according to Wednesday’s release.

All in all, EnerNOC’s cash and cash equivalents fell by $50.8 million in the first quarter, to stand at $102.6 million as of March 31, 2011. The majority of that decrease was due to acquisitions, the company stated in Wednesday’s release.

At the same time, EnerNOC’s business growth kept chugging along in the first quarter. Core demand response projects grew to about 6,300 MW as of the end of March, up from about 5,300 MW at the end of 2010. While most of EnerNOC’s business is with mid-Atlantic grid operator PJM, it also added business in New England and with the Bonneville Power Administration in the Pacific Northwest.

But EnerNOC has also been building up its energy efficiency business, built on several acquisitions it has made over the last few years. The first quarter saw the company add a big new customer for its energy efficiency business: utility Southern California Edison, which will help cover part of up-front costs for customers who sign up for the program.

EnerNOC also got a couple of regulatory boosts in the first quarter. In March, the Federal Energy Regulatory Commission issued an order laying the groundwork for demand response providers to earn prices for their power reductions that are equal to the prices power plants get for the electricity they produce — a rule that could lead to increased revenues for demand response providers like EnerNOC, Comverge and others.

EnerNOC also got a boost from FERC in early March, when the commission ruled that the company hadn’t broken any rules in the way it accounted for demand response — something that PJM had accused the company of doing in February. PJM is now asking FERC for permission to change its market rules in a way that could reduce EnerNOC’s revenues, as EnerNOC executives conceded in a Wednesday conference call.

Excluding that possibility, EnerNOC is predicting its full year 2011 revenues will fall to between $300 million to $320 million, and projects net income will be in the range of 25 cents to 50 cents per share, compared to 2010’s earnings of 37 cents per share.

Outside the scope of the quarter, EnerNOC reported that it entered into a $75 million senior secured revolving credit facility with Silicon Valley Bank and TD Bank in April. That replaces a previous $50 million credit facility for funding credit requirements to grid operators and utilities that demand response aggregators must pledge to secure their contracts.

Photo courtesy of Argonne National Laboratory via Creative Commons license.

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