WBJ: Analysts Praise Recent Ameresco Purchases

Worcester Business Journal
By Brandon Butler, Worcester Business Journal Staff Writer

In the past three months, Ameresco, the Framingham-based energy efficiency company, has made two strategic acquisitions that analysts and company officials say will help this MetroWest business pursue its plans to become an even larger national player in the energy services field.

Ameresco purchased APS Energy Services of Arizona in August, one month after it bought Applied Energy Group of New York. The company has not yet released financial details of either transaction.

George Sakellaris, Ameresco’s president, CEO and founder, said the moves are part of a strategic plan to expand the company both from within and by purchasing other businesses when it makes sense.

The APS Energy acquisition, specifically, will help Ameresco expand in a region of the country that the company does not yet have a strong presence. Meanwhile, the Applied Energy Group deal will help Ameresco grow in a niche market: helping utility companies provide efficiency services for customers.

Analysts are praising the moves, and the company.

Market Reaction

Zach Larkin, an energy services analyst with Stephens Inc. in Little Rock, Ark., said the APS purchase is a classic example of a company expanding geographically through acquisitions.

APS does basically the same work as Ameresco, which is budget neutral and technology-agnostic energy efficiency upgrades. When Ameresco or APS — which will be referred to as Ameresco Southwest —works with a client, there’s no upfront cost to the client and Ameresco because it doesn’t have contracts with specific vendors and chooses the best possible technology to install for the maximum return.

The energy improvements are budget neutral because Ameresco uses the savings produced by the energy upgrades to fund the cost of the new technologies.

‘Done Extremely Well’

“If you look at Ameresco’s business model, they’ve done extremely well over the past many years growing organically and through acquisitions,” said Dale Pfau, an analyst who tracks the company from Silicon Valley in California. “Part of that success has been expanding into additional regions where they can bring expertise and tie into local talent already established there.”

Sakellaris said it’s simply a coincidence that the two deals happened within a short time frame; the company had investigated both deals for months.

“Our strategy is to grow the company organically and when we find acquisitions that can bolt on or tack on to our current offerings, we examine that,” he said.

More Engineers, Synergies

Sakellaris added that the acquisitions will also allow Ameresco to bring on additional engineering talent and create “synergies” within the business.

Analysts are bullish on the future of the company as well. Both Pfau and Larkin have “buy” recommendations on the company, citing strong management and financial performance, plus a receptive market for energy-efficient upgrades.

The company made an $8.8-million profit on $165 million in revenues in its most recent quarter, representing increases of 7.7 percent and 17 percent, respectively, from the same quarter last year.

“It’s a very positive environment for the kinds of projects Ameresco does,” Pfau said. “In a time of challenging budgets, the ability to lower energy costs, upgrade facilities and do it all within a financing framework that allows for no upfront costs is a very attractive model for institutions and government entities that are challenged to find capital these days.”

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