April 23, 2008
A mid-size Texas REP with 40,000 meters retained Affiliated Energy Group (AEG) to explore strategic merger, acquisition and sale opportunities. The REP, which only does business in ERCOT, has mostly mass market customers with several hundred large commercial end-users, positive EBITDA, and annual sales of about 1.5 million MWh.
That portfolio could smooth out the load characteristics of a competitor, explained Rob Potosky, Executive Vice President at AEG. Potosky, one of Dynowatt’s co-founders, led that REP through its acquisition by Accent Energy last year. Other M&A benefits include the standard cost savings and synergies, economies of scale, and access to new sales channels and marketing cache, Potosky added.
Although REP consolidation has been slower than many have predicted, Potosky believes interest has picked up because after several years of operations, REPs now have stronger histories and records that potential buyers can rely on in performing due diligence.
The biggest combinations in the past year (Accent-Dynowatt, Energy Savings-Just Energy) have focused on retailers with little or no ERCOT presence acquiring a well-known or entrenched brand with rooted sales channels, local marketing and operations, Potosky noted. The acquisitions allow the new entrants to realize positive gross margin far faster than incrementally enrolling customers organically.
AEG is fielding inquiries for its client on a blind inquiry basis.
