Power technologies company PowerSecure (NYSE:POWR) has landed a deal providing services to one of the nation’s largest utilities that is expected to double the company’s work and provide up to $35 million in annual revenue.
The Wake Forest company, which typically does not disclose its customers, left the utility unnamed but said it is with a company that it started working with late last year. CEO Sidney Hinton said that over the last year the relationship developed into the opportunity to become a regular, long-term provider.
“This win has the potential to be the largest contract that PowerSecure has ever won,” Hinton told analysts on a conference call to discuss third quarter financial results, according to a transcript from Seeking Alpha.
“The contract is with one of the largest electric utilities in the country. And they’ve selected us as one of two new partners to provide transmission infrastructure service on their power grid.”
Hinton said the specific volume of work will be determined in coming quarters. But based on discussions with the investor-owned utility, PowerSecure estimates that the two-year deal could be valued at between $25 million and $35 million annually. Hinton hopes to parlay the contract into a 10, even 20-year relationship with the utility.
PowerSecure, which provides a wide range of energy services to utilities, commercial and industrial customers, traded up on the news Wednesday with the company’s stock price climbing as high as $20.57. PowerSecure shares closed at $19.65, up 6.1 percent from Tuesday’s closing price.
PowerSecure already had strong financial results even before announcing the new utility contract. The company generated $81.5 million in third quarter sales, a whopping 84.3 percent increase from the $44.2 million in sales for the same period last year. PowerSecure’s net income for the third quarter totaled $3.4 million, up from $290,000 a year ago.
The big jump in revenue reflects contributions that recent acquisitions have made to PowerSecure’s top line. The company’s solar business is an acquisition that the company completed last year. The Energy Services Co. unit, or ESCO was acquired in February; LED lighting business Solais Lighting was acquired in April.
PowerSecure divides its operations into three divisions – distributed generation, utility infrastructure and energy efficiency. Distributed generation is the largest unit, representing $40.6 million of third quarter revenue. Utility infrastructure and energy efficiency made up $24.1 million and $16.6 million revenue in the quarter respectively.
The ESCO acquisition has already paid for itself and then some. ESCO, which produced $9.5 million in third quarter revenue, has generated $2.3 million in profit for PowerSecure over the last two quarters, Hinton said. PowerSecure had paid $1.8 million cash to acquire that business.
PowerSecure would have seen revenue growth even without the new acquisitions. Organic growth from existing operations accounted for $24.5 million of the year-over-year revenue growth. The company’s backlog – upcoming work that has been awarded but has not yet been done and turned into revenue – stands at $240 million. Hinton said that the backlog does not include the large $25 to $35 million utility work that the company announced Wednesday. That project will be added to the backlog when the volume of work is determined.
PowerSecure finished the third quarter with $54.1 million in cash and cash equivalents and $26.2 million of term debt outstanding. While the company earlier this year secured a $20 million revolving credit facility, it has yet to draw from it.
