Energy & Power Solutions Inc.—a Cos-ta Mesa-based energy efficiency specialist that last year attempted to raise $25 million in an initial public offering—has filed for bankruptcy and is looking to be sold to one of its main competitors.
The privately held company, which makes software to help businesses cut energy costs and reduce emissions, filed for Chapter 11 bankruptcy protection late last month, along with five subsidiaries.
The Energy & Power Solutions bankruptcy petition lists $10 million to $50 million of debts for the 35-person company, which got its start in Irvine in 2002.
Major debt holders include Santa Clara-based Silicon Valley Bank, Ngen Partners LLC of Palo Alto, and Portland, Maine-based TD Bank.
Energy & Power Solutions is slated to run out of cash by December, according to court filings.
The company’s pushing for a quick, court-overseen sale. It has a deal in place to sell itself to a unit of Framingham, Mass.-based Ameresco Inc., according to filings made last week in Santa Ana’s federal bankruptcy court.
Newport Beach-based law firm Winthrop Couchot Professional Corp. is representing Energy & Power Solutions in the bankruptcy case.
Abrupt Turn
The bankruptcy filing marks an abrupt turn in fortune for Energy & Power Solutions, which made waves in early 2010 after filing plans for an IPO pegged at $25 million.
The company, which has also operated under the EPS Corp. name, had already raised $50 million in venture funding in separate deals in 2007 and 2009.
Venture investors included: Ngen Partners, a private-equity group focused on green technology; Altira Group LLC in Denver; and Robeco NV, the investment arm of the Netherlands’ Rabobank Group.
The company’s venture capital investors are still believed to be its dominant owners.
Last year’s registration statement reported Energy & Power Solutions posting sales of $12 million in 2009, much of it through its xChangePoint software that companies use to find ways to save money on energy.
The company, started by a group of former Enron Corp. employees, works with manufacturers, small companies and big corporations to cut energy costs by installing equipment, outsourcing operations and securing government rebates.
Energy & Power Solutions’ xChangePoint software measures usage of electricity, heating gas, water and wastewater output and tracks the weather.
Customers were said to include Tyco Healthcare, now Covidien PLC, along with what’s now MillerCoors LLC, and a “multinational soft drink company,” according to Energy & Power Solutions’ 2010 registration statement filing.
Energy & Power Solutions last year ranked as the 33rd fastest-growing private company in Orange County based on revenue growth, according to the Business Journal’s list last October. It was the 17th fastest-growing area company in 2009, according to the Business Journal (see related stories, pages 1, 3, 6; Special Report, page 31; list, page 41).
Despite its revenue growth in prior years, the company wasn’t profitable. It lost $14.9 million in 2009, up from a $9.7 million loss a year earlier.
As of last year, the company reported an accumulated deficit of nearly $30 million.
The company’s registration statement for a public offering was pulled at the end of 2010, with executives attributing the move to the downturn in the economy.
Another attempt at a private placement also failed to find interested investors last year, according to the company.
The company’s employee base, which as of last year topped 90 people in four offices, is now 35 workers, most of them in Costa Mesa.
Without any new funding sources available and the company running out of cash, Energy & Power Solutions officials said in court filings last week that it believes a sale is now the best way to maximize its remaining value. It has been marketing itself for sale since late last year.
It used New York-based investment banker Greentech Capital Advisors to initially contact 145 potential buyers, and eventually received letters of intent from four potential buyers, according to court documents.
Lone Bid
Only one company, listed as Delaware-based IPSE Services LLC, ended up putting in a bid for the company.
Court records show IPSE having the same address and legal counsel as Ameresco, which along with Carlsbad-based OnSite Energy Corp., has been cited by Energy & Power Solutions as its main competition.
Ameresco is offering $4.5 million for a bulk of Energy & Power Solutions’ assets. That sales price doesn’t factor in about $1.4 million in assumed contracts that would lower the company’s bid.
The Ameresco stalking-horse offer is subject to higher bids, which would have to start at $5.3 million, according to court documents. A date for a court-overseen sale hasn’t been disclosed.
Growth Push
Publicly traded Ameresco counts a market value of about $430 million, and has been on a growth push of late, according to reports.
The energy efficiency company has made two other acquisitions in the past two months, for businesses in Arizona and New York.
The acquisitions are part of the company’s strategy to expand into regions where it doesn’t have a strong presence, or buys that help fill a niche market, according to company officials.
Ameresco’s only California office is in Temecula, according to the company’s website.
