Constellation Energy Group Inc. is paying $175 million to acquire Stamford-based MXenergy Holdings Inc. even as the Baltimore-based giant moves ahead with its own $7.8 billion sale to Chicago-based Exelon Corp.
MXenergy shareholders include Stamford-based Sempra Energy Trading L.L.C., through which MXenergy buys electricity and natural gas under a 2009 agreement that gave the company wiggle room on debt agreements that were coming due at the time. The actual Constellation acquisition figure will likely be adjusted at a later date based on final working capital balances and other financial details.
Constellation said it will assign one of its own executives to lead MXenergy, without immediately specifying whether it will maintain the company”™s small headquarters office in Stamford.
MXenergy established its main operations center in Houston following its 2006 purchase of Shell Energy Services Co.
MXenergy co-founder and CEO Jeffrey Mayer has been a vocal commentator on energy industry issues via a blog he updates semi-frequently; his most recent commentary on energy was titled “frick”™n frackin” on the controversial use of hydro-fracking to free trapped natural gas reserves by injecting chemical-laced water underground.
The company also runs a Cablevision channel dubbed MXenergyTV on which it offers tips on renewable energy, recycling and other topics, having featured several local organizations including the Garbage Museum in Stratford, Shelton-based Better Packages and Westport”™s Green Village initiative.
In a February conference call with investment analysts, Mayer said the TV station was one strategy to help stem attrition in its customer base, as more competitive suppliers enter MXenergy”™s markets.
“We”™ve historically noticed that when there are new markets which are experiencing a good deal of growth ”¦ attrition can pick up, probably because there”™s a lot of competition, a lot of publicity surrounding the new market and a lot of customer cognitive dissonance, for want of a better term,” Mayer said. “In a retail market where customers frequently only see our name as a line item on the utility bill, one often doesn”™t have the loyalty that one might have in other businesses.”
In 2010, MXenergy had nearly 55,000 customers in Connecticut according to a March report from the state Department of Public Utility Control. That was the fourth best tally of the some 20 electricity aggregators and resellers that compete with Connecticut Light & Power Co. and United Illuminating Co., which are subsidiaries respectively of Hartford-based Northeast Utilities and New Haven-based UIL Holdings Corp.
Direct Energy Services led Connecticut”™s competitive supplier market with 66,000 customers, of some 493,000 total tracked by DPUC, which omits data from a few suppliers. In all, competitive aggregators have captured 24 percent of the state”™s accounts, with CL&P serving more than 1.2 million customers in 2010 and United Illuminating 325,000 customers.
Constellation New Energy, which unlike Direct Energy and MXenergy does not offer residential service, did not crack the top 10 in the state with about 13,000 customers total. DPUC does not furnish figures on the amount of actual power delivered by each company, however, which could elevate Constellation New Energy”™s standing due to its focus on commercial customers that consume more power than households.
Until now, Constellation has focused on offering residential electricity to customers in Maryland, Washington, D.C., and parts of New Jersey and Illinois. The MXenergy acquisition gives Constellation some 500,000 new customers in 15 states, as well as Ontario and British Columbia in Canada.
In its second fiscal quarter ending Dec. 31, MXenergy earned $25.7 million as sales increased 20 percent from a year ago to $184 million. The company closed the quarter with assets valued at $229 million and liabilities of $140 million.
Constellation earned $79.4 million in the first quarter of 2011 as revenue ebbed slightly to below $3.6 billion; while Exelon profits totaled $668 million on a 13 percent increase in sales to nearly $5.1 billion.
