Grainger Enters Energy Services Market with Purchase of Alliance Energy Solutions

Nov. 20, 2009
Grainger Enters Energy Services Market with Purchase of Alliance Energy Solutions

Industrial distribution giant W.W. Grainger made a move this week into the energy services market, closing a deal to buy Alliance Energy Solutions, an energy services company (ESCO) based in Oxford, Conn. Terms of the all-cash deal were not disclosed.

Alliance Energy Solutions (AES), which was founded in 2001 and posted annual sales of $20 million in 2008, handles broad-range energy-efficiency retrofits, but its primary focus is on energy-efficient lighting. That emphasis on lighting seems to have been a key for Chicago-based Grainger.

“Our customers told us they had a need for a service to complement our deep product line around lighting products and we listened,” said Mike Pulick, president of Grainger’s U.S. Business. “The Alliance Energy Solutions team is dedicated to helping customers through offering value-added services that help them drive energy efficiency and productivity, with particular expertise in the area of lighting retrofits. We are delighted to have them join the U.S. team.”

Grainger spokesman Robb Kristopher called the deal a “milestone,” marking Grainger’s first foray into the energy services market, though the company has partnered with AES and other ESCOs to help customers improve efficiency over the years. Most of AES’s retrofit projects have been done in the eastern U.S., but Grainger expects to cover a broader territory. Whether Grainger will pursue further ESCO acquisitions to expand that territory remains an open question, Kristopher said.

“We’ve worked with AES for a number of years, and we’re going to learn a lot as we bring the Alliance team into our team. The management team has indicated an interest in acquisitions as it makes sense, but for the time being it will be business as usual. Alliance has a number of projects in the pipeline, and we’ll be looking at how best to fill that pipeline.”

James Ryan, Grainger chairman, president and CEO, pointed to the acquisition as a customer-driven expansion. “This transaction is the first service-based acquisition we’re adding to our U.S. customer offering and we anticipate it will help us accelerate our strategy to become our customers’ indispensable partner in helping them keep their facilities safe, efficient and functional.”

Alliance Energy President Kevin Siebrecht and Chief Operating Officer Matt James will continue to lead the operations under the Alliance brand name. In addition to lighting, AES also implements comprehensive conservation projects deriving additional energy savings from HVAC systems, direct digital controls, compressor upgrades and industrial process improvements. AES has expertise in securing federal, state, local incentives, rebates and tax benefits and can provide interest-free loans for energy savings projects. Its customer base includes manufacturing, retail, commercial, health care, recreational, educational and governmental buildings, according to the company’s website,

Grainger also made some announcements to the investor community this week, reporting October sales down 3 percent from October 2008, including the effects of acquisitions and foreign exchange. Backing out those factors, the company’s sales were down 8 percent from the year-ago period.

For the 2009 fourth quarter, the company is forecasting sales to be in a range of down 2 percent to up 1 percent compared with the fourth quarter of 2008. For the full year 2009, the company is expecting sales to be down 9 percent to 10 percent from 2008.

For 2010, the company is forecasting revenues up 4 percent to 9 percent compared to 2009.