World Energy CEO Talks Growth and Profitability Amid Cleantech Downturn

It’s not every day I make it out to Worcester. Especially not the nicest office space in Worcester. Well, at least I haven’t seen a better one.

I made the trek out there to visit World Energy Solutions (NASDAQ: XWES), an energy management company that occupies the 20th floor of 100 Front Street in downtown, with sweeping views of the city and rolling hills. World Energy moved into the space this summer and recently passed 100 employees, about half of them local. The firm has been making some noise in a sector that’s very tough to crack.

World Energy isn’t the easiest company to grasp, for an outsider. It started in 2001 and operates in specialized areas such as green-energy auctions and renewable energy certificates (RECs); online reverse auctions, in which electricity customers in deregulated states invite suppliers to make bids in real time; and the demand response market (where utilities pay businesses and municipalities to curtail energy use during peak demand). One of its chief competitors, EnerNOC (NASDAQ: ENOC), is based right in Boston.

But World Energy CEO Phil Adams (pictured above), who took over the job from Richard Domaleski in June, boils the whole backdrop down to a simple idea. “Fifteen years ago, the energy manager in this building got an electric bill and paid it. It wasn’t that hard,” he says. “All of a sudden, energy has exploded.”

He means that now energy considerations are a bigger part of a facility manager’s job. With every move or renovation, the manager has to consider things like energy efficiency, incentives from utilities, retrofitting, getting green-building certification, and other factors that could impact his or her bottom line. “Customers are saying, ‘We realize there’s a lot to energy management,’” says Adams, the company’s former president and chief operating officer.

And World Energy wants to take care of it all. The firm will sit down with a customer—a health club owner, say, or a big company—and figure out how the company is thinking about energy, and what its options are in terms of utilities, contracts, and so forth. “We create a plan for you, a batting order of tactics,” says Adams.

Adams and World Energy lived through the post-dot-com era, in which a lot of Web companies were trying to become the “eBay or Amazon for energy.” As Adams puts it, “Money poured into the space in 2000. Then a lot of VC-backed, technology-based companies went for B rounds and there was no money. They saw a technology approach.” Meanwhile, he says, “We were running around in offices of energy managers in basements, and they didn’t have e-mail on their business card.”

In short, World Energy figured out that its business is about services, not just technology. But still it has been a grind. The company grew steadily and went public on the Toronto Stock Exchange in 2006 before hitting the Nasdaq in 2009. Last year it hit a crossroads in terms of growth and decided to raise $5.5 million from institutional investors in a stock sale. “Our thought was, if we didn’t do anything a year ago April, we’d get to $50 million [annual revenue] in six or seven years on 15-20 percent organic growth. That’s a long slog to not even get as far as you need to go,” Adams says. “We said, ‘Let’s dilute a little, make accretive acquisitions that will turbo-charge the growth, and get us to $50 million in two to three years instead.’”

Which brings us to the firm’s recent acquisitions and growth. It has become profitable in the past two years, and is on pace to … Next Page »

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