PowerSecure Sells Businesses to Focus on Smart Grid Solutions

  • Posted on: 5 June 2011
  • By: chw staff

PowerSecure International, has taken actions to enhance its focus on its core business of Energy and Smart Grid Solutions, including the sale of its non-core WaterSecure business and the exit of its PowerPackages business.

“The sale of WaterSecure, in conjunction with the sale of Southern Flow earlier this year, completes our strategy of monetizing our non-core businesses to enhance our focus on our core Energy and Smart Grid Solutions business,” said Sidney Hinton, CEO of PowerSecure. “This transaction provides us with significant capital to support the continuing growth of our core business, and enables us to deploy our capital more efficiently into areas of higher return.”

The Company reported that its WaterSecure operations, which holds a minority interest in a water recycling and disposal business in Colorado, has been monetized through the sale of the business assets to an unaffiliated third party. As a result of the sale, which was an all-cash transaction completed on June 2, 2011, the Company expects to receive approximately $27 million of cash proceeds, including approximately $25 million in connection with the closing of the sale, and approximately $2 million which was placed in escrow and will be distributed in twelve months subject to customary post-closing adjustments and contingencies. PowerSecure will record a pre-tax gain on the sale of approximately $21 million in its second quarter ended June 30, 2011.

The results of the Company’s WaterSecure operations, including the gain on the sale, will be reported as continuing operations in its consolidated financial statements. The Company also reported that the WaterSecure transaction would utilize the majority of its $25 million of tax net operating loss carry-forwards in 2011, which will minimize the Company’s cash tax liability from the sale, but will also result in an increased effective tax rate in future periods which the Company expects will approximate statutory tax rates.

The Company also reported that in conjunction with its on-going efforts to enhance its focus on its core business, it will exit its PowerPackages business. PowerPackages is a medium speed generator business the Company entered into mid-2009.

The Company has initiated a plan to exit the business by December 31, 2011. The Company expects to incur losses from the impairment of long-lived assets associated with the business, as proceeds from the disposition of the business are expected to be less than its carrying value of approximately $4 million. The Company also expects to incur additional expenses related to the exit plan, including employee and facility-related costs. As a result, the Company expects to record pre-tax charges related to the PowerPackages business during its second quarter ended June 30, 2011, of $2-4 million.

The results of the Company’s PowerPackages operations, including the charges related to this exit plan, will be reported as continuing operations in its financial statements for the period ended June 30, 2011, and will remain in continuing operations until the disposition of the business is complete and operations cease, at which time it will be reclassified in to discontinued operations for all prior and subsequent periods.