NRG Acquires Verengo Solar's Northeast Sales and Operations Teams
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NRG Energy executives weren't kidding when they told investors that solar is a central part of their strategy to double the company"s earnings by 2022.Today, the energy giant put resources behind those words by acquiring the Northeast sales and operations teams of Verengo Solar, a leading U.S. solar installer. The move underscores NRG"s commitment to expanding its presence in the rapidly growing residential solar market."It"s an ever-consolidating space in residential solar," said Kelcy Pegler Jr., president of NRG Home Solar, in an interview. "With the corporate sophistication of NRG as a Fortune 250 company...it really puts us in an advantaged position to bring on team members, like Verengo, and leverage our position in the space to become the ultimate winner."NRG Home Solar was the fifth-largest residential solar installer in the U.S. as of the third quarter of 2014.
Verengo was the sixth. By the end of the year, NRG plans to claim the No. 2 spot, challenging SolarCity, which is currently the largest installer in the U.S., with more than a third of the market.NRG made its first major strategic move into home solar last March with the acquisition of Rooftop Diagnostics (RDS), which Pegler used to lead. At the time, RDS was a 475-employee company and one of the top ten installers in the country.Last fall, NRG pushed further into the home solar market with the purchase of Pure Energies, a 150-employee online solar customer acquisition platform. NRG also opened two new offices and added 100 employees in California last year, where it has traditionally lagged behind its rooftop solar competitors.NRG is now bringing on 100 former Verengo employees that will be relocated to offices in New York and New Jersey in the coming weeks."One of the most exciting things about the solar space is that it"s so new and growing so explosively.
But one of the under-appreciated aspects is that there are just no employment pools to hire from." said Pegler. "Any time you"re able to plug in 100 skilled employees it really accelerates your capabilities from a time perspective."Consolidate or get left behindIntegrating these executive teams and sales infrastructures has given NRG the tools it needed to build a vertically integrated home solar business. While smaller, pure-play solar companies have an early lead in the residential solar space, NRG expects to catch up quickly by leveraging its scale and expertise.In this context, the Verengo purchase comes as little surprise -- particularly given that Verengo has been up for sale for almost a year. The terms of the deal and the exact assets involved were not disclosed.According to Bank of America Merrill Lynch, which is overseeing Verengo"s sale, the installer had a total revenue of $116 million and deployed 25 megawatts of photovoltaics in 2013.NRG's purchase points to increasing consolidation among the emerging giants in the fast-moving residential solar market.
Sunrun, like NRG, recently established itself as a vertically integrated solar installer and financier with the acquisition of REC's residential solar unit. Industry front-runners have been busy too. Vivint recently purchased Solmetric for $12 million, while SolarCity recently acquired the lead-generating business Paramount Solar, financial technology firm Common Assets, racking maker Zep Solar, and module maker Silevo.Three to five years ago, the residential solar market was arguably anyone"s game, said NRG"s Pegler. "Today, though, the top tier is established, and it"s the same companies you"ll see battling for that leadership position over the next three to five years," he said.
The most surprising part of NRG"s latest business move is that it didn"t acquire all of Verengo, which operates mostly in California, said GTM Research analyst Nicole Litvak."NRG/Roof Diagnostics already had a very strong presence in the Northeast, but had just started expanding to California, so I would think they would want to acquire a California installer to speed up that process," she said. "Of course they still could, but this acquisition shows that they still see the Northeast as their biggest opportunity."
According to Pegler, the purchase was appealing because Verengo"s Northeast teams were easy to plug in to NRG"s existing business."It solidifies some advantages we have, and we have a ton of momentum in the Northeast," Pegler explained. "But certainly we"re focused on growing nationally and in all of the markets where we participate. This was just a great opportunity that fit for us at this time."What remains unclear is what the deal means for Verengo. Will the company continue to be sold off in chunks? Or will it refocus on its core business in California?Verengo refused Greentech Media"s request for comment.
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