This article is part of our Rising Star portfolio series.
Today, I'm going to tell you about PowerSecure International
PowerSecure's business is the smart and efficient use of energy. Its product solutions make the electric grid more efficient, and with energy prices sky-high, this is of critical importance to business and society. I've scoured the country for smart-grid investments over the past two years, and aside from ESCO Technologies
What sets PowerSecure apart is its people. PowerSecure employees understand energy -- how it is generated, transmitted, and used. They understand how to make its use more efficient, solving problems utility customers didn't know they had or thought were unsolvable. They are creative, entrepreneurial, innovative, and probably the best minds working in this space today. For electric utilities around the country, PowerSecure is a present that keeps on giving.
An energy visionary
This winning hand was shrewdly built by an unrecognized visionary in the smart energy space, Sidney Hinton. A former Southern Co.
The business and new products
PowerSecure generated $98 million in sales in 2010 from three business areas: distributed power generation, utility infrastructure, and energy efficient lighting.
At over 50% of sales, distributed power generation is the largest business. Here, PowerSecure supplies Caterpillar
The other two businesses split the other 50% of sales. The first is utility infrastructure, and here PowerSecure simply makes its utility customers very happy. It maintains transmission lines, puts systems back up after storms, and conducts design and engineering studies. This is a wonderful business, but the excitement is around two new products: SmartStation and MicroGrid. The SmartStation is a brand new electrical substation -- smaller, more efficient, and more reliable. The MicroGrid is a small electric grid operating system that can be deployed in the field to connect, distribute, and regulate various sources of power. The value of these products is very compelling for utilities and in the case of MicroGrid, the military. Moreover, the potential for these products is enormous relative to PowerSecure's size.
The final business is energy efficient lighting. In just a few years, PowerSecure has built a strong competence in LED, or light-emitting diode, lighting. Its competence is not in the manufacture of chips like supplier Cree
Lighting is an enormous market -- the streetlight market is $30 billion, and the refrigerated case retrofit market about $1 billion. PowerSecure's products deliver lower energy usage, often 70% lower, and lower maintenance costs, which equate to immense paybacks for customers such as Walgreen
Why I'm excited
I'm excited about PowerSecure now because growth is just starting to pick up. Over the past four years, the company has focused on investment: hiring the best minds in the business, investing in research and development, and building out its customer relationships. This year, it is focused on translating those investments into marketplace success, and we should see those investments pay off in 2011 and 2012.
PowerSecure is also catching the eye of big players. It has a joint venture with Schneider Electric, the $25 billion electrical power company. And two weeks ago a top executive at another major company told me he wanted to partner with PowerSecure because "they understand energy." This high praise shows PowerSecure is getting noticed.
This is an incredibly innovative company just beginning to blossom, but at $7.70 per share and a market capitalization of only $140 million, the market still hasn't realized the success bubbling under the surface. I peg PowerSecure's value at $300 million, or more than $15 per share. PowerSecure might be America's most exciting small company; but it also might not be a small company for much longer.
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Andrew Sullivan, CFA, owns shares of PowerSecure International. Southern Co. is a Motley Fool Income Investor choice. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.