Northern Power Acquires Crown Engineering Businesses

Northern Power, the energy services unit of Distributed Energy Systems Corp. (Nasdaq: DESC), has acquired the engineering, procurement and construction (EPC) business, as well as the operations and maintenance (O&M) service business, of California-based firm Crown Engineering & Construction.

The transaction adds to Northern Power’s EPC and O&M capabilities in California, primarily serving that state’s distributed generation (DG) market, and includes 8 long-term service contracts with an estimated aggregate value of $2 million per year over the next several years. Key employees of Crown familiar with the EPC and O&M service clients will become employees of Northern Power. The agreement took effect April 3, 2006.

Ambrose L. Schwallie, CEO of Distributed Energy, said that the acquisition is part of the company’s plan to increase the scale of its energy services business. “California is a key market for us and Crown’s activities are very compatible with our existing capabilities and initiatives; we expect the results of this transaction to prove accretive to our operating results.”

The company intends to strengthen its leadership position in the California DG market. According to the California Energy Commission’s 2005 Integrated Energy Policy Report, combined heat and power (CHP) DG systems are expected to increase by a capacity of 5,400 MW in California by 2020, adding to an existing CHP capacity of more than 9,000 MW in that state. With a forecast that would indicate increasing utility rates and decreasing gas prices in California, Northern Power has identified the small-scale (under 5 MW) DG market as a target focus.

With the acquisition of Crown’s small-scale DG sales pipeline and existing service contracts, the company expects to obtain increased market share in California.

The agreement includes the acquisition of O&M service contracts for 16 existing on-site power systems at 8 locations throughout California, including several well-known food companies, casinos and industrial manufacturing sites. Current O&M business from Crown makes up a total power capacity of 19.2 megawatts (MW). “When you add these contracts to what we already are doing in California,” said Northern Power president Darren Jamison, “it brings our portfolio to 67 systems, with a total capacity of over 47 MW of electric power. This makes us a sizeable participant in the California market, and we fully expect to grow from there.”

“There are a number of real synergies in this agreement,” stated Shelby Ahmann, vice president of Crown, who will join Northern Power and oversee its established PowerAdvantage(TM) O&M business. “Both companies use many of the same equipment technologies, key equipment suppliers and sales and marketing strategies. This compatibility and experience should give us a compelling competitive advantage going forward.”