Sithe Abandons Plan to Acquire Energy Factors Inc.

Sithe Energies Group on Wednesday abandoned its proposed $80 million acquisition of Energy Factors Inc., the companies said.

However, the two energy services companies still are discussing the possibility of a “substantial investment in Energy Factors” by Sithe, according to Rick Kay, vice president of Energy Factors. Additionally, Energy Factors “is also exploring other possibilities” that would strengthen its ability to finance projects, Kay said.

Neither company would comment on why the deal, which was announced on May 21, fell apart. Industry analysts who are familiar with Energy Factors said they did not know why Sithe withdrew its offer to buy Energy Factors. The collapsed deal “ . . . means that Energy Factors has to keep looking because they need that capital infusion,” said Charles Freedman, an industry analyst with Crowell, Weedon, a Los Angeles-based investment firm. “Sithe could still be the source of that capital, either through an equity or debt position.”

Energy Factors, which designs, builds and operates co-generation power plants, has told analysts it needs a capital infusion in order to secure financing for a string of proposed projects around the country.

Energy Factors faces capital problems in the wake of the collapsed deal, but it “also has a lot of options,” according to Larry Selwitz, a Los Angeles-based industry analyst with Bateman Eichler, Hill Richards Inc. “They could go to some larger companies and ask them to participate in an equity role in exchange for picking up some of the (financing costs). They could sell off one or two projects or look at the possibility of some sales and lease backs.”

Energy Factors may try to revive discussions it has had with other firms that are believed to be interested in acquiring the company, analysts said.

Energy Factors reported $531,000 in net income and $8.8 million in revenue for the first quarter ended March 31. It reported $1.6 million in net income and $7.5 million in revenue a year ago.

Sithe, a subsidiary of France’s Compagnie General des Eaux, operates four hydroelectric plants in the United States. The New York-based builder and operator of hydroelectric plants on May 20 agreed to pay $17.25 a share for Energy Factors.

Energy Factors closed up half a point at 15 3/4 in over-the-counter trading Wednesday.