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Good Energy investing its windfall to accommodate transition to net-zero


It’s been a good half-year for Chippenham-based renewable energy company Good Energy [LON:GOOD] which published its half-year results to the end of June today (19th September).

The AIM-listed, renewable energy distributor saw its revenue jump by 45.6% to GBP156.1m as wholesale energy prices continued to rise. Better pricing also saw Good Energy’s gross profit up by 168% to GBP32.7m, increasing its profit margin by 9.5 percentage points to 20.9%.

However, the energy supplier warned that a “one-off loss” was visible on the horizon in 2H23 “due to lagging commodity costs and tariff reductions”. Operational profit saw Good Energy convert a GBP500,000 loss in 1H22 to a GBP14.1m operating profit but forewarned that investors shouldn’t expect more of the same at the end of the year due to falling commodity costs.

As previously reported, Good Energy has been in business for 20 years, and buys all its power from renewable energy generators in the UK. However, the company has been evolving from a distributor to mainly retail clients into a renewable services company.

Acquisition of solar panel installation business

In June Good Energy acquired WessexECO for GBP2.5m, a solar panel installation business. According to Good Energy WessexECO will install at least 200 systems this year with plans to double installations in 2024. Good Energy has also acquired a heat pump installation business.

Nigel Pocklington, chief executive officer, who has been with the business for two years after stints at [LON:MONY] and Expedia [NASDAQ:EXPE], starting life at the Financial Times part of the Pearson Group [LON:PSON]  said:

“Good Energy has hit an inflection point in the past six months. The company is now more than an energy supplier; it’s a heat pump and solar installer with over 40,000 customers live on smart export tariffs. Combined with continued strong growth in Zapmap, we are delivering on our strategy and well on our way to achieving our mission of helping one million homes and businesses cut their carbon.”

The company has also jumped on the (battery-powered) EV bandwagon through its investment Zapmap app, a UK-wide map of electric car charging points that helps electric car drivers locate and navigate to their nearest EV charging point. Drivers can search and filter for electric car charging points, as well as plan electric routes with the smart route planner.

Good Energy investment in Zapmap

Zapmap, a Bristol-based start-up secured GBP9m of Series A funding just over a year ago from global fleet solutions provider Fleetcor [NYSE:FLT] and Good Energy, which was already a cornerstone investor contributing a further GBP3.7m to help Zapmap expand its charging app services. However, Zapmap reported a loss of GBP1.1m for Good Energy’s 49.9% shareholding, but it remains an investment for the future.

The renewable energy company has experienced strong growth over the last two decades and now management is juggling with scalability issues if it is to continue on the same trajectory. Working with folks that already have solar panels installed, Good Energy rolled-out a new export tariff for the excess power they produce from their panels and the company is planning to develop this wholesaling and installation business further in the next year.

The company has used the unexpected hike in energy prices caused by the War in Ukraine to make 2023 a year of investment, spending its windfall in building up its solar panel, heat-source pump, and EV divisions to accommodate the transition to net-zero that the UK government has prioritised as we move towards 2050. The investments are starting to show potential. Most of Good Energy’s customers are already evangelists for net zero 2050, so adding solar, heat pump and EV services is preaching to the converted, and should help Good Energy continue its impressive growth trajectory.

Good Energy ‘one to watch’

Core to Good Energy’s business plan is buy-and-build, although the company stepped away from outright owning generation facilities, putting its entire 47.5MW generation portfolio up for sale at the end of 2021, buy-and-build now means that they are supporting customers to install their own micro-generation facilities through heat pumps and solar panels, whilst still buying green electricity and gas from renewable generators through power puchase agreements. The generation portfolio was acquired by Bluefield Solar Income Fund (BSIF) [LSE:BSIF], the FTSE250-listed closed-ended investment fund, for GBP21.2m in January 2022, at a significant premium-to-book value.

Previously listed on the Aquis Stock Exchange, Good Energy withdrew from the market at the end of March and relisted on AIM. The company has tried to build its brand on sales not debt, and has tried to avoid the banks and opted for the DCM (Debt Capital Markets) route, issuing two bonds, the first in 2013 to develop 13 solar farms in the UK generating 1500MW of energy, and the second a 4.75% bond which was used to buy WessexECO and Igloo Works, the heat-pump installation business which is over 70% repaid with GBP4.9m outstanding. The company has net debt of GBP5m which is offset by GBP10m in net finance income and a higher cash balance of GBP34.9m following a windfall year.

The DCM has worked out well for Good Energy, so expect more of the same in coming years. Dividends have also been healthy, with Good Energy declaring an interim dividend for 2023 of 1p/share, up from 0.75p/share in 2022.

All-in-all, Good Energy has a lot to be pleased about and is on the right track given the mood music of the energy sector at the moment, and so becomes ‘One to Watch’.

Good Energy opened the day at 215p, giving the company a market cap of around GBP32.5m. The shares fell back to 198p by 11:00. Over the year the share price has appreciated by 19.4% but over one year fell by -15.7%

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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