One of the key pledges that the Labour Party made in its manifesto was the creation of a state-owned renewable energy company, Great British Energy. Within the first few weeks of the new government, newly installed secretary of state for Energy Security and Net Zero, Ed Miliband cut the ribbon on the new public-owned renewables firm (25th July).
The new energy company (which currently just has a website) was established to improve the UK’s energy security in the wake of persistently high energy prices resulting from the invasion of Ukraine by Russia; reduce retail energy bills; and accelerate the country’s move to net zero by investing in renewable energy infrastructure and generation facilities.
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Miliband promised speed and scale, with a focus on offshore wind, onshore wind and solar. In line with the new government’s intention to bulldoze any planning objections, and Build, Build, Build, Great British Energy will use GBP8.3bn to cornerstone what the government expects will be a further GBP60bn of private sector investment, to install new energy capacity. Miliband expects at least 20 gigawatts of new offshore wind capacity just through its partnership with the Crown Estate.
One of the potential beneficiaries of Great British Energy is Chippenham-based renewable energy company Good Energy LON:GOOD. 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.
Heat pumps and solar are key to Net Zero
Good Energy acquired WessexECO, a solar panel installation business, for GBP2.5m in June 2023. Good Energy also acquired a heat pump installation business. Both these subsidiaries are areas that Great British Energy has highlighted as key components of the net zero transition programme. Good Energy followed its WessexECO deal with the acquisition of JPS Group, which allowed it to expand its solar and storage installation services across the south of the UK.
Moreover, with Great British Energy’s proposed investment in more generation assets, the wholesale price of renewable energy should fall across the board. This should help the company, which sells to retail and business customers, improve its profit margins. Good Energy already has more than 2,000 small, independent, often community-led renewable energy suppliers.
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In its last results for the 12-months to end-December 2023, published in March, Good Energy reported a 2.4% increase in revenue to GBP254.7m, which was affected by high commodity costs. The company’s gross profit was up 47.9% year-on-year to GBP44.2m. Good Energy also pushed up its gross margin by 5.4 percentage points to 17.4% helped by its previously negotiated power purchase agreements with suppliers (often negotiated pre- the Ukraine War and profiting from the spike in retail energy prices over the past two years). Profit before tax was also up 307% to GBP5.7m.
Good’s losses on new technology
However, as reported Good Energy invested heavily into Zap-Map, an app that EV users can use to find electric vehicle charging points, but had to book a GBP2m loss as its share of the losses incurred by the technology company. That said, Zap-Map increased its registered users to over three-quarters of a million. The write-down contributed to a softer reported profit after tax of GBP2.9m and basic earnings per share down to 17.1p/share. In 2022 it was 55.7p/share. Good Energy also built up its bank balance with cash rising from GBP24.5m in 2022 to GBP41.3m last year. Nevertheless, Good Energy awarded shareholders a final dividend of 2.25p/share, up from 2p/share the year before.
Good Energy’s shares opened the week (29th July) at 275.55p, up 57.5% over one-year but down 30% year-to-date. The company’s shares have ranged between 160p and 426p over a 52-week period. Good Energy has a market cap of GBP50m.
It’s a bit too early to comment on the success of Great British Energy. However, over the next few years heat pump and solar markets are set to experience rapid growth – something that will be super-charged if Great British Energy makes good on its pledges – and Good Energy’s diversification into the markets, along with its investment in the enabling technology for electric vehicles bodes well for the AIM-listed company.
