REG - Good Energy Group - Acquisition of Igloo Works Limited

Good EnergyAnnouncement

02/12/2022 15:30

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RNS Number : 4918I  Good Energy Group PLC  02 December 2022

Good Energy Group PLC

("Good Energy" or the "Company")

 

Acquisition of Igloo Works Limited

 

Good Energy, the 100% renewable electricity and energy services provider, has
acquired the entire share capital of Igloo Works Limited ("Igloo"), an
established UK based heat pump installation business (the "Acquisition"), for
an initial consideration of £1.75 million.

The Acquisition represents a significant milestone in delivering on Good
Energy's strategy to accelerate its capability in decentralised energy
services, complementing its established energy supply business. It also
supports Good Energy's ambition to help one million customers cut carbon by
2025, creating a new service in the crucial clean, green heating space.

Strategic Highlights

·      Good Energy can now offer affordable heat pump installations,
positioning it to benefit from the rapid growth in demand for heat pumps - the
market is expected to grow to £11bn and at up to 40% CAGR to 2030, with
annual installs of up to 600,000 per year.

·   Igloo will be incorporated into the Good Energy brand and form a new
energy services division for the Company.

·   Services will be marketed to both Good Energy's existing customers and
new prospects. Installations are expected to drive earnings growth in the
short term, leveraging corporate overheads to deliver effective customer
acquisition and cost to serve.

·      Igloo's tested model for installation, services and maintenance
of heat pumps will initially be scaled up through Good Energy's more than
270,000 strong current community of green-minded customers.

·     Igloo is a fully packaged air source heat pump installer and
service provider for domestic customers with an established team of engineers,
technicians and operations specialists.

·     Igloo benefits from a lean and agile operating model with minimal
fixed overheads. It was among the first to offer heat pump installation at an
equivalent cost to a fossil fuel boiler in 2021 and places a strong emphasis
on transparent pricing and a seamless customer experience.

·     It is a virtual energy services business with no fixed premises or
other significant overheads, that is ready to scale with rapidly growing
market demand.

·    The Acquisition provides a platform to build on Good Energy's energy
service offering across other product areas including solar, storage and
electric vehicles. Good Energy will seek to accelerate growth in these areas
through further bolt-on acquisitions.

Transaction Highlights

·     Good Energy has acquired 100% of Igloo's share capital for an
initial consideration of £1.75 million, payable in cash on completion (the
"Initial Consideration"). Igloo is a subsidiary of Lightbulb ES Limited.

·    For the financial year ended 31 March 2022, Igloo reported sales of
£1.0 million and a net loss of £1.2m. Gross assets as at 31 March 2022 were
£0.9m.

·     Working capital will be required over the coming 15 months to
allow the business to reach breakeven point and to scale. Good Energy expects
to invest £3.4m in working capital to reach this point and £0.3m of this
will contributed by the two Igloo founders. Working capital will be provided
by the parties as debt, bearing 8% interest.

·   2023 is a year of investment as we look to build out the Igloo
platform. Installations are expected to drive earnings accretion from 2024,
leveraging corporate overheads to deliver effective customer acquisition and
cost to serve.

·   The Initial Consideration, rest of the working capital and any future
pay-outs will be funded through the Company's existing resources.

·    To incentivise the two founders to help grow the business, Good
Energy is putting in place a growth share plan. This involves the issue of
shares in Igloo that carry economic but not voting rights equivalent to 15% of
Igloo that vest (subject to certain conditions) after three years (10%) and
four years (5%). The value of the shares will be determined by calculating
their proportion of Igloo's equity value. The equity value is calculated by
reference to a 6.2x multiple of Igloo's EBITDA less the value of the working
capital requirement, which is expected to be approximately £3.4m. The
founders will also be repaid the £300,000 they re-invested plus rolled up
interest.

·     The founders have a put option to sell the shares which have
vested after December 2025 while Good Energy has a call option to buy those
shares which have vested from December 2026.

 

Nigel Pocklington, Chief Executive of Good Energy said:

"The heat pump market is hotter than ever. As everyone feels the crunch of gas
prices, more customers than ever are eager to cut loose from fossil fuels and
take control of their energy by switching to clean power.

"Bringing the Igloo Works team on board is a big step towards building out our
decentralised energy services and delivering on our ambition to help a million
customers cut their carbon. It also targets a vital area where that's needed
- the electrification of heating. With Igloo's established expertise and
technology Good Energy will be right at the forefront of this transition.
Acquiring an established heat pump provider 'off the shelf' to slot into Good
Energy's existing offering helps the Company to achieve its strategic shift
towards services at pace.

"2023 will be a very exciting year for Good Energy's services expansion, with
new products being launched for home generators alongside those for heating.
We are excited to scale up an established end-to-end business and expect
material earnings growth to be driven from H2 2024 onwards, following
relatively low investment. Good Energy will soon be the complete package for
homes and businesses looking to go green and save money."

 

Matt Clemow, Founder and Chief Executive of Igloo Works said:

"We have a shared vision with Good Energy in helping customers move away from
their reliance on fossil fuels. Having clearly demonstrated the market
interest, joining a business that has the capital and the existing customer
base allows us to accelerate towards this vision. The market for heat pump
installations is continuing to grow significantly and as one of the first to
offer a heat pump for the same price as a fossil fuelled boiler back in 2021,
we see it competing with the 1.5m homes per year replacing their boiler. We
are looking forward to growing with Good Energy and helping people make an
impact on climate change."

 

Enquiries

 Good Energy Group PLC
 Nigel Pocklington, Chief Executive                                       Email: press@goodenergy.co.uk (mailto:press@goodenergy.co.uk)

 Charlie Parry, Director of Corporate Strategy & Investor Relations

 Ian McKee, Head of Communications
 SEC Newgate UK (Financial PR)
 Elisabeth Cowell / Molly Gretton                                         Email: GoodEnergy@secnewgate.co.uk (mailto:GoodEnergy@secnewgate.co.uk)
                                                                          Tel: +44 (0)7900 248213
 Investec Bank plc (Nominated Adviser and Joint Broker)
 Daniel Adams / Henry Reast                                               Tel: +44 (0) 20 7597 5970
 Canaccord Genuity Limited (Joint Broker)
 Henry Fitzgerald - O'Connor / Harry Rees                                 Tel: +44 (0) 20 7523 4617

 

About Good Energy www.goodenergy.co.uk (http://www.goodenergy.co.uk)

Good Energy is a supplier of 100% renewable power and an innovator in energy
services.  It has long term power purchase agreements with a community of
1,700 independent UK generators.

Since it was founded 20 years ago, the company has been at the forefront of
the charge towards a cleaner, distributed energy system.  Its mission is to
power a cleaner, greener world and make it simple to generate, share, store,
use and travel by clean power.  Its ambition is to support one million homes
and businesses to cut carbon from their energy and transport used by 2025.

Good Energy is recognised as a leader in this market, through our green kite
accreditation with the London Stock Exchange, Which? Eco Provider status and
as the only energy supplier with Gold Standard Uswitch Green Tariff
Accreditation for all tariffs.

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