London-listed eEnergy Group (AIM: EAAS ) announced that it has entered into various agreements to increase its equity interest in eEnergy Insights Ltd ("EIL") from 33% to 37.5%.  

The Group said it has entered into a distribution agreement with EIL ("Distribution Agreement"), where EIL has granted eEnergy the exclusive, global distribution rights to all its products, save for in markets where such sales do not directly compete with eEnergy. 

The "Energy Efficiency-as-a-Service" (EEaaS) business said it will become the exclusive distribution partner of EIL, a recently formed specialist smart metering measurement equipment and analytics business, with the potential to increase its interest to 100%. 

Today’s agreements follow a previous investment made in April 2021 when eEnergy announced that it had made an initial investment in EIL in the form of loan notes, as well as a nominal equity investment, resulting in eEnergy holding a 33% equity interest in EIL. 

At the time, eEnergy said EIL had acquired certain trade assets out of the administration process of Measure My Energy Limited and certain associated intellectual property assets.  

eEnergy said the new agreements contain the detailed terms agreed between the parties in connection with the development of the new business which the Board believes will allow the EIL business to grow, with shareholders and management sufficiently incentivised. 

Under the terms of the agreements, eEnergy will be granted exclusive, global distribution rights for EIL's products, including its measuring equipment and analytics offering, which will provide it with the opportunity for it to sell its proposition into existing and new customers.  

eEnergy will invest loan notes of £0.061.2m and a nominal equity investment, which will see the company’s equity interest in EIL increase to 37.5%. In addition, eEnergy will be given the option to increase its interest in EIL to 51% and 100%, respectively, further down the line. 

eEnergy told investors that the agreements provide an opportunity to use key data insights captured by the platform to enable eEnergy to deliver additional energy conservation measures through the integration of the Internet of Things (IOT) and smart controls. 

eEnergy said it is ‘seeking to unlock the potential of energy analytics’ through proprietary smart metering "behind the meter" hardware and software. Energy measurement and monitoring is a key growth pillar of its energy management platform that will seek to deliver measured share of savings contracts and accelerate the transition from Light-as-a-Service into EEaaS. 

It said it continues to make progress with new customer wins and increasing its offering to customers from energy efficiency through to energy management. The Board said it expects to achieve a breakeven profit before exceptional items for the year to 30 June 2021.  

CEO, Harvey Sinclair, said: "Following our initial investment into smart metering through EIL, we are excited to have formalised a longer-term agreement with the EIL shareholders which enables us to provide customer validation of energy efficiency savings behind the meter.” 

"These new Agreements are structured to incentivise the key stakeholders, while providing routes for eEnergy to take its interest in EIL up to 100 per cent. over the medium term.   

We see the agreement with EIL as an exciting opportunity to establish an offering in smart metering and will look to provide cross-sell opportunities to existing and new customers of our light-as-a-service and energy procurement platform,” Sinclair told shareholders.  

Shares in eEnergy have nearly doubled in value since the beginning of 2021. The stock was trading 2.13% higher this morning at 23.49p immediately following the announcement. 

Reasons to EAAS

eEnergy intends to develop into a broader energy services company and acquire other businesses in the energy management sector. It is currently focused on providing ‘Light-as-a-Service’ to commercial customers and helps businesses and schools switch to LED lighting, typically for a fixed monthly service fee, avoiding any upfront payments.   

For businesses and schools, the energy savings are greater than the monthly service fee, allowing them to unlock free cash-flow from day one as well as to improve the quality of their lighting and reduce carbon emissions.  

Rapidly Expanding Market 

The market in the EU for energy efficiency services was approximately €25 billion in 2017 and is expected to double by 2025.  

In November 2020, eEnergy launched the ‘Green Energy Initiative’, a scheme focused on helping more UK schools, which are eligible for part but not full Government funding, to reduce carbon emissions and save money by switching to cheaper, efficient LED lighting.  

The Initiative has been set up by eEnergy to work in conjunction with the Public Sector Decarbonisation Scheme ("PSDS"), a UK Governmental entity which provides grants for public sector bodies in order to fund energy efficiency and heat decarbonisation measures.  

eEnergy believes only 20% of schools have upgraded to date and expects to be able to increase its addressable market as the ‘Initiative’ will either make up any shortfall or fully fund the switch, using just its Funding Partners.   

Strong Supply Chain  

In November 2020, eEnergy signed an exclusive OEM partnership with Venture Lighting Europe Limited ("VLE") to provide eLight-branded LED technology.   

Chosen after a tender process which included some of Europe's leading OEM manufacturers, with a 35-year heritage, VLE forms part of Advanced Lighting Technologies, a US-based group which has 600 employees and an annual revenue of over $130m.  

eEnergy believes an integrated supply chain for eLight will maximise operating efficiencies and is a significant market differentiator. In particular, it will hold dedicated stock lines for eLight, ‘significantly’ reducing the time that it takes to complete installation projects. 

ESG merger and acquisitions strategy 

eEnergy has an active ‘Climate Action Initiative’ with energy efficiency marked as the #1 solution for many commercial buildings to reduce their energy consumption.  

The Company has a declared M&A strategy in this space, which it expects to complement its core business and lead to an exciting ESG Investment Case for Investors.  

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