THIS IS FROM ONE OF MY FEEDS—pretty much what we know. It may be helpful for newbies to the stock, but the competition part was interesting for me.
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Compounding energy software solution provider
Scott Middleton
Nov 11
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I’m continuing with the theme of compounders in this month’s deep dive, looking at the energy trading technology company EnergyOne that is listed on the ASX.
EnergyOne has managed to grow revenue every year for almost a decade. They’ve grown profits every year, except this year when they posted a reduced profit to invest in the globalisation of the business.
But hey, if you’re profitable and coming from this history, you’ve earned the right to invest like this.
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Summary
EnergyOne provides software solutions for energy trading. This could be for an energy retailer but it could also be for one of the many organisations involved in the energy supply chain, like energy generators, pipelines, and financial traders.
EnergyOne has built itself on organic growth and M&A.
Let’s dive in.
About EnergyOne
EnergyOne was founded in 1996 and became an independent energy retailer selling to small to medium-sized businesses as well as residential customers.
EnergyOne listed in 2006, driven primarily by Ian Ferrier (of Ferrier Hodgson, the insolvency firm, fame) and Vaughan Busby (a former Ferrier Hodgson Director).
The IPO prospectus touts their “sophisticated IT system”, a sign of things to come because the company would eventually exit energy retail in 2008 to focus on providing software solutions to organisations that trade energy.
The exit from retail came after a volatile year in energy when wholesale prices were between 732% and 1000% higher compared to prior year prices. The Chair’s 2007 annual report letter finishes with we would “like to resume retailing electricity to consumers.”
A year later, volatility in the retail energy market continued, and the company pivoted completely to software, winning its first customer for its software and acquiring an energy trading and risk management solution.
Since then, primarily under the leadership of the current CEO Shaun Ankers, EnergyOne has acquired 7 more companies while managing to post growth in revenue and profit each year.
Business Model
EnergyOne’s business model centres around its suite of software and services for organisations trading energy. Their suite covers the full spectrum of organisations that trade energy large businesses, small traders, electricity generators, gas pipelines, energy retailers, and wholesalers.
They find customers through a traditional, direct go-to-market strategy combining sales, trade shows and events. Market access and local market insights appear to be a key aspect of the model (e.g. access to various pipelines a business may need to trade on).
Market
EnergyOne’s market can be defined broadly by any organisation engaged in the trading of energy however, in practical terms, it is more tightly constrained to organisations trading energy in the markets EnergyOne has access and localisation for.
The diagram below helps bring these constraints to life:
And this market map helps show all the types of organisations that might trade in energy:
Sizing the Market
With that context, we can now broadly size the market.
It would be too time consuming, for the purposes of this publication, to get an estimate of the number of organisations that trade energy because of the diversity of organisations involved. So, we will use energy utilities as a proxy, knowing that this represents just a portion of the total number of firms that trade energy.
Globally, there are 8,000 energy utilities (from our analysis of Gentrack).
This then narrows to their accessible market of Europe and Australia. In Europe, there are 4,600+ electric utilities. In Australia, there are between 43 and 114 energy providers (according to the Australian Energy Regulator and an energy comparison site respectively).
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Competition
EnergyOne’s competition comes in two forms, energy-focused trading platforms and broader platforms. Broader platforms here includes commodity trading platforms, financial services firms and capital markets software.
Customer Value Proposition
EnergyOne has a wide suite of offerings that target a variety of different customers, which makes it inappropriate to apply one broad customer value proposition.
These tables provide the best way to understand EnergyOne’s customers and what problems they solve for them:
Products & Solutions
The products and solutions of EnergyOne are interrelated but service a different customer segment or customer problem:
- Energy Balancing, Scheduling & Nomination: solutions for the logistics of energy
- Energy Trading & Risk Management: solutions for buying and selling energy
- Gas Transmission: solutions for managing gas
- Market Analytics: solutions to provide insights on the market more wholistically
- Outsourced Trading: a service, utilising EnergyOne’s solutions, to run trading operations on behalf of a customer.
Go-to-Market
EnergyOne’s go-to-market appears to be a fairly vanilla, direct enterprise sales model supported by your usual activities like trade show booths and social media.
There wasn’t much detail beyond this to provide deeper analysis here. What we can say is that this model appears to be working given their continued revenue growth.
Finances
Compounding Profits and Revenue
For every year, except the most recent year, EnergyOne has managed to grow profits and revenue. But even in the most recent financial year EnergyOne grew revenue and was profitable.
Share
The recent year’s lower profits are attributed to investments in global growth. They’ve got the profitability to make these calls.
Key Insights
There are some key insights to take away from EnergyOne:
- Energy markets, while similar on the surface, are highly localised.
- You can grow revenue and profits.
- Industry focus and an industry-wide view of solutions has made for a differentiated offering.
- You need services wrapped around software solutions for medium-to-large or non-technical customers (this is a running theme on mopoke at the moment).
