Energy One - Updates the market

On the 16th of October 2014, Energy One (EOL) updated the market with some quite useful new background information.

In terms of a recap EOL has 17.9 million shares on issue and at 40 cents commands a market capitalization of around $7 million AUD.  The company has a good quality Board of Directors, net cash of $1.78 million (30 September 2014) and generated operating revenues of $2.85 million in the 2014 financial year.  Energy One (EOL) provides energy trading software to electricity retailers, electricity generators, energy traders as well as gas transmissions companies.

The key snippets from this update included

• In Australia there is less than 50 medium to large sized customers who use in-house and externally provided energy trading systems.
• The global energy trading & risk management (ETRM) providers in Australia include  Allegro and OpenLink, while the main domestic competitors are mostly in-house developed systems and processes, many still manual.  There are also quite few small private system suppliers who do ETRM, billing and information services in Australia and these include Brave Energy Systems, Creative Analytics,  Envizi, Energy Edge,  Global Roam, Intelligent Energy Systems  
•  The likes of Energy Action (EAX) focuses on energy procurement and energy reporting systems.  
• Energy One systems used for 25-30 percent of NEM trading volume (15000 MW).
• Energy One systems are used for 20 percent of Australia wholesale electricity contracts.
• The company estimate the Australian market for spot trading systems is $6 to 12 million.
• The company estimate the Australian market for ETRM software is $10 to $20 million.
• The company estimate the Australian market for their Energy Flow solutions is $5 to $10 million.
• We have subsequently been updated that Energy One's EnergyOffer product has been rolled out in AGL after been earlier sold to Loy Yang. 
• In summation Energy One see the Australian market for their existing energy trading products as a $21 million to $42 million dollar market - Mid point market size is $31.5 million.  This estimate excludes energy forecasting, industrial billings, analytics, valuation and risk systems.  
• On the basis of 2014 revenues and the mid point of estimated market size Energy One has a 9 percent share in the domestic Australian market for energy trading systems.
• Revenue from an ETRM software sale is split 25 percent up-front initial license fees, 48 percent implementation services, 23 percent support and maintenance and 3.5 percent hosting.  The implementations in significant deals can be long with Energy Ones 2011 deal with Stanwell Corporation having a 32 week installation.
• Recurring revenues accounted for 70 percent or $2 million of 2014 revenue, which was up from circa $1.1 million in 2012 and  (growth of 70 percent in 2 years).  This $2 million in recurring revenues does not include the recurring component from the Alinta deal, nor the 2nd less substantial trading system deal (possibly Origin Energy). The company is trading on a enterprise value to 2014 recurring revenue ratio of 2.7 times, which will fall in 2015/2016 as the recurring revenue from the two recent deals kicks in.
• The company currently has 27 staff which is up from a recent low of 17 FTE's (2013).
• The company is focused on organic as well as growth by acquisition.

For more background information - see Energy One - Whats the Investment Play

For more background information - see Energy One - Comprehensive Background

                                                             See Disclosures in About Me