Good Enrg Regulatory News (GOOD)

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

About Good Energy 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.