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Supply market headwinds blow Good Energy on course for ‘exciting position’ in decentralised energy

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Good Energy is to pivot its core business towards energy services instead of supply, an area in which it sees the “future value” of the energy sector as the clean energy transition continues.

Today Good Energy reported its financial results for the year ended 31 December 2017, posting a profit before tax of £0.7 million, a collapse of nearly two-thirds (63.7%) in comparison to the £2 million it reported in 2016.

While chief executive Juliet Davenport lauded the performance of its core supply division under otherwise “tough market conditions”, she indicated that the firm’s future growth lay in renewable energy services and associated sectors such as behind-the-meter storage.

The firm’s revenues grew by 16.6% year-on-year, totalling £104.5 million primarily driven by strong growth in its business supply unit. But operating profit for the year slid almost 10% to £5.6 million on the back of increased administration and restructuring costs and significantly greater operating losses from its now discontinued generation business.

Good Energy has continued to pivot away from its past as a renewables developer, shuttering its development teams as of September last year. Today it revealed that it had also taken a £3.6 million hit in reduced value for its remaining sites due to “changing conditions” for onshore renewable development.

It remains on the hunt for buyers for its two remaining solar and two remaining onshore wind developments as it looks to realise value.

Nevertheless, Davenport's growing interests elsewhere, particularly in the decentralised energy market, had left Good Energy in an “exciting position”.

She added that the firm’s intention was now to move towards energy services instead of just energy supply. This will entail strategic initiatives in both electric vehicle chargers and battery storage which have already borne fruit, and a new desire to become an “expert integrator of green and value add technical services” in decentralised energy.

In Q4 2017 the firm clinched two important strategic firsts. It installed its first behind-the-meter battery storage system at the Eden Project, one of Good’s most prominent business supply customers, and agreed a partnership with Shell-owned NewMotion for an EV charging pilot at the firm’s HQ in Wiltshire.

Those projects have seemingly acted as a precursor for Good Energy to move its core business away from that of just energy supply. It is now backing its nascent energy services unit, which will offer new behind-the-meter storage, solar and thermostatic propositions for both businesses and domestic customers, to gain traction as the UK energy market continues its transition to more decentralised systems.

“We believe that the energy market is undergoing fundamental change, where the future value will be in energy services in a decentralised market.

“As regulation and policy to support the transition of the UK to a low-carbon economy continues to expand, new technologies and innovation are broadening the market for energy services.

“This is an exciting position for Good Energy. Looking ahead, we expect to perform in line with market expectations in 2018 and that our strategic developments will deliver growth in profitability and in value, plus deliver a green dividend yield over the longer term,” Davenport said.

Good Energy’s share price slid marginally (2%) to 123p in early trading this morning, and financial analyst Cantor Fitzgerald Europe placed its target price of 125.5p under review.

Adam Forsyth, alternative energy and resource research efficiency analyst at Cantor Fitzgerald, added: “This was always going to be a weaker year for Good as the impact of restructuring combined with higher churn resulting from the expiry of collective switching agreements. The impact of potential price caps remains a key uncertainty but could play to Good’s strengths. Overall the company now needs to show it can recover in FY 2018 but we believe it is in a better place to do so.”

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