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Energy One Sees Larger Addressable Market

This morning news broke that Energy One had agreed to acquire Australia’s CQ Energy in a deal reportedly worth $36mAUS in cash and shares.CQ Eenergy is the leading provider of operational energy services to the Australian gas and electricity sector. CQ provides similar 24×7 operational services to Energy One’s European businesses eZ-nergy and Egssis as well as running a sophisticated risk transfer/broking and consulting business. The company sees the energy transition as presenting a tremendous opportunity for it to grow and access a significantly larger addressable market according to an investor presentation filed with the ASX.

Energy One sees the energy transition as resulting in a larger market of smaller distributed assets and significantly more complexity in and around scheduling and despatching those assets. It expects to see greater volatility, complexity and rapidly increasing amounts of data being generated and consumed to support decisions. We would add that there are likely to be many more smaller transactions and so transaction volumes will also rise rapidly as the demand for data and risk assessments increasingly becomes near real-time. Certainly, these markets are set for massive change and globally.  “So as markets expand and decentralise, a much larger number of participants will require sophisticated software to operate effectively in national energy markets…,”the presentation states.

Energy One sees that many of the smaller assets holders and players will likely gravitate towards a services model to help them navigate complexity, uncertainty and the cost of acquiring and maintaining adequate software. Furthermore, as it points out, scheduling cannot be performed with software alone but requires people on the end of the phone in case of the unexpected and urgent. It sees the operators needing not jus the software but the service as well and even sees larger utilities eyeing outsourcing of various activities in the future.

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In acquiring CQ Energy, Energy One believes that it has a 24/7 software, services and control room capability allowing it to cover the globe. Indeed it claims to be Number 1 in Australia in this area post the acquisition and number 2 in Europe with its acquisition of EGSSIS. Having acquired the various pieces of the puzzle in EGSSIS, Ez-nergy and CQ Energy, Energy One now views its challenge is to build out its global energy services business. One step towards that goal is the rebranding of all the acquired businesses to Energy One as well as to combine its software and energy services capabilities to provide services in “managing the bidding and scheduling of decentralised renewable assets.”

It certainly looks like Energy One is executing on a robust and coherent strategy via acquisition and growth and it is clear that its objectives are in line with the emerging trends and needs within the industry as the energy transition proceeds. Meanwhile, it also has the Contigo business that can satisfy the more traditional ETRM market in Europe as it goes through that transition. For example, in our recent market sizing report, we discuss the potential for an increase in the ETRM market for coal and other carbon-dirty fuels in the short-term. We will be talking with Energy One going forward to see how the implementation side of its business plan goes while expecting additional acquisitions in the future.