Belgian vendor EGSSIS is set to be acquired by Energy One according to papers filed with the ASX last Friday. Energy One is an Australia-based vendor that has in recent years developed a presence in European energy markets via acquisitions of Contigo and eZ-nergy in the UK and France respectively. To date, its acquisitions have looked like smart transactions and have helped Energy One to grow its revenues and profitability considerably while entering a geographic market with significant potential for further growth. Both Contigo and eZ-nergy have thrived under the Energy One umbrella as was seen in its latest annual report filed recently.
EGSSIS is a company that has emerged in recent years supplying gas and power scheduling and short-term balancing solutions for European markets. It provides the software on a SaaS basis and provides services ‘on behalf of’ nomination and scheduling services in European markets. To that end, it would be considered a competitor to eZ-nergy. Energy One says that that EGSSIS is profitable with around 30 staff and 58 customers and set to pay 4.25m EUR over 18-months in cash and equity – an EBITDA multiple of 7x based on FY23 expectations, it says. It expects EGSSIS to generate 3.7m EUR in revenues and 0.6m EYR EBITDA in the next (FY23) financial year and with group synergies to grow its EBITDA contribution in subsequent years. The acquisition will be self-funded from internal cashflows.
On the surface, EGSSIS competes with eZ-nergy as well as others in the market for power and gas scheduling in Europe including GMSL, Brady, Volue, and others. Yet, EGSSIS does add geographic and commodity coverage in Europe for the Group. Energy One argues that the technology stack used by EGSSIS is like that of Contigo and eZ-nergy and that it will leverage synergies in areas like services, support, consulting, sales, hosting and back-office staffing. It expects maximal development of synergies to take about 24-months. However, the real value of the acquisition to Energy One is stated in its filings with ASX which state “We will use our software capability to become a major vendor in the 24 by 7 energy services market.”
Energy One sees more limited competition in this important part of the market where it believes just three vendors currently play – GMSL, eZ-nergy and EGSSIS. By combining two of these vendors, it argues that it will have the size necessary to take on the competition and develop new customers. By leveraging synergies with Contigo as an ETRM supplier (and UK scheduling software vendor), it sees opportunity. Both eZ-nergy and EGSSIS have been heavily investing is their SaaS approach and ability to provide one-stop services for customers in European markets and eZ-nergy has strongly demonstrated that this approach is highly attractive in today’s market.
ComTech also sees this market as one with strong potential for growth. The ability to conduct business process outsourcing of areas such as scheduling, nominations and so on is highly attractive to businesses looking to extract maximum value from transactions and where margins have historically eroded. Another aspect of that has been the growth of trading in which smaller traders trade under the umbrella of a larger trader with better credit and better operational capabilities. However, we expect this market to be attractive to other players in the industry too and we expect it to become more competitive over time as a result. Speed of capability will therefore be a consideration in the development of this market from a vendor perspective and that is where this acquisition works. It essentially catapults Energy One into a position that otherwise would have taken considerable time, capital, and investment to arrive at.
Energy One Group European CEO, Simon Wheeler, comments: “eZ-nergy and Egssis are two of the three established European vendors selling software with a service: power and gas scheduling and automated trading software, along with 24/7 “on behalf” operations. This new acquisition will reinforce the Energy One Group strengths, bringing together highly skilled teams with strong market knowledge, high-quality services and a dedicated customer service culture. There are strong synergies between the two companies, which will create an extensive offering to both existing and new clients. We are extremely happy to welcome Egssis into the Energy One family and look forward to the next steps in our journey”.
ComTech will, as usual, follow developments and report back on how the acquisition goes. I will be speaking and virtually attending the Energy One user group later this year where I hope to learn much more.