Further investment in Smart Metering Business

22 June 2021

 

eEnergy Group plc

("eEnergy" or "the Group")

 

Further investment in Smart Metering Business

 

eEnergy Group plc (AIM: EAAS), a leading "Energy Efficiency-as-a-Service" (EEaaS) business in the UK and Ireland, is pleased to announce that it has entered into various agreements with the other existing shareholders of eEnergy Insights Ltd ("EIL") (a recently formed specialist smart metering measurement equipment and analytics business) and EIL (the "Agreements"). The Agreements follow the original investment of 19 April 2021 and will increase the Group's equity interest in EIL from 33 per cent. to 37.5 per cent. and the Group will become the exclusive distribution partner, with the potential to increase its interest to 100 per cent. over time.

 

Background

 

On 19 April 2021, eEnergy announced that it had made an initial investment in EIL in the form of loan notes, as well as a nominal equity investment, resulting in eEnergy holding a 33 per cent. equity interest in EIL.

 

It also announced that EIL had acquired certain trade assets out of the administration process of Measure My Energy Limited and certain associated intellectual property assets (the "Acquisition").

 

The new Agreements contain the detailed terms agreed between the parties in connection with the development of the new business which the Board believes will allow the EIL business to grow, with shareholders and management sufficiently incentivised, while providing eEnergy the opportunity to increase its interest in EIL over time up to 100 per cent. of the issued share capital.

 

Highlights

 

Highlights of the Agreements include:

·    The grant to eEnergy of exclusive, global distribution rights for EIL's products, including its measuring equipment and analytics offering, providing the opportunity for eEnergy to sell this valuable and differentiated proposition into existing and new customers. EIL retains the ability to sell its products in markets where such sales do not directly compete with eEnergy;

·    Further investment by eEnergy and other shareholders. eEnergy will invest loan notes of £61,250 and a nominal equity investment, which will see eEnergy's equity interest in EIL increase to 37.5 per cent. Other Shareholders will invest a total of £208,500 in new loan notes, as well as nominal equity investments;

·    Grant of a nominal-cost Warrant to eEnergy to increase its equity interest in EIL to 51 per cent., which may be exercised during a period beginning on the later of (i) the date that eEnergy has reached minimum cumulative orders of EIL products and (ii) 1 July 2021;

·    Grant of a Call Option to eEnergy allowing it to increase its equity interest in EIL to 100 percent. on pre-agreed valuation metrics, exercisable three to five years from the date of the Agreements, at the sole discretion of eEnergy;

·    Grant of a Put Option on pre-agreed valuation metrics, with restrictions on the maximum amount payable, to the other shareholders of EIL providing them with a potential exit opportunity. The Put Option is exercisable by certain shareholders three to five years from the date of the Agreements, and by other shareholders from the fifth anniversary of the date of the Agreement and for a period of six months thereafter.

 

eEnergy's Smart Metering Offering

 

eEnergy is seeking to unlock the potential of energy analytics through proprietary smart metering "behind the meter" hardware and software. Energy measurement and monitoring is a key growth pillar of eEnergy's energy management platform that will seek to deliver measured share of savings contracts and accelerate the transition from Light-as-a-Service into Energy-as-a-Service.

 

The Agreements provide an opportunity to use key data insights captured by the platform to enable eEnergy to deliver additional energy conservation measures through the integration of the Internet of Things (IOT) and smart controls.

 

Group Outlook

 

The Group continues to make progress with new customer wins, as well as increasing its offering to customers from energy efficiency through to energy management. The Board continues to expect the Group to achieve a breakeven profit before exceptional items for the full year to 30 June 2021.

 

A detailed trading update is expected to be published in early July.

 

Harvey Sinclair, CEO, eEnergy, commented:

"Following our initial investment into smart metering through EIL, we are excited to have formalised a longer-term agreement with the EIL shareholders which enables us to provide customer validation of energy efficiency savings behind the meter.

 

"These new Agreements are structured to incentivise the key stakeholders, while providing routes for eEnergy to take its interest in EIL up to 100 per cent. over the medium term.

 

"We see the agreement with EIL as an exciting opportunity to establish an offering in smart metering and will look to provide cross-sell opportunities to existing and new customers of our light-as-a-service and energy procurement platform." 

 

 

Details of the Agreements

 

Distribution Agreement

 

eEnergy has entered into a distribution agreement with EIL ("Distribution Agreement"), where EIL has granted eEnergy the exclusive, global distribution rights to all its products, save for in markets where such sales do not directly compete with eEnergy.

 

The Distribution Agreement sets out the commercial terms between the parties.

 

Further Investment by eEnergy in EIL

 

Pursuant to the Agreements, eEnergy will make a further cash investment of £61,250 into EIL in the form of loan notes, as well as a further nominal equity investment in EIL, resulting in eEnergy's equity interest in EIL increasing to 37.5 per cent.

 

Certain shareholders will invest further cash into EIL comprising a total of £208,500 in new loan notes, while all shareholders will invest in nominal equity investments alongside eEnergy.

 

In the event that certain commercial criteria for a next generation of distribution monitors are not achieved by 18 October 2021, then claw back provisions may apply, where eEnergy's equity interest could increase up to 51 per cent.

 

The book value of the assets of EIL pursuant to the Agreements was £0.2m, representing the value of the consideration to fund the Acquisition.

 

Issue of Warrants in EIL to eEnergy

 

eEnergy will be granted nominal-cost warrants (the "Warrants"), allowing the Group to increase its equity interest to 51 per cent. of the issued share capital of EIL. The Warrants are exercisable for a period of 12 months beginning on the later of (i) 1 July 2021 and (ii) the date that eEnergy reaches minimum cumulative orders of power distribution monitors or power meters.

 

Issue of eEnergy shares

 

In order to align certain existing investors in EIL ("EIL Investors") with the eEnergy strategy, upon confirmation of EIL's next generation of distribution monitors achieving the desired commercial criteria, £138,000 of the loan notes held by such investors will be converted into an equivalent amount of Ordinary Shares in eEnergy at an issue price equivalent to the 30 day VWAP at the time. A further announcement will be made in the event of completion of such transaction.

 

Issue of options over eEnergy ordinary shares

 

In order to have in place appropriate incentives for the EIL management, eEnergy will issue to management a total of 2,000,000 options of ordinary shares of 0.3p in the Company ("Ordinary Shares"), with an exercise price equal to the 30 day VWAP prior to specific performance criteria being satisfied, (together, the "Share Options"). The Share Options will be issued on achieving the desired commercial criteria and are exercisable on the earlier of four years from eEnergy's initial investment (being 18 April 2021), or a change of control of eEnergy and would be subject to orderly market restrictions. Assuming full exercise, the Share Options would represent 0.8 per cent. of the issued share capital of eEnergy, as enlarged by the Share Options.

 

EIL Board

 

As part of the Agreements, the board of EIL will contain up to five members, with eEnergy having a right to appoint two members and with a casting vote. Upon exercise of the Warrants by eEnergy, the Board will contain up to six members, with eEnergy having a right to appoint three members and with a casting vote.

 

Drag and Tag Provisions

 

The Agreements contain drag along and tag along provisions that apply from the third anniversary of the Agreements, where 60 per cent. or more of shareholders for the drag along and 51 per cent. or more of shareholders for the tag along, have agreed to sell their shares in EIL to a purchaser.

 

Obligatory Transfer Events

 

In the event that any shareholder of EIL becomes insolvent (as a corporate entity or an individual) or commits a material or persistent breach of certain provisions of the Agreements and, if capable of remedy, is not remedied within 20 business days, there can be an obligatory transfer of those shares in EIL to other shareholder(s) at the Board's determination of fair value.

 

Call Option

 

In providing eEnergy with the flexibility to increase its equity interest in EIL to 100 percent. over the medium term, the other shareholders in EIL have granted to eEnergy a call option ("Call Option"), to acquire all of the issued share capital not owned by it, based on the higher of (i) an agreed fixed multiple of annualised EBIT and (ii) an agreed multiple of Revenue, exercisable between three to five years from the date of the Agreements.

 

eEnergy retains the discretion to exercise the Call Option. In the event of exercise, the investors would receive cash consideration and EIL management would receive either (i) cash consideration, (ii) Ordinary Shares in eEnergy (at the 30 day VWAP prior to exercise and subject to a 12 month lock-in and orderly market provisions) or (iii) a combination thereof (at eEnergy's discretion).

 

Put Option

 

In providing the other EIL shareholders with a potential crystallisation opportunity in the medium term, the other EIL shareholders ("Put Option Holders") have been granted a put option ("Put Option") to sell all their ordinary shares in EIL to eEnergy, based on the higher of (i) an agreed fixed multiple of annualised EBIT and (ii) an agreed multiple of Revenue, with exercise restricted such that it would not trigger a reverse takeover pursuant to Rule 14 of the AIM Rules for Companies. The Put Option is exercisable by certain shareholders three to five years from the date of the Agreements, and by other shareholders from the fifth anniversary of the date of the Agreements and for a period of six months thereafter. In the event of exercise, all EIL shareholders selling their EIL shares to eEnergy would receive either (i) cash consideration, (ii) Ordinary Shares in eEnergy, (at the 30 day VWAP prior to exercise and subject to 12 month orderly market provisions) or (iii) a combination thereof (at eEnergy's discretion).

 

 

Contacts:

eEnergy Group plc	Tel: +44 20 7078 9564
Harvey Sinclair, Chief Executive Officer Ric Williams, Chief Financial Officer	[email protected]; www.eenergyplc.com
N+1 Singer (Nominated Adviser and Joint Broker)	Tel: +44 20 7496 3000
Justin McKeegan, Mark Taylor, Asha Chotai (Corporate Finance) Tom Salvesen (Corporate Broking)
Turner Pope Investments (Joint Broker)	Tel: +44 20 3657 0050
Andy Thacker	[email protected]
SECNewgate	Tel: +44 7540 106 366
Robin Tozer Isabelle Smurfit	[email protected]

 

 

About eEnergy Group plc

eEnergy Group plc is a leading "Energy Efficiency-as-a-Service" (EEaaS) business focused on providing its core "Light-as-a-Service" ("LaaS"), to educational and commercial & industrial customers through its eLight and RSL operations in the UK and Ireland. The Group helps businesses and schools switch to LED lighting, typically for a fixed monthly service fee, avoiding any upfront payments.

 

eEnergy was admitted to AIM in January 2020.  The Board's strategy is to develop eEnergy as a broader energy services company and acquire other businesses in the energy management sector. The market in the EU for energy efficiency services was approximately €25 billion in 2017 and is expected to double by 2025. 

 

In December 2020, eEnergy completed the acquisition of Beond Group Limited. Beond is a UK-based renewable energy consulting and procurement business, whose services aim to reduce costs for clients and tackle climate change.  Beond's services include provision of clean energy strategy, smart energy procurement, hedging strategies, bill validation, bureau services and market intelligence. However, its key offering is its proprietary platform used to run reverse energy auctions for clients.

 

eEnergy has been awarded The Green Economy Mark by the London Stock Exchange, which recognises a company's work on sustainability.                                   

 

https://eenergyplc.com/