Profile: Good Energy

Good Energy, the AIM-listed Social Stock Exchange member, is enjoying good times right now. It’s successfully concluded its second bond, which aimed to raise £10 million but was significantly over-subscribed and closed at £16.7 million. I spoke to Denise Cockrem, Good Energy’s Chief Financial Officer, to find out what’s behind the new bond – and also to see how the energy supply sector is faring right now.

“We’ve been in this business for 18 years,” says Cockrem, “and this bond is another significant milestone in the success of Good Energy. We raised £15 million through our first bond, in 2013, which was an over-subscribed offer. We used the proceeds from that to support the development of solar farms, which enabled us to increase the amount of ‘home-grown’ energy to supply our growing customer base. The second bond was closed on 5 June. We had a target of £10 million and we have again significantly over-achieved,” she says. This bond pays a 5% interest to customers of Good Energy and 4.75% interest to non-customers.

Cockrem says the bond issuance is “part of our diversified funding strategy” (it did an equity raise last year which raised slightly more than £3 million) but it’s also part of a more general aim, one of creating a community of loyal customers, by getting them to invest in the company. Good Energy prides itself on providing good customer service and the fostering of supportive relations between company and customer is a key part of Good Energy’s ethos. “We get a lot of feedback from customers saying this is important to them and obviously they align more strongly with us this way – it really builds customer loyalty and customer retention,” says Cockrem.

What will the proceeds of the bond issuance go towards? “We will continue to invest in the supply business,” says Cockrem, “but we are probably talking about customer growth in the teens rather than in excess of 30%, as has been the case. We think that, given the amount of competition in the market, and the fact that we are not a price-led proposition – we give value for money but our proposition is more around providing green energy, from an ethical and purposeful company giving great customer service – customer growth may be a little slower.”

So Good Energy is looking to expand in other directions, with three growth areas in its sights. One is energy storage – batteries in common parlance; two is electric vehicle networks; and the third is green business consultancy. Taking them in reverse order, Cockrem tells me that green business consultancy has been triggered by approaches from bigger businesses who want to learn what they need to do to go green, to reduce their carbon footprint. She says: “We do understand very well what’s involved in sourcing green energy and the steps that businesses can take to improve sustainability. So this will be about helping these large businesses to source the right kind of products, which could include helping them to do some of their own generation.”

As for energy storage, there are very few batteries connected into networks right now, and from the domestic side, “batteries are probably not yet cost effective,” says Cockrem. “But that will come.” However Good Energy can see advantages for corporate customers, by enabling them through battery technology to balance their energy usage more effectively. “We’re not looking to put large capital sums at risk on this front. Instead we are looking at partnering with people, using our supply and trading skills,” says Cockrem.

The increase in people’s appetite for electric vehicles has also piqued Good Energy’s interest. Last week saw the second millionth electric car being sold, still a drop in the ocean of the overall global market, but a straw in the wind nevertheless. “Again, we’re not talking about building a big network of charge points, but we are looking at building more tailored support for customers, using our technical expertise for our customers, perhaps by looking to help them charge their vehicle faster, at home or at work,” says Cockrem.

Good Energy is not just a leading ethical energy provider – it’s also a nimble and thoughtful company that is looking to the future. On that score, I was intrigued to hear what Denise Cockrem might think about current government policy, price caps, and the confused state many customers are in (although not Good Energy ones) when it comes to contemplating their bills. She argues that “you need to step back and ask: what is the issue that the government is trying to address? It’s that you have a big differential between the highest and the lowest price in the market. That’s not just a differential between suppliers but also within suppliers. Around 60% of customers have never switched supplier and those customers who slip into paying higher tariffs are being used to offer good deals to new customers. That’s really what the government is concerned about. Our view is that’s not the right or fair way to treat customers and if you are differentiating your price to your customers, there should be a reason why that is.”

There is always a ‘however’, and here is Cockrem’s on this issue: “The danger is that, historically, there have been examples of what I would call clumsy interventions, which have failed to achieve their objectives and have also had unintended consequences. For example, if we think about price caps on the standard variable tariffs for the ‘Big 6’. What that could potentially do is undermine competition. People would say ‘there’s no point in switching’. We see competition and choice for customers as good things. The unintended consequence of price caps could be that it would consolidate the grip of the ‘Big 6’ on the market. We know that we would not be the target of this kind of price cap. However, the risk is that some of the smaller competitors in the market could end up being put at a disadvantage.”

The energy supply market in this country has mushroomed. From around 10 independent suppliers just two or three years ago, there are now well over 50. That alone should guarantee greater competition – but it equally poses problems for the hapless consumer, problems of how to choose, and also a degree of uncertainty about the governance and stability of some of these companies.

As we close our conversation, Denise Cockrem adds that the Social Stock Exchange “has been a strong supporter of Good Energy. They have given us the opportunity to present our business to really good audiences of potential investors, and to start to change the perception around social impact investing. That’s been a real positive.”



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