Eco Investor July 2016

Core Securities

New Strategy for Energy Action

Former market darling Energy Action is aiming to renergize with a new strategic plan that capitalizes on three trends in the energy market - microgrids, big data, and the National Australian Built Environment Rating System (NABERS) for energy efficient buildings. It has also reorganized its core product offerings and launched an Energy Metrics Platinum service.

Energy Action started as an energy auction service to buy cheaper energy for clients and offered added value with energy efficiency services. But it says the buying behaviour of many clients is changing and energy is transitioning from a cost management exercise to a risk management commodity or as an opportunity to generate incremental revenue.

It says the three mega trends are part of this change. Each is a significant market opportunity and Energy Action is accelerating its investment in solutions development, sales and marketing to capitalize on them.

The company says designing, deploying and operating commercial and industrial microgrids is a potentially $150 million plus market.

Microgrids require a manager to manage inputs from the grid; local generation from solar energy systems, natural gas and fuel cells; back-up gen sets; uninterruptible power supplies; energy storage; and the output to loads. Energy Action will also offer design services for electricity procurement, reporting and compliance, managing tenant metering and billing, and solar feasibility.

It says the rise of microgids means that between 25 and 45 per cent of all generation will occur from local microgrids by 2050, and that over half of Australian shopping centres currently operate an embedded network.

The company says that big data and leveraging access to enhanced market data to offer alternate procurement and contract management services is potentially a $75 million plus market.

Although big data brings digitization to the energy community, energy utilities lag most other industries in their adoption of digitization to engage clients. Smart meters increase access to daily data on energy consumption and costs. The rise of smart meters has gone from 110,000 premises in 2005 to 2.6 million premises in 2015 and could surpass 8 million by 2025. Yet data intelligence solutions and applications have not evolved with the evolution of data availability, says the company.

Smart meters can extend Energy Action's procurement and contract management offers through access to wholesale market data and improved daily and near realtime data. They can allow clients to buy energy in shorter time blocks that suit their load profile, and they provide a platform for other product offers such as mobile applications.

The company says that continuously monitoring and tuning buildings to maintain NABERS ratings and undertaking commercial building upgrades is potentially a $300 million plus market.

Energy efficiency ratings directly impact commercial property valuations and there is a direct correlation between property ratings and the total investment return from a property. NABERS is a 6 star system and Energy Action says half of the rated buildings are below 4.5 stars. Energy Action is looking at refurbishments and upgrades, monitoring and energy audit services.

To keep up to date, the company has appointed Mathews George to the new position of chief information officer. He leads a team of technology professionals responsible for the company's IT landscape and delivering regular product releases and IT upgrades.

Energy Action has also consolidated its existing Contract Management portfolio into three service and software offers that is says are the most comprehensive in the market. The upgraded offers are - Energy Manager, Energy Bureau and Energy Metrics.

Energy Manager integrates the company's procurement and contract management services under a single monthly amortized fee.

Energy Bureau and Environmental Reporting delivers multifuel, contract management and environmental reporting solutions in conjunction with software partners.

Energy Metrics is the old Activ8 service. Electricity and gas contract management solutions will be delivered from the company's Enact software platform.

Energy Action has also announced an Energy Metrics Platinum service that offers real time energy monitoring and real time cost and consumption trending and alerts without the need for additional metering infrastructure.

As an energy broker and energy efficiency manager, Energy Acton assists clients to save money on both the demand side and supply side of their energy needs. It has over 5,000 clients with 25,000 sites.

The changes show Energy Action is thinking about its business, market and clients. Investors will be hoping the changes are enough to turnaround its declining performance and share price over the past two years. (ASX: EAX)

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