Well blow me down!
Sounds like the company
- grew its electricity sales group faster than the accompanying funding guarantees - basically a stock management error - inexcusable
- didn't understand that wholesale power pricing would rise so much during summer heatwaves so underbid on electricity sale prices - possibly understandable in the heat waves so much greater than in the previous few years (but still not unexpected in an El nino year while house building is ripping along)
- as a result of the pricing errors have had to limit their market to small businesses where the big wholesalers/energy firms can't be bothered looking and without the big administrative overheads of residential - necessary but how big is this potential market? What are the upsells that can be added?
- Redback has been put on the back burner until there is money to buy in - Redback electricity management is red hot at the moment, there will be queue of ex-mining listed shelf companies outside the Redback offices offering a backdoor listing - Redback could very easily grow into a direct electricity management specialist using batteries in the mix so GOE is very likely to miss this boat
- all of the above pricing errors make me wonder if GOE has a realistic grip on what is going to happen in the electricity market in the next 1-5 years
- wholesale prices will rise as ancient coal-fired power stations retire and the thermal generation market returns to profitability through rebalancing supply and demand and raising prices to cost+
- electricity balancing services (energy, frequency, power factor) will be the hot place in the market as increased variable renewables continue to grow as a fraction of the market (currently 1-2% of total electricity but likey to grow to (say) 30% in the next decade)
- more and more smaller consumers will disconnect from the market, initially low demand households, then smaller businesses in their own premises.
Hopefully the new board will be running weekly strategy meetings and doing lots of research for the next year to get a grip on this.
At the moment GOE looks like a cyclist who sprinted early and is soon to be overtaken by a better organised pack.
GOE Price at posting:
2.0¢ Sentiment: Hold Disclosure: Held
