From Energy to Equity - a new way for venturing

From Energy to Equity
… a new way for venturing
Daniel Riad Akiki
Financial Advisor & Strategy Consultant
February, 2016
There is no elevator to success, you have to take the stairs

WILL SMILE FOR
FUTURE CASH FLOWS
Crowd-sourcing the project
 If you like my project please share it, thank you.
The Crowd
HQ
ENERGY SUPPLIER
PROJECT
ENERGY FOR
EQUITY
DANIEL RIAD AKIKI – Financial Advisor & Strategy Consultant
Shared value
creates common
wealth…

Energy for Equity business model
 Summary
 The ambition of an energy supplier
 The context & Business model innovation
 Value proposition
 Profit equation
 Pricing
 Business plan
 Win – Win / Fair process
 Conclusion
“Service, in short, is not what you do, but who you are. It is a
way of living that you need to bring to everything you do, if you
are to bring it to your customer interactions.” ~ Betsy Sanders
- Client Centric -

 The ambition of an Energy supplier…
 … is to contribute to the improvement of economic and social welfare throughout the value chain while providing
qualitative energy. This ambition applies to the energy supplier employees, to the local communities nearby the
energy plants and to the partners directly or indirectly bound to the supplier.
The 3rd level is the ultimate level of shared value
The 2nd level is for sustainable development
The 1st level is the minimum required of compliance to
environmental, economic and social rules
30
years
SHARED
VALUE
DURABILITY
Preserve the future,
environmental norms,
responsibility, etc.
COMPLIANCE
Law, business management
principles, code of conduct, norms,
etc.
15
years

 Context
 The ‘’Utilities’’ revenues come from diverse sources among which the energy sales. Yet, during crisis periods, the
energy sales decreases because of the activity decline of all actors (industrial turn-around). Simultaneously,
numerous young innovative SMB have original B to B or B to C offers and long-standing industrials have difficulty
honoring their energy bills because energy is too expensive.
 Business model innovation
 My objective is to steer an energy supplier to launch a brand new business model : trading equities against energy
credits “Energy for Equity” or a share of earnings “Energy for Revenue Sharing”. The energy supplier identifies
SMB and industrials which would benefit greatly from a downsizing of their energy bills (They would be either in a
restructuration or in a development phase). It would offer to enter the capital or to share additional earnings
generated by the increase in performance. Admittedly, the energy supplier would encounter a momentary and short-
term shortfall in its income (acquisition of equity). But, on the long-term, the value created by the appreciation of the
equities as well as the enhanced performance will generate a much more important gain at the sale of the equities.
 Result
 While providing (X) millions euros in energy volumes (This electricity would be provided by plants that are not
working full time or that don’t work at all. Hence, the marginal cost of this electricity is cheaper). Instead of
maintaining artificially these plants, let’s use them to help SMB and industrials. The energy supplier can then
recoup its investment, multiplied by (X) in the following 3 to 5 years.

 Value proposition
VALUE ARCHITECTURE
Introduce new
technology
Change one or
several steps in
the value chain
Find new
resources
Suppress or add
one or several
steps to the
value chain
Take advantage
of your strategic
resources
Associate with
competitors or
partners
Identify
complementary
businesses
XXXX
1 2 3 4 5 6 7
VALUE PROPOSITION
Reduce price for
the customer
Simplify the use
for the customer
Modify sources
of income or the
way to invoice
Convince new
customers to
use the service
Develop
functionalities or
emotions
Explore other
segments or
sectors
Predict
tendencies and
new potential
needs
XX
1 2 3 4 5 6 7
X
It’s the first company to build the mental position that has the upper hand,
not the first company to make the product.
IBM didn’t invent the computer; Sperry Rand did.
But IBM was the first to build the computer position in the prospect’s mind.
ENERGY
SUPPLIER
B to B

 Value Proposition 2
Classic Energy
Energy for Equity
-
R
E
L
A
T
I
V
E
V
A
L
U
E
 Value Architecture 2
Business
Selection
Negotiation of
the Terms &
Conditions of
the exchange
Withdrawal
from the
capital
(monetization)
Instead of a classic
commercial approach, the
energy supplier selects the
companies which would
benefit the most from the
energy credit to get the
highest value created when
withdrawing from the capital.
After 3 to 5 years
1 2
3
Energy for Equity
Energy for Revenue Sharing
+

 Profit Equation
Turnover
disappearance but
higher potential
revenue when
withdrawal from the
capital or earnings
sharing.
Additional costs of
selecting the
businesses.
Turnover Costs
-
Increasing
(acquisition of equity)
Increasing
(postponed earnings)
Fixed assets
Working Capital
Requirement
+
 In a classic energy sales scheme, the
turnover has an upper limit. For the
energy supplier implementing this
new business model, the turnover is
proportional to the performance of
the underlying asset.
 The cost of this project and the risk
taking are moderate depending on
the selection of businesses.
 The cash impact is null: it’s a
momentary shortfall and a time gap
in treasury, offset by the superior
valorization of equity when
withdrawing from the capital.
ROCE =

 Offer pricing
+
-
1 2 3 4 5
C
O
M
P
A
N
Y
V
A
L
U
E
TEMPS
Fixed Price
Flexible price depending
on the performance of
the underlying asset.
 The energy supplier income
increases with time, depending on
the evolution of the partner company
value.
 The energy supplier and the
selected business have mutual
interest in making this new business
model work.
 Both interests are aligned.
Classic Energy
Energy for Equity

 Business Plan
Shorfall in
TURNOVER
EQUITY
SALE
Energy for Equity PARTNER
1 2 3 4 5
-30 -30 -30 -30
0
0
0 0 0 150
ROCE
Impact
-30 -30 -30 -30 150
TURNOVER
COST GAIN
1 2 3 4 5
180 185 190 200
30
220
30 30 30 -30
ROCE
Impact
+30 +35 +40 +50 -30
The energy supplier suffers a momentary
shortfall which allows the partner
company to restructure or develop and
consequently, to increase its
performance.
In crisis period, the partner company has
additional room for maneuver. It can allocate
its resources to growth strategies or to the
acceleration of its restructuring plan. Both
decisions will lead to the better valorization
of its activity.
Margin
+30 M€*
Gain of
20%
* 1 equity = 1€ in year 1, then 1 equity = 1,5 € in year 5 when withdrawing from the capital. Meanwhile, the price of electricity is fixed but the value of the equity is rising.
Shortfall
120 M€
Sale of the equity at a higher price than
the purchasing price which guarantees a
comfortable margin.
Back to
the initial
standard
package.
PERFORMANCE
ENERGY

 Business Plan
ST LTTIME
PARTNER
1 2 3 4 5
Productivity gains
which allow a different
allocation of the
available cash
Differed revenue for 3
years
Low additional costs
of participation follow-
up
EnergyForEquity
WCR decrease
Momentary entrance
of a new shareholder /
partner
WCR and fixed assets
increase
6
P&L BALANCE SHEET
Sales increase and/or
costs decrease
Positive impact linked
to the sale of better-
valued equity
Company value
increase
WCR increase (need
for cash to pay energy
bills like before)
WCR and financial
fixed assets decrease
P&L BALANCE SHEET

 Win-Win / Fair Process

Good for Y,
Bad for X

Bad for Both

Good for X,
Bad for Y

Good for Both
ST LTTIME
PARTNER
1 2 3 4 5
On the short-term, the partner
company benefits from an
energy credit which allows him
to implement its growth
strategies or its restructuration
plan while building a strong
partnership with a major
energy supplier.
On the short-term, there is a
time gap in treasury. The
energy supplier builds new
industrials relationships, gains
in expertise in new businesses
and contributes to the
economic recovery.
EnergyForEquity
On the long term, the activity
of the partner company
becomes durable and
sustainable (without major
social impacts). The value of
the company increases,
creating value for its
shareholders.
On the long term, this strategy
creates value and generates
new sources of earnings. This
creation of value comes along
with a highest margin.
We exchange Energy for Equity that creates value with time.
6

 Conclusion
My view is that the time for talking has passed, and the time for action is NOW.
Everything takes time and time is money …
Free entrance…
Hum… Sounds
interesting

From Energy to Equity - a new way for venturing

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