Utility Week

UTILITY Week 1st September 2017

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UTILITY WEEK | 1ST - 7TH SEPTEMBER 2017 | 21 Finance & Investment Analysis V erastar is a little-known company trading under many different brands in the telecoms, water, energy and broadband space, and it is fast gain- ing market share in the utilities world. The multi-service provider was founded in 1998, with the promise that it would focus on small businesses, and recently it has started to make waves in the non-house- hold water market. The company supplies electricity, gas, water, fixed and mobile telecommunications, broadband and fibre connectivity and insurance services to an estimated 10 per cent of all the UK's small businesses. And it has just announced the purchase of Scottish water retailer Aim- era, making it the largest challenger in Scotland and strengthening its credentials as it aims to take market share across the UK. Recent confirmation of Verastar's acquisition of Aim- era is yet another example of the ongoing consolidation process in the utilities sector. Utilities analyst Nigel Hawkins says that in supplying such services "size matters", and that this is a principle to which Verastar, in making its eighth transaction in just 18 months, is "clearly wedded". "Many companies will currently be holding discus- sions with one another about the benefits or otherwise of merging," he says. Several suppliers, like Verastar, focus on the small and medium-sized enterprise (SME) market, where they manage their SME clients' utility requirements, espe- cially in terms of procurement – an obvious example being Utilitywise, which has built up a strong SME-orien- tated business. Despite a profit warning last June, Utility- wise has a market value of £50 million. But many small entrants focus on the retail market, where the supply criteria are different – and where mar- gins are under real pressure, as the ill-fated GB Energy discovered. A leading supplier of cross-utility services, outside the big six is Telecom Plus, with annual revenues of £740 million. Through its Utility Warehouse brand it boasts more than 300,000 electricity, 260,000 gas and 120,000 telecoms customers. In the very competitive energy sub-sector, many small players vie for market share, including First Utility, Ovo Energy and Good Energy. The latter has a market capitalisation of £46 million and was recently embroiled in a major battle with Dale Vince – the founder of Ecotricity, who bought a sig- nificant minority share in its rival in October last year. Ecotricity wanted two seats on its Good Energy's board, but has now withdrawn the bid. On the water front, fur- ther consolidation initiatives are likely as partial market liberalisation takes root. "Forecasting the next utility deal is problematic but deals will assuredly materialise," says Hawkins. "It will be the decisions of a few key individuals as to which transaction follows in the footsteps of Verastar's latest acquisition." Verastar itself is not showing any signs of slowing on its insatiable quest for market share. On the day the deal was announced, strategy and business development director Piotr Nowosad said Verastar had "led the way" in consolidating the Scottish water market, "bringing efficiency and driving down costs for SME businesses". "We have already begun to replicate that model and shake up the market in England following deregulation in April 2017," he said. "We continue to be active in seek- ing to acquire companies and customer books across a broad product portfolio including payments, insurance, telecoms, energy and water." Key Verastar acquisitions Aimera Verastar bought independent Scottish water retailer Aim- era on 21 July, bringing its UK customer-base to an esti- mated 10 per cent of UK businesses. The company said the acquisition would increase its water customer vol- umes and provide access to new sales channels to sup- port future organic growth. Ovo Energy's commercial customers On 18 October 2016, Ovo Energy sold its business cus- tomer base to Verastar for an undisclosed sum. The energy retailer previously provided one business electric- ity fixed-price plan – Better Energy – which was made up of 33 per cent renewable electricity as standard. It did not supply gas or offer a 100 per cent green energy plan to its commercial customers. The acquisition bolstered Ver- astar's customer-base to 9 per cent of small businesses in the UK. Clear Business Water Clear Business Water, was among the first to be granted a water supply and sewerage licence for the English market by Ofwat earlier this month. It was bought by Verastar in 2013, and has been providing business water services in Scotland since then. It now has a Scottish market share of around 20 per cent. On the acquisition trail Verastar's acquisition of Scottish water retailer Aimera is the latest in a long line of utility consolidation deals, and it is unlikely to be the last. Lois Vallely reports. Other notable Verastar buys Economy Gas Kinex The Insurance Octopus The Media Octopus Crown telecom Solutions Business Comms Solution Marble Telecom Titan Telecom Unicom "We continue to be active in seeking to acquire companies and customer books across a broad product portfolio" PIOTR NOWOSAD, VERASTAR STRATEGY AND BUSINESS DEVELOPMENT DIRECTOR

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