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Genesis Energy to Purchase Nova Energy Retail LPG Business

MARKET AND NEWS RELEASE Date: Monday, 1 May 2017

Genesis Energy drives customer-centric growth strategy with purchase of Nova Energy retail LPG business

Genesis to acquire Nova Energy retail LPG business for $192 million

Increase in market share, from 3% to 19%

• Significant value created through vertical integration, scale and margin benefits

Strong foundation for delivering integrated customer offering and innovations

Acquisition of Nova Energy Retail LPG Business

Genesis Energy Limited (GNE) today said it was delighted to announce an agreement to acquire the LPG distribution assets and LPG customer base of Nova Energy, a subsidiary of the Todd Corporation, for total consideration of $192 million.

“This is an important day for Genesis Energy. The transaction builds on our recent highly successful organic growth in LPG over the last 12 months. It will significantly accelerate our growth aspirations in the key LPG market consistent with our announced strategy which the company outlined last year,” said Genesis Energy chair Dame Jenny Shipley.

“The Nova acquisition is the second significant transaction we’ve made in the past year, and is great news for our customers,” said Genesis CEO Marc England.

“Genesis Energy will now become New Zealand’s second-largest LPG retailer by number of customers, with our market share leaping from 3% to 19%.”

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Mr England said that by growing its LPG business in this way the company could keep innovating in ways that benefitted its customers throughout New Zealand.

Genesis Energy has a unique position in the industry, combining three fuels on one billing and customer management platform, allowing complete integration of the customer experience.

“In every respect today’s announcement represents a big addition to the Genesis Energy family. It means 23 depots up and down New Zealand, two reticulated networks in Dunedin and Christchurch, and 68 vehicles servicing 35,000 LPG customers, with the support of over 70 Nova employees who we’re really looking forward to working with,” said Mr England.

About Nova Energy LPG

The Nova Energy retail LPG business is a leading supplier of LPG in New Zealand with a distribution network servicing customers in key demand centres across the North and South Islands. It has developed a platform that is ideally positioned to capture the strong ongoing growth in the New Zealand LPG market, and has a complementary overlap with Genesis Energy’s national customer base.

The distribution network includes a nationwide retail and bulk distribution system covering a well-established customer base of 35,000 bottled gas customers across residential, commercial and industrial segments. The business is supported by an experienced operating team of over 70 employees. In addition, the purchase includes around 6,400 dual fuel electricity and LPG customers and an option to acquire Nova’s 12.5% interest in Liquigas for additional consideration.

Acquisition of Nova: Transaction detail, rationale and funding

The transaction is expected to deliver approximately $17 million of EBITDAF in 2018 before integration costs, and generate synergies of $4-6million per annum from FY19 onwards mainly from vertical integration benefits. The purchase price represents an EBITDAF multiple of 8.5 times after synergies and will deliver 5% EPS accretion[1].

The transaction is conditional on limited confirmatory due diligence and other limited conditions. It is expected that completion will occur on 31 May 2017. A transition service period will then operate to enable effective service handover and rebranding which is expected to be completed on 31 July 2017.

The transaction will complement Genesis Energy’s leading market shares in electricity and gas, thereby providing a platform for an improved holistic customer offering as part of its customer centric focus. It will also improve Genesis Energy’s exposure to the attractive demand dynamics of LPG, particularly in the 45kg and bulk segments which currently make up 75% of the market and have been growing strongly.

Genesis Energy currently produces around one quarter of total LPG in New Zealand. This acquisition will allow it to distribute directly to its customers, leveraging on its strong retailing capabilities, in turn reducing revenue volatility and capturing additional related margin.

Nova Energy’s LPG distribution network complements Genesis Energy’s existing customer base as well as removing barriers to growth in new market segments such as bulk and SME. It also gives Genesis Energy the ability to integrate its customer offering across its portfolio, providing opportunities to improve customer service, drive its multi-fuel strategy and maximise the benefits of innovation initiatives.

The transaction will be funded from existing debt facilities. Genesis Energy is also considering the launch of a capital bond offer, with 50% equity credit.

Market Briefing

A conference call for investors and analysts will be hosted by Marc England (Chief Executive) and Chris Jewell (Chief Financial Officer) at 11:00am NZST this morning (Monday, 1 May) to discuss the transaction. This can be accessed via the following ways:

• Live via webcast: click here for the link to the analyst webcast

• Live via telephone (for “listen-only” participants and those who would like to ask a question):

Conference ID 5506518
New Zealand - Toll Free 0800 423 970
New Zealand – Local +64 (0) 9 9133 622
Australia - Toll Free 1 800 591 251
Australia – Local +61 (0)2 9193 3709
United Kingdom 0800 279 6839
United States 888 394 8218
Hong Kong 800 961 110
Singapore 800 186 5107

A replay of the webcast will be able to be accessed after through the Genesis Energy Investor Centre which you can find here


[1] On a pro forma basis including fully realised synergies (excluding one-off integration costs and transaction costs)


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