Recently I had the pleasure in interviewing Nic Frances Gilley, co-founder and CEO of DC Power Co. The full transcript is available below.
DC Power Co is a pro-renewable energy company servicing the Australian residential households.
The company aims to unlock the collective power of Australian households - starting with the 2 million homes with solar panels - to take on the big energy companies with a home renewables alternative to fossil fuels.
DC Power Co was formed around two years ago with the specific aim of reducing households’ power costs and promoting renewable electricity, primarily rooftop solar panels, batteries and demand side management. The company launched its public offering around 6 months ago and has rapidly grown to around 2,500 customer accounts.
The average house spends $1,384 a year on electricity according to Australian Energy Market Commission (AEMC)1 and, according to a recent Venture Insights survey2, 57% of households feel that they are paying too much for their power– of which over half of them cannot tell you how much of a premium they are paying.
Installing solar panels can have a payback period of around 5 years or less3 and can save 50% or more on a household’s monthly power bills. A typical VIC household spends $1,400 - $1,600 per year on electricity (AEMC) with a typical 4kW solar power system will save a Victorian approx $1,000 per year (30% self-consumed, 70% exported). The use of a battery can time shift usage and reduce further a household’s need for grid electricity. Grid electricity costs are likely to be flat to falling according to AEMC, but this cannot reduce monthly overall bills the way that panels and batteries can.
“consumers can expect a flat to falling price outlook because a pipeline of new renewables supply and flat demand is taking pressure off price”
Source: AEMC Chief Executive, Anne Pearson
The electricity market is very large around $15 billion annually[1] and market share is heavily concentrated around 3 major gentailers (they both generate and retail electricity). The profit motive for these large companies aligns them with selling more (not less) energy at higher (not lower) prices. The vast majority of the electricity sold by these retailers is fossil fuelled based – around 83% at present (see chart below).
DC Power Co’s mission is to reduce power bills for households and shift the mix to renewables sources. On the contrary, the big retailers are motivated by selling as much electricity as they can and avoiding stranding their fossil fuel assets
DC Power Co is different. It is focused on reducing energy costs for its customers. With a fixed $10 per month subscription fee it provides electricity ‘at cost’. DC Power Co encourages its customers to reduce energy use and switch from grid electricity to self-generated (i.e. solar panels) and stored (i.e. batteries). Its profits are not tied to the amount of electricity its customers use – so it is motivated to help customer’s reduce their electricity bills. It also provides timely data to its customers to help them reduce their energy usage and assist them with making good decisions around purchasing solar panels and batteries.
DC Power Co was founded by four successful entrepreneurs (Nic Frances Gilley, Monique Conheady, Nick Brass and Emma Jenkin) and has built out a team of sector and technology experts.
The business has raised around $7.5m to date and is currently in a funding round to raise around $2-4 million, which will be spent primarily in marketing services to customers and employing staff.
Venture Advisory has worked with DC Power Co from an early stage, providing financial and strategic advice and is also an investor. If you’re a wholesale and sophisticated investor and are interested in investing you can lodge your interest here. If you are a retail investor you can investor directly through Birchal’s crowdsourced funding here.
Source: Australia Government – Department of Energy and Enviroment2
The NEM includes grid electricity in the Eastern and South Eastern states and accounts for approximately 85 per cent of total electricity estimates in the year to December 2019.
You can find out more about DC Power Co here.
You can find the offering documentation here.
There are risks that may affect the operating and financial performance of DC Power Co. You should always consider the general crowdsource funding risk warning and offer document before investing. These risks can be found on the Birchal website.
Interview transcript
Chris Blyth 0:00 Hi Nic, how are you?
Nic Frances Gilley 0:01 I'm good, thanks.
Problem and Market Need
Chris Blyth 0:02 Okay, today we're going to talk a little bit about DC Power Co. You started the business along with your other co founders a couple of years ago. You actually launched your product six months ago. You've raised seven and a half million dollars to date, you're about to do another capital raising. Let's find out a little bit about the business. So the first question is about the problem and market need. What's the problem you're trying to solve?
Nic Frances Gilley 0:22 Well, I think the problem is that people want to reduce their energy bills, and they want support with their renewables to do that. And we don't have companies that do that currently.
Solution, product and technology
Chris Blyth 0:31 You've told me that customers want to pay less for their power bills. What's your solution?
Nic Frances Gilley 0:36 Our solution is to support the 2 million homes that have got solar, and the 3 million that are thinking about solar and battery as well, with a really simple solution that allows them to get more out of their energy and then to reduce their energy bills. And we do that with a different model, we don't actually charge and try and sell them more energy, we have a simple monthly subscription fee.
Market Sizing
Chris Blyth 0:55 So Nic, you said that 50% of houses will have solar and batteries, how much does this mean in dollars?
Nic Frances Gilley 1:00 Well, currently energy market is $17 billion a year in terms of energy, half of the market are moving to renewables. We're the only company that currently doesn't have to sell you energy. So we don't have a model that makes money from that, we actually support you to get renewables and then reduce your power bills. So to that extent, it's a big marketplace. And we're currently the one player focused on delivering that for homes.
Business and revenue model
Chris Blyth 1:25 Let's talk about your revenue model, how are you going to make money?
Nic Frances Gilley 1:29 Well, we've got about two and a half thousand customers right now buying energy from us every day, we've only been going six months That's pretty quick growth. I think probably as large as any power company has grown in that short period of time. Obviously, our goal is to be a very large company in a very large market. And the way that we will make our money is from that subscription fee, that monthly charge to get you on the grid, lower your bills. But also to support people on the journey of buying solar, buying a battery and getting into the marketplace.
Sustainable competitive advantage
Chris Blyth 1:58 What makes DC Power Co special. How you going to compete in the market?
Nic Frances Gilley 2:03 Well, I guess all the big players own a lot of gas and coal fired power stations, right? And we're shifting to renewables. And that means that they are not flexible, and they're having to slow down this movement. I think for us, we are not wedded to any particular technology or any particular future, we're there alongside the homeowner helping them shift and be renewable and cut their bills. So, that's the business model.
Chris Blyth 2:26 So we're saying that your competitors can't really adopt your model and do it better than you?
Nic Frances Gilley 2:30 They've got a lot of stranded assets, haven't they really, I mean, if you're in a move where we're moving to renewables, but you've actually got gas or coal fired power stations that are going to keep burning for another 30 years, you want to keep selling people energy, you don't want them to cut their bills, we want them to cut their bills.
Talent
Chris Blyth 2:45 Ok Nic, every business plans as good as the people who deliver on it, who's on the team, what sort of skills have they got?
Nic Frances Gilley 2:51 I think we were an extraordinary founder group, when we started, you don't normally get sort of four entrepreneurs all joining together and working together to build something. So that was pretty impressive. And we knew this space. So that worked well. I think we now have a board that actually has some extraordinary skill and capacity on it. And we have a team that we've recruited that are specialists in their own field, we've got some from energy, some new entrance to energy and some outside of energy, because they know, we know it's gonna be different. I think we've got an extraordinary young team that understands a new space and are excited about delivering it.
Chris Blyth 3:24 We all know that electricity is going away of technology. What have you got and your team around technology? Are you going to deliver on that side?
Nic Frances Gilley 3:30 Well, I think one of the things ... regarding technology, Yann Burden had his own technology business, that's his background. He left his own business to come and work with us here delivering that. I think for us is all about data, the new energy space is going to be about how you move the data associated with energy to ensure that you can trade it and benefit. In our case, trade and benefit for our householders.
Funding
Chris Blyth 3:54 Let's move our conversation towards funding I think you're trying to raise somewhere between two and $4 million. Where's the money going to come from? What are you gonna spend it on?
Nic Frances Gilley 4:03 We just launched a crowdfunding platform, we're going to keep doing this with investors. We think to grow quickly, we need to do it with investors. But we've had a million dollars committed in advertising from a media company. We've got about $500,000 on the platform today. We’ve got another month to go. I suspect that that will be made up of some wholesale some retail investment. And we will be somewhere between 2 and 4 million.
Financial outlook
Chris Blyth 04:30 Great. Let's talk about the money. What's the financial outlook? Like, where do you think we'll be in two or three years time? Maybe five years time?
Nic Frances Gilley 04:39 I think in this next year we have got to get some scale that really makes us solid in the marketplace. I don't know, if a medium sized power company in this market has got 400,000...
Chris Blyth 04:48 What? 20,000, or 50,000 or 400,000 customers what? What's your goal?
Nic Frances Gilley 04:51 Well a medium sized power company has 400,000 customers? I would love to see us in the next 3, 4, 5 years get to 400,000 customers. And if we do, we're a half a billion dollar or something sized company.
Liquidity and Exit
Chris Blyth 5:08 Great. Last question is if I'm an investor in this business. And I'm an investor, what's my horizon? When am I going to get a payback? When am I going to get some liquidity? What does that look like?
Nic Frances Gilley 5:17 We're interesting aren't we? Because we've been trading for six months, but we've got 12 and a half thousand investors. More than most ASX listed company. So IPO for us is a real opportunity earlier on probably the most companies. And i t certainly if our investors grow this business with us, we could see an exit, within a couple of years through an IPO and through growth.
Chris Blyth 5:38 Thank you, Nic. It's been a pleasure talking to you.
Nic Frances Gilley 5:40 As always. Thank you
Venture Advisory has worked with DC Power Co from an early stage, providing financial and strategic advice and is also an investor. If you’re a wholesale and sophisticated investor and are interested in investing you can lodge your interest here. If you are a retail investor you can investor directly through Birchal’s crowdsourced funding here.
Sources:
https://www.aemc.gov.au/sites/default/files/2018-12/National%20fact%20pack.pdf
Venture Insights conducts independent market surveys as part of its overall research coverage. These surveys are proprietary and cover a broad range of sectors, including telecoms, media, digital, health, energy and financial services. All surveys are conducted to achieve a national representation of Australian views on any particular.
https://www.solarquotes.com.au/blog/solar-power-payback2019/
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