Kogan Confirms its Move to Energy
Kogan.com (ASX: KGN) was founded in 2006, as a direct-to-consumer online business model, which has since expanded into markets including mobile and internet services, insurance, travel and even home loans. As of yesterday morning (June 24), Kogan announced it has entered into a multi-year agreement with Meridian Energy’s Australian subsidiary, Powershop. Together, Kogan and Powershop will provide competitive power and gas services to consumers domestically under the new brand, ‘Kogan Energy’.
Kogan’s new partner is a New Zealand owned green energy producer. Meridian’s assets include hydro-stations producing enough electricity to power around 1.4 million homes, and wind farms capable of powering upwards of an additional 150,000 homes.
Powerhouse Australia is a leader in low-cost, high-efficiency, ultra-high temperature thermal conversion in the waste-to-energy market. Focusing on creating affordable, environmentally friendly power options for consumers. Powerhouse has a positive public relations base, being the only officially recognised carbon neutral energy-provider by the Australian Government. The positive PR is expected to become a value proposition as Kogan Energy seeks market share with its’ consumer products.
Royal Bank of Canada analyst, Tim Piper, said Kogan’s decision to partner up with Powerhouse is based on their pre-existing investments in infrastructure, as they already have the capacity to distribute energy services to Kogan’s substantial 1.5 Million customers. Kogan aims to have its electricity and gas services available for the public to purchase by the end of the 2019 calendar year.
An issue regarding renewable energy in a practical consumer market is the associated costs. Powershop was rated as the greenest electricity provider in 2018, however, it was noted that the cleanliness is matched by an increased price. In response to the criticism, Powerhouse has stated that Kogan will be responsible for setting final pricing, and going off their track record it is plausible they will opt for the pricing strategy that undercuts competitors. Kogan will be responsible for sales and marketing, and Powershop will be in charge of providing operations, as well as physical retail and instalment.
Kogan is beginning to move into an all-in-one service provider. Offering sales of long-term and fast moving consumer goods, financial services, software services, and now the energy to power them all. All of this while reducing the global carbon footprint, and keeping investors positive with a ~45% increase in their share-price this year alone.
Ed McManus, chief executive of Powershop owner, Meridian Energy stated yesterday that “Together with Kogan, we believe we can make a real difference to the energy space by delivering simple, great value, energy offerings.”
After the news broke out yesterday Kogan shares initially gained at the open but were 2.1% lower at 1.00pm AEST amid struggling index.
In the overall market, there are 25 companies listed on the All Ords who solely focus on renewables and sustainability. Kogan is currently the leading online retailer in Australia in terms of size, and despite Amazon having made its way into the domestic market scene, Kogan dominates the way that Australians are retailing online. This is a good sign for investors in both Kogan and Powerhouse. As Kogan and Powerhouse move forward in their venture to push cleaner energy options, consumers and investors alike should closely monitor for market news as this new product establishes itself in the consumer energy marketplace.
By Will Banham
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