ENERGY ONE LIMITED — M&A Activity 2016

Aug 24, 2016

25 August 2016

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ASX ANNOUNCEMENT

Energy One Completes the acquisition of the pypIT software business

Energy One Limited (ASX:EOL) has completed the acquisition of the pypIT software business from Sydac Pty Limited (as announced 30 May 2015) :

• Purchase price $1,500,000, to be funded from cash

• Software business engaged in the scheduling of gas transmission rights for major gas pipelines

• Customer list includes 5 major pipelines in Australia

• Opportunity to service gas shippers (gas retailers, end users etc.) with other product offerings

Energy One has paid $1,500,000 to purchase the customer contracts and software assets of pypIT from existing cash reserves, initially bringing approximately $572,000 annual revenues and approximately $381,000 EBITDA to the Company.

pypIT is a business providing software and services to Australia’s major gas transmission gas pipelines. All of Australia’s major energy companies utilise gas transmission pipelines to fulfil their end use or retail gas supply requirements.

The pypIT software allows customers of gas (gas shippers) to place order nominations onto the pipelines for the transmission of bulk gas, to have those nominations scheduled and to receive and settle invoices for transportation.

The pypIT software is used by major pipelines located in NSW, Victoria, SA and WA. Approximately 40% of Australia’s domestic gas flows through these pipelines.

Customers for the pypIT software include blue-chip organisations; Jemena, SEAGas, the DampierBunbury pipeline and other gas infrastructure pipeline assets in Tasmania and South Australia.

The acquisition by Energy One will provide corporate, financial and marketing resources to the pypIT business and extend market and potentially further service the needs of shippers and pipelines through access to Energy One’s extended suite of products.

For further information on the acquisition please refer to the attached presentation.

About pypIT

The software integrates with existing systems such as SCADA and SAP and manages the end-to-end business needs of gas transmission, including shipper nominations, scheduling and apportionment, invoicing and reporting. It also automates the traditional manual methods of performing these functions, which are prone to errors and are highly reliant on the skills and process knowledge of individuals. It therefore provides the standardisation and auditing ability that is lacking in manual entry systems.

Lvl 13, 77 Pacific Highway, North Sydney, NSW 2060 PO Box 6400, North Sydney, NSW, 2060

Phone : +61 2 8925-9100 Fax : +61 2 8925-9134 ASX : EOL

Energy One Limited ABN 37 076 583 018 www.energyone.com.au

About EOL

Energy One Limited is a supplier of software products and services to wholesale energy, environmental and carbon trading markets.

Listed on the Australian Stock Exchange since 2007, but with more than 10 years of market experience, Energy One has a successful track record of providing sophisticated, practical solutions to Australian and international energy market customers.

The wholesale energy market is complex, incorporating the trading of physical energy (gas and electricity) with the requirement to capture and settle contracts for hedging, trading and risk management purposes as well as a vast array of wholesale operations needs such as electricity bidding, gas nominations, pipeline logistics and environmental compliance management.

Our integrated Wholesale Energy Trading Suite makes all this possible by incorporating best-of-breed system modules to provide a single platform solution to enable generators, retailers, producers, shippers, large scale users and traders to manage their entire wholesale trading portfolio, specifically:

• Energy Trading and Risk Management (ETRM) for deal capture, risk and settlements – for electricity, gas, coal, oil and Environmental products including carbon.

• Physical Energy (Spot)Trading for all formalised markets for gas and electricity

• Wholesale market operations, gas nominations, contract and network optimisation.

• Energy Business Intelligence, data management, dashboarding and out-of-the-box reporting for managers of wholesale energy operations

• Market and network analytics for electricity and gas

Shaun Ankers Chief Executive Officer

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pypIT acquisition

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Disclaimer

This document has been prepared by Energy One Limited (EOL) and comprises written materials and slides for a presentation concerning EOL.

This presentation is for information purposes only and does not constitute or form part of any offer or invitation to acquire, sell or otherwise dispose of, purchase or subscribe for, any securities, nor does it constitute investment advice, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision.

Certain statements in this presentation are forward looking statements. You can identify these statements by the fact that they use words such as “anticipate”, “estimate”, “expect”, “project”, “intend”, “plan”, “believe”, “target”, “may”, “assume” and words of similar import.

These forward looking statements speak only as at the date of this presentation. These statements are based on current expectations and beliefs and, by their nature, are subject to a number of known and unknown risks and uncertainties that could cause the actual results, performances and achievements to differ materially from any expected future results, performance and achievements expressed or implied by any such forward looking statements.

No representation, warranty or assurance (express or implied) is given or made by EOL that the forward looking statements contained in this presentation are accurate, complete, reliable or adequate or that they will be achieved or prove to be correct. Except for any statutory liability which cannot be excluded, EOL and its respective officers, employees and advisors expressly disclaim any responsibility for the accuracy or completeness of the forward looking statements and exclude all liability whatsoever (including negligence) for any direct or indirect loss or damage which may be suffered by any person as a consequence of any information in this presentation or any error or omission therefrom.

Subject to any continuing obligation under applicable law, or any relevant listing rules of the ASX, EOL disclaims any obligation or undertaking to disseminate any updates or revisions to any forward looking statements in these materials to reflect any change in expectations in relation to any forward looking statements or any change in events, conditions or circumstances on which any statement is based. Nothing in these materials shall under any circumstances create an implication that there has been no change in the affairs of EOL since the date of this presentation.

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Contents

Acquisition overview	4
Strategic rationale	8
Financials	14
Valuation metrics	16

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Energy One successfully acquires pypIT

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The acquisition provides a strategic addition to EOL’s stable of products

The acquisition is aimed at expanding Energy One’s strategic presence in gas markets.

When combined with the Company’s existing gas products, Energy One software will be responsible for facilitating the transport of 40% of the domestic . gas in Australia’s pipeline networks*

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• Source: AER, IMO

And pypIT expands EOL’s blue chip customer base

Customer*	Asset
Jemena The Queensland Gas pipeline 627km delivers gas from Wallumbilla to Gladstone, Eastern Gas pipeline 797km delivers gas from Gippsland basin to Sydney, VicHub interconnect enables gas to flow to the Eastern Gas pipeline as well as the Victorian gas transmission network
SEA Gas Owns the Adelaide to Melbourne pipeline transporting natural gas from the Otway and Bass Basins to South Australia and Port Campbell.
Western Australia Dampier-Bunbury pipeline in Western Australia.
South Australia A major infrastructure asset in South Australia.
Tasmania A Tasmanian gas pipeline.

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• Some customer names subject to confidentiality

The pypIT software helps pipeline operators manage gas nominations

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pypIT was acquired from Sydac,
an Australian company (part of the
-
German Knorr Bremse Group).
Sydac is a world leader in driver
training (trains, trucks, buses etc.)
simulators with clients across the
globe. The Australian pypIT
-
business was non core to their
global operations.
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Combining pypIT with our existing products will create a seamless process for scheduling the transportation of gas

EOL’s current software products manage, for large gas customers (known as ‘shippers’), the contractual and nomination processes for the movement and delivery of gas to a specific point on a given pipeline.

The pypIT software receives, on behalf of pipeline operators, these gas nominations processing them in order to schedule the gas for delivery. The platform also issues invoices and manages settlements for these transactions.

The combination of Energy Flow and pypIT can provide a value-add for large industrial gas shippers* by providing a seamless way to manage their entire gas transportation needs and managing their nomination process and, at the same time, providing the operators of the gas pipelines a more efficient and seamless way of receiving and managing the nominations and scheduling process.

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*Shippers include retailers and users of gas. Energy One considers them as potential customers for EnergyFlow and other products in our range.

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…and also provides a new
potential customer base of large
industrial gas users & shippers
Any large gas user is now a
potential customer for EOL:
•
Steel mills
•
Gas fired power stations
•
Aluminum smelters
•
Timber mills
•
Food processing
•
Cement production
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Australia’s gas pipeline network is extensive and complex

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Image: Gas Today Magazine http://gastoday.com.au/shop/australian_gas_and_pipelines_map/91033

And moving gas from one place to another is complicated..

As this snapshot of just the Wallumbilla Gas hub shows, shippers are required to navigate an array of contractual and physical network factors in order to acquire and costeffectively transport their gas.

Each transaction requires optimization of these factors, nomination to market/counterparty and settlement processes.

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EOL’s gas transportation software can facilitate both sides of the transaction to provide a more seamless interface for users

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Storage providers Gas producers Interconnecting pipelines
pypIT
Gas traders
Energy flow
Transmission and distribution systems
pypIT
Large Customers Retailers
Energy flow
Retail Customers
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EOL’s software will be responsible
for facilitating the transport of ~40%
of the domestic gas in Australia
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The acquisition is earnings accretive

	pypIT (base case) $000	EOL 2016 $000	Combined* $000	Increase
Revenue	$572	$5,059	$5,631	+11.3%
EBITDA	$381	$1,176	$1,557	+32.4%
NPBT	$381	$923	$1,304	+41.3%
NPAT	$267	$464	$731	+57.5%
EPS (cents)	1.44	2.51	3.95	+57.4%

• Pro-forma before one off acquisition and integration costs and accounting treatments

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And has been funded using cash…

Acquisition price of $1,500,000 will be funded using cash Cash and cash equivalents at 30 June 2016 was $2,227,869 Trade and other receivables at 30 June 2016 was $2,055,823 Energy One remains debt free following the acquisition

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…which has created substantial shareholder value

	pypIT (base case)	EOL (2016)	Combined(1)	Increase
NPAT	$267,000	$464,000	$731,000	+58%
PE ratio	X5.6	X13.0(2)	X13.0
Value	$1,500,000	$6,112,000	$9,649,000(3)	+58%
Implied share price (cents)		33	52	+58%

• 1) Pro-forma before one-off acquisition and integration costs and accounting treatments

• 2) The PE ratio for EOL (13x) is derived from current (24/8/16) metrics.

• 3) The combined value is then extrapolated by applying the same implied PE (13x) ratio

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Price / Earnings: EOL shares trading at a discount to peers…

70� Price / earnings ratio of ASX technology stocks 60� 50� 40� 30� 20� 10� 0� MSP� EOL� RKN� SMP� PRO� GTK� Average� HSN� BPF�

Data as of 23 August 2016

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EV/EBITDA: EOL shares trading at a discount to peers

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35�
EV/EBITDA ratio of ASX technology stocks
30�
25�
20�
15�
10�
5�
0�
SMP� EOL� RKN� BPF� Average� GTK� PRO� MSP� HSN�
Data as of 23 August 2016
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…and similarly on a number of other metrics

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Price to book ratio of
ASX technology stocks
8�
7�
6�
5�
4�
3�
2�
1�
0�
EOL� MSP� RUL� SMP� GTK� Average� BPF� RKN� HSN� PRO�
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EBITDA multiple of
ASX technology stocks
25�
20�
15�
10�
5�
0�
EOL� RKN� SMP� BPF� Average� GTK� PRO� MSP�
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Data as of 23 August 2016

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Summary: EOL compared to ASX technology stocks

Metric	EOL	Average*
PE ratio	x13.2	x28.0
EV/EBITDA ratio	x2.8	x16.8
Price to book ratio	x1.0	x4.0
EBITDA multiple	x4.6	x17.1

• Average for selected stocks on previous slides. Data as of 23 August 2016

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Energy One is
a profitable
technology
stock with a
dominant
market share
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Company summary

Company metric
Share price (24/8/16)	33 cents
Share price 52 week	45 cents
high
Share price 52 week low	30 cents
Shares on Issue	18,519,876
Market cap	$6.1 million
Cash on hand (30/6/16)	$2.2 million
Debt	Nil

Substantial shareholders
Mr Ian Ferrier	36.5%
Mr Vaughan Busby	20.3%
Mr Ottmar Weiss	5.4%
Mrs Emma Jane Gracey	5.2%
Top 10 shareholders	78.8%
Management & directors	66.3%

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EOL’s blue chip customers include:

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We continue to analyse potential acquisition opportunities both domestically and offshore

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Mr Shaun Ankers - CEO and Managing Director Email: enquiries@energyone.com.au Level 13, 77 Pacific Highway North Sydney NSW 2060

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