New business opportunity identified 

LPE’s underlying business – retail electricitysales to strata communities in Queensland – is growing at an attractive clip,adding over 21 GWh (annualised) of new contracts in the March 2018 quarter to178GWh. 

Importantly, LPE has identified -through in-depth industry consultation - an underserviced and highly fragmentedmarket for medium density communities that do not have the scale for atraditional embedded network (i.e., a parent meter). LPE estimates thatservicing direct market customers (DMC) could triple the addressable market forLPE’s in-house products. LPE anticipates a strong initial take up of theoffering with approximately 6,000 direct customers in the first 6 months.Management is currently working on funding safeguards for the increased uptakeof direct customers, and the impact on near-term cash flows. The company willannounce further information regarding the DMC opportunity in due course.

State One comments

As the quantum and timing ofpotential revenue and costs (including capex) associated with the DMC businessis uncertain, we have not, as yet, factored DMC into our LPE financial modeland earnings forecast/ share price valuation. However, we suggest that theinitiative illustrates management’s ability to identify new growth opportunities;we believe that DMC could make a material contribution to LPE achieving itsfive-year business plan of 450GWh in billing contracts by 2021.