MIDAS SHARING TIPS: Farmers switch to renewable energy in bid to make good profits

Good Energy shares have oscillated over the past year, hitting £3.76 last November and now trading at just £2.64. This seems unfair. The company is well managed, growing rapidly and financially sound. A long-term purchase. Farming can be a precarious business. Dairy farm income soared on average more than 60 per cent to £230,000 in the year to March 2023. Over the year to March this year, it plummeted to around £50,000.

Farmers are also expected to suffer brutal cuts to their livelihoods, with average incomes plunging to just over £30,000 for grain specialists.

Prices vary, returns are unpredictable, and costs vary wildly, especially in recent years. It’s no surprise then that farmers worry about making ends meet. An increasing number are trying to increase income by diversifying into other areas. Green energy supply is high on the list.

Some install a handful of wind turbines in their fields. Others are more ambitious and install anaerobic digesters that convert rotting crops and slurry into methane and convert the gas into electricity.

The system is very effective: it recycles waste, turns toxic gas into something useful and helps farmers make money. Good Energy Group It is one of its largest clients.

Founded 25 years ago, Good Energy pioneered the renewable energy market, generating electricity from its own wind and solar farms, sourcing similar energy from individuals and supplying super-green electricity to environmentally conscious consumers.

In 2021, founder Juliet Davenport resigned and was replaced by Nigel Pocklington, fresh from a board position at Moneysupermarket. Pocklington has since rejected a bid from rival Ecotricity, steered Good Energy through the energy crisis and repositioned the company.

The wind and solar divisions were sold, new businesses were acquired and today Good Energy has a broad mix of operations, sourcing and supplying electricity and also providing related services. The group has contracts with around 2,500 small-scale suppliers, from farmers to factories with solar panels that generate more energy than they need. Together they produce around 500 gigawatts of energy a year, a small but growing percentage of the UK’s electricity needs.

Good Energy supplies this energy to around 100,000 environmentally conscious customers, who are willing to pay a little more for completely green products. Some are wealthy homeowners, but most are companies looking to boost green credentials, such as accountants PwC, whose offices are supplied entirely by Good Energy.

This side of the business is growing steadily, but Pocklington is interested in expanding the services side, managing the bills of homes and businesses with solar panels and installing these panels, along with heat pumps and battery storage.

Last year, the solar installations market was valued at almost £2bn, as businesses and consumers reeled from rising energy prices. Prices have fallen since then, but forecasters still expect the solar panel market to exceed £4.5bn by 2030.

Good Energy is well positioned to benefit as it is well known in its field and focuses on high-quality aftercare.

Customers are very diverse, from cost-conscious families to theme parks including Chessington World of Adventures and Thorpe Park. Good Energy also has a 49 percent stake in ZapMap, which shows electric car owners where they can charge their vehicles across the country. The company, which covers 95 per cent of all charging points in the UK, dominates its market and has recently expanded into mainland Europe.

Pocklington is ambitious and expects to make profits from £5.7 million last year to more than £10 million next year and more than £15 million by 2027.

Dividends are also expected to increase, with 3.8p expected in 2024 and rising to 5p over the next three years.

Good Energy has a strong balance sheet, with more than £30m on the books, allowing Pockington to invest and make selective acquisitions.

One such deal was completed this month: Lincoln-based solar installation company Amelio Solar for up to £6 million.

MIDAS VERDICT: Good Energy shares have oscillated over the past year, hitting £3.76 last November and now trading at just £2.64. This seems unfair. The company is well managed, growing rapidly and financially sound. A long-term purchase.

Traded in: Aim Heart: GOOD Contact: goodenergy.es