Lodestone Energy's IPO, explained

Shared Lunch

This episode features an interview with Gary Holden, Managing Director of Lodestone Energy, regarding the company's upcoming $75-$100 millio

Key takeaways

• Lodestone Energy is seeking $7/75M to $100M through an IPO to fund the next phase of solar farm construction.
• The company utilizes a 'bite-sized' model of 25-35 megawatt plants to minimize interconnection costs and consenting hurdles.

Main topics

• Lodestone Energy IPO
• Solar energy business models

Notable quotes

All we're doing is finding the cheapest way to locate electricity in as many locations as we can.

Conclusion

The episode provides a clear look at how decentralized, small-scale so

Transcript preview

Speaker 1 (0:00) To help our investors learn more about Lodestone Energy and its upcoming initial public offering, we're about to sit down with Gary Holden, Managing Director and Founder of the company, to get an idea of what the company does, how it makes its money, and why now is the right time to be listing. Speaker 1 (0:21) Before you consider investing in any IPO, we recommend that you read the product disclosure statement in full. This episode does not replace that, nor is it intended to. This episode discusses Lodestone's initial public offering and has been prepared for general informational purposes only. It does not constitute financial advice and is not an endorsement or recommendation to investors to participate in the IPO. Sharesies is receiving payment in the role as co-manager for the IPO. Speaker 2 (0:49) Investing involves risk. You might lose the money you start with. We recommend talking to a licensed financial advisor. We also recommend reading product disclosure documents before deciding to invest. Everything you're about to see and hear is current at the time of recording. Speaker 1 (1:03) Welcome, Gary. Speaker 2 (1:04) Glad to be here. Thank you. The Speaker 1 (1:07) more I learn about New Zealand's electricity market, the more I learn just how complex it is. If you were describing what Lodestone does to someone who knew nothing about the sector, how would you describe it? Speaker 3 (1:20) Well, I think at a high level, really all we're doing is finding the cheapest way to locate electricity in as many locations as we can. And by locating generation across the landscape, we can sell directly to customers in the variety of locations that they are. And so we fixed ourselves on solar because it really is the lowest cost energy now. And we're using that low cost to find customers wherever we can and scattering it across the whole landscape. Speaker 1 (1:52) And one of the terms that comes up frequently in your product disclosure statement that's out now is this vertically integrated term. Can you describe what that actually means in practice? Speaker 3 (2:02) Yeah, effectively vertically integrated is a fancy word for saying we make our product and we sell it directly to customers. And the electricity market is made up of four big... gen tailors they're called, that's also a fancy word for they make their product and sell it to customers. And so we'll just sit alongside the big gen tailors and make electricity and hopefully sell it for a cheaper price than they can and get market share by doing so. Speaker 1 (2:33) So in summary though, you are playing at sort of multiple parts of that value chain. So it's building the asset and generating the electricity and it is selling to the consumers as well. Speaker 3 (2:43) Yeah, I mean, it's kind of the most simple model you can imagine. We're working very hard to get the cost of solar as low as we possibly can. And by doing so, we then can offer the best deal to customers and build our business by being low cost and making it accessible. And Speaker 1 (3:03) what are some of the ways that you make that low cost? What are some of the levers that you pull that perhaps those four big gen tailors that you mentioned can't do? Speaker 3 (3:12) Well, we've specialized on a particular size of plant, and we worked out a number of years ago that the electricity grid is broken up into nice bite-sized pieces of about 25 to 35 megawatts of power. And there's, you know... a small town would use something like that amount to supply themselves and so we we specialize on this size and then we worked hard to be able to do them quickly so we can build two or three of these farms a year and if we can build two or three of these a year and locate it at these locations where the size is well matched then we can get good at it you know, become kind of the specialists at that size. And then the interconnection costs are also as low as possible. Speaker 1 (4:02) That sort of localized offering is quite interesting. If there's sort of any word of the year, I think it's resilience. And that's something that we're constantly hearing about. Does that make potentially those local communities more resilient of sort of building these localized infrastructures at that community point? Speaker 3 (4:20) Yeah, I mean, the electricity grid is broken up in a way where a generator that makes its power in a distributed sense will be able to lower the price of electricity wherever it goes. And so the market rewards people to locate near where consumption is. And so the first thing we do is try to bring the power price down in a given area. And then the second thing we do is... is try and think of how do we create resilience in that local area by potentially adding battery capacity, effectively turning the town into an equivalent of putting solar panels on the roof of your house. And that's our plan. It's a big plan. Each one of those is sort of a $50 million type investment. But we are dealing with trying to offset a town and make it kind of in the daytime, at least, off grid. Speaker 1 (5:15) It's really matching that. demand and supply at that more local level, isn't it? It sort of reminds me back to Economics 101, university days, but it really is sort of that simple. Speaker 3 (5:25) Exactly right. All the electricity generation in aggregate, every half an hour, matches demand in the whole country. And then our role is just to try and do that at a very small, isolated area at a time, one at a time. Speaker 1 (5:42) When I'm at home and I'm turning the light on, that's quite a simple task, but clearly there are a lot of different participants at play there in terms of you've got the generators who you've spoken about, some of them. You've also got the grid operators. You've got the electricity retailers. Can you talk a bit about those different participants and where you might see competition and where you might see more of a partner? Speaker 3 (6:05) Yeah, I mean, the electricity grid in aggregate is always working to give everyone firm power all the time. And so we feed in our solar power when the sun shines and other participants are feeding in