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Summary of Operations
Genie Energy is a global energy company. It operates in three segments: Retail, International, and Renewables, which provide energy to American (concentrated in the Northeast) and Scandinavian customers through fossil fuels and renewables. The Retail segment, which mainly provides energy through natural gas and accounts for about 85% of revenues. Electricity and natural gas is typically purchases from wholesalers and sold to customers, with local utilities typically still managing distribution and billing. It does not own plants for generation or pipelines for distribution and works more like a middleman in energy.
Strategy
The company prefers to operate in states where the industries for electricity and natural gas are sufficiently deregulated and monitors other states for room to expand. Otherwise, it likes its current model because it does not require a lot of capex.
The main path to acquiring customers is convincing customers to choose them over competitors, which requires investments in sales and marketing. For its Renewables segment, it’s leveraging its existing channels and networks from Retail to lay foundation for larger solar operations.
It primarily funds operations through its own cash and prefers not to rely on debt.
Growth and the Future
Growth will come from acquiring similar businesses and penetrating new markets. The company believes 11 other states are candidates for expansion. They will also need to grow their Renewables segment as people transition from fossil fuels. Given the competitive environment in which they operate, it’s unclear what kind of advantages Genie has to enjoy tremendous growth. They make it seem like it’s battle to keep their existing customers, while also being vulnerable to major disruptions, like commodity price volatility and major weather events.
Miscellaneous Information
A majority of the voting power is held by trusts that possess Class A and Class B shares. These trusts are intended to benefit the children of Howard S. Jonas, the founder and former CEO. 2012 Series-A Preferred Shares existed and are entitled to annual dividends. Their voting power is equal to the Class B common shares.
The company has also been recently subject to lawsuits for its sales practices and erroneous financial reporting.
Valuation
Let’s assume the company do about $20 million in FCF per year.
Growth Assumptions: 5%
Intrinsic Value Per Share: $6.89
Net Cash Per Share: $3.65
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