Out of the dugout and onto the pitch

Sep 30, 2020

Enda Gunnell FCA had a successful career in corporate advisory but the entrepreneurial impulse was always there. When the opportunity to start his own company presented itself, he couldn’t turn it down, writes Barry McCall.

There aren’t many successful companies based on a business model of selling less product to its customers, but that pretty much sums up the Pinergy strategy. Established in 2013 to provide electricity on a pay-as-you-go basis to budget-conscious households, Pinergy has evolved to become a purpose-driven business with a mission to help customers reduce their electricity consumption by providing them with ‘energy with insights’.

Founder and CEO Enda Gunnell began his career as a Chartered Accountant with Mazars but entrepreneurship was probably always in his DNA. “My family had a shop and filling station on the outskirts of Roscrea,” he explains. “I was raised in a business environment and we all had to put our shoulders to the wheel to help out.”

The varied and challenging life of a Chartered Accountant

But his pathway to accountancy was certainly not mapped out from an early age. “I was surprised when I was accepted for a place in UCD Commerce,” he says with a degree of self-deprecation. “I was the first member of my family to go to college. I got in because my matric maths mark got me a few extra points. When I went to UCD, I did work experience with a local accountant in Roscrea during the summers and other breaks. I gravitated towards the Chartered Accountancy route.”

He says he got a bit fed up with the ‘milk round’ recruitment interviews but was still offered a training contract with Rawlinson Hunter which went on to become Mazars. “I stayed with them for 23 years and ended up working with the then-Managing Partner Joe Carr in the consulting team doing corporate advisory work. That was always my type of work; I enjoyed it more than audit. I really liked working with SME owner/managers. You get a chance to form a relationship with them. They might have 50 employees but no one to talk to.”

He also worked on some major projects during the years, including a strategic review of the GAA and a review of Irish banks’ loan books for Blackrock which was working on behalf of the Troika at the time.

Interesting though these projects were, they couldn’t really compare to an assignment in Lithuania on behalf of the World Bank. “It was just after the country had gained independence from the former Soviet Union. One night, I was approached in the office lobby in Vilnius by an armed man who asked me to value some uranium for him. His English wasn’t very good, and my Lithuanian was even worse, but I managed to say thanks but no thanks. When I think about that, I always remember something that Joe Carr said about the varied and challenging life of a Chartered Accountant.”

The start of Pinergy

He believes the entrepreneurial impulse was always there to one extent or another. “When I was working with owner/managers, helping them take their businesses to the next level, it was always in the back of my mind that I would like to do it myself. I was open to the opportunity for a long time, I just didn’t know what it was. I knew I wanted to get out of the dugout and onto the pitch and try it.”

As often happens, the stars aligned to create the opportunity. “A set of circumstances came together,” says Gunnell. “The funding was available, the market conditions were right, and the idea was there. I figured someone would give me a job if it didn’t work out. I had come across the pay-as-you-go electricity space a few years previously and then met someone in the electricity market and another person interested in funding a start-up in the space. I put the three together.

Everyone needs electricity; the country was on its knees. The regulator was telling electricity retailers that there must be a better way to provide the service. Pay-as-you-go already had 15% of the UK market but had almost no share here.

“The technology was there in a box ready to roll out and we had the other elements in place. We weren’t reinventing the wheel. The technology and the model were already being used around the world. It was of its time, and we were introducing it in a recessionary market. It took a little while to get going. We had to do a lot of work before we could sell a single kilowatt. We had to integrate the technology with the existing market and systems. It’s a regulated industry so you can’t just do it your way.”

The next stage was to go out and sell. “We got a sales team together. As an accountant, I liked the idea of variable costs. We had the sales team knocking on doors and we paid them if they made a sale. We didn’t have fixed overheads. We were rewarding success. Back then, we sold everything through the Payzone platform. I remember driving around Dublin going into shops buying Pinergy credit to make sure the platform worked. Our original plan didn’t have TV ads or brand ambassadors, but we had to do that in the end. We had to learn how to build a brand and I found myself on sets watching TV commercials being made. Today, Pinergy supplies businesses and homes with clean energy as well as insights to give clarity and knowledge to help them change how they use energy.”

Creating a sustainable future

Pinergy is now a purpose-driven brand. “I believe everyone has a role to play in creating our sustainable energy future,” says Gunnell. “The energy market in Ireland hasn’t really changed in years. The market has not been responding nearly enough. We realised five years ago that the whole industry was fixated on price. It was a bit conflicted in how it approached sustainability. The traditional business model in the retail space is getting paid for kilowatts used and wasted. There is no incentive to encourage customers to be more sustainable and reduce their consumption.”

Pinergy was the first company in Ireland to use smart meters. “We showed that by using smart technology, consumers could reduce their electricity usage. We began to view the smart meter as an energy-saving device. Then we started looking at LED lights. They use 80% less electricity than incandescent bulbs, but they were very expensive back then. We knocked on people’s doors and offered to sell them at the wholesale price and use the smart meter to recoup the cost over the next two or three years.”

While innovative offers like that won the company customers and admirers, it was all too easy for those customers to switch to another provider with a discount offer. “The regulator’s main mandate is to look after consumers. That makes it very easy to switch.”

That saw the company evolve its strategy to look beyond domestic consumers. Initially, the focus was on apartment blocks to get the contracts to supply the common areas as well as gain access to residents. After that came the move into the commercial market. 

“We were in the electricity sales business, but we wanted to sell less electricity to individual customers. The way we see it, if we can partner with a new customer to save 30% or 40% of their electricity consumption that still means we are selling more electricity overall. When we moved into the commercial market, we realised SMEs could be paying 20% more for their electricity than a householder across the road. We took our smart meter technology and pricing model and sought to apply the same principles to the commercial market.”

The energy with insight model gives customers the ability to analyse and understand how and where they use electricity in their business. “For example, a retailer with five branches gets the data from the smart meters on a single portal and they can compare and analyse the usage patterns in the different locations and get insights to help them reduce energy consumption. One of our customers owns a warehouse which closes at 6pm every day, but was still using half as much electricity in the evenings as it was in the daytime. They found that equipment was being left on and were able to make immediate savings.”

Immediacy is the key. “Rather than wait for a bill two months after the event, we put real-time data in customers’ hands and give them the ability to take control of their consumption. After that, we can talk about other technologies like LED lighting, microgeneration and heat pumps and so on. Instead of selling a commodity, we want to create an advisory relationship-led business. It’s the same principle as when I was in practice, helping customers to meet their business objectives.”

But competitive advantage is fleeting. “All of our electricity comes from renewable sources. This is now taken for granted by our customers,” says Gunnell. “That’s a lesson in business, the market keeps changing and customer expectations change, and you’ve got to keep taking it a step further or others catch up.”

The impact of COVID-19

The business is now strongly profitable. “We started with a single product in 2013 in an intensely competitive business. The ability to generate a return in the electricity space is all about gaining critical mass. We have installed around 60,000 smart meters around the country but have about 30,000 domestic customers now. The cost of customer acquisition is very high. 2018 was a turning point for us. Our financial performance in 2018 was a negative EBITDA of €3.3 million. Then we transitioned into the commercial space and in 2019 that changed to a positive EBITDA of almost €300,000. For this year, we were projecting €3 million before COVID-19.”

While COVID-19 will have had an impact, the business will emerge from the year in a very good position. “We don’t want to supply everybody. Our only interest is in those who want to be more sustainable and efficient, and we will have a significant share in particular sectors.”

The COVID-19 impact could have been quite severe though. “The government had said the lights would stay on,” Gunnell points out. “That meant electricity suppliers couldn’t cut people off. We were worried that people would be slow to pay their bills or wouldn’t pay them at all. The way the wholesale market is regulated, we would have had to pay for electricity even if it wasn’t used. Fortunately, that situation was addressed. Working capital was a concern for us but we had been approved for a loan under the government Credit Guarantee Scheme early in the crisis so that helped. Other government and Revenue schemes helped our working capital.”

Despite the challenges, there have been positive aspects. “It’s been a really intensive period. We had to respond with quick decision-making and really good staff communications. I enjoyed it, to be honest. COVID-19 has changed how business will be done forever. We told people to continue to work from home if they wanted to after we reopened in June. Even when we do go back fully, 80% of our staff have said they would like to work from home one or two days a week and some of them would like to work from home all the time. We have to look at how we care for the welfare of our people. That will be much more challenging when we don’t have daily contact and those water cooler conversations.”

For the immediate future, the company is introducing a number of new innovations for customers. These include Lifestyle, a billing offer for families which guarantees discounted energy prices at the times they use most.

Another is a smart charging product for electric vehicles which will allow the vehicle to communicate with the grid and select the cheapest time to charge. “Ultimately, there will even be times when there is excess power on the grid when users will be paid to use electricity,” Gunnell adds.

“Instead of ‘there’s a bill two months later and pay it or we’ll cut you off’, we want to change the nature of how consumers are treated and continue the journey towards a sustainable, carbon-free electricity future.”