Ultragaz buys distributed photo voltaic vitality startup

Ultragaz has just acquired a distributed solar energy startup, seeing clear synergies with its gas distribution business.

Ultrapar, the parent company of Ultragaz, had already bought 11% of the startup – called Stella – a year and a half ago through an investment by its corporate venture capitalor you.

Now, Ultragaz is buying 100% of the business, paying R$7.5 million immediately and another R$55.5 million as earnout the receipt of earnout will depend on the achievement of some operational targets by 2027.

Stella already serves 11,000 customers in a marketplace: it connects residential consumers with solar power plants.

The customer buys an energy credit from Stella, which entitles him to a reduction in the value of his electricity bill. The great benefit is the economy, which is around 15% in relation to the amount paid directly to the distributor. For example, a credit that the customer buys for R$85 from Stella will generate a reduction in the electricity bill of around R$100.

The secret behind the savings is that energy purchased from distributed solar generation is cheaper than that purchased by the distributor.

For Ultragaz, the logic of the transaction is simple: “almost every customer who buys gas is also a consumer of electricity,” Marcos Lutz, the CEO of Ultrapar, told the Brazil Journal. In addition, “this market has enormous potential and Ultragaz’s capillarity is an important competitive advantage.”

After the acquisition, the company’s idea is to start offering Stella’s energy subscription service to the 11 million customers who buy gas from Ultragaz every month. Home sales are carried out through a network of more than 6,000 partner resellers, who will also offer Stella’s product. Ultragaz also directly serves approximately 60,000 companies.

Marcos said that it is still too early to estimate Stella’s potential penetration into Ultragaz’s customer base, but that “reaching around 20% at the limit would not be absurd.”

The move also positions Ultrapar for a tectonic shift that should take place in the energy market: the free market for residential consumers.

Today, these consumers can only buy energy on the regulated market through distributors (Enel or Light, for example) or distributed generation, deducting the credit from their account (Stella’s model).

A bill currently being processed in the Chamber – PL 414/2021 – proposes to open the free energy market to all consumers, in a model already widely adopted in countries such as England.

In this model, the customer pays the distributors for the wire (the infrastructure), but is free to buy energy directly from whoever offers the best price – which should greatly increase competition.

“Regulation is going that way,” said Marcos. “People differ on when she’s going to get there, but that’s the direction.”

Ultragaz’s thesis is to be well positioned when change comes. “If we already have the customer at the base, understanding our solution and trusting the product, it is much easier for them to continue buying energy with us when the market opens.”

Stella was founded in 2019 by Leonardo Garcia and Sérgio Borges, who will continue to lead the business. Since then, the company has made only one round of investments, which has entered the Ultra Venture Capital (UVC).

Source: Brazil Journal