German outfit seeks to ‘redefine’ residential industry in Australia with $100m aggressive acquisition strategy

1komma5°, German for 1.5°, signalling towards the targets set in the Paris Climate Accords, this week acquired a majority stake in one of Australia’s biggest home solar and battery installation companies, Natural Solar. 

Headed up by Philipp Schröder, formerly the managing director of Sonnen and Tesla’s country director in Germany, 1komma5° is backed by people behind some of the world’s biggest hitters including Porsche, Klarna, Sonnen, eCapital and Eurazeo. Which is to say, the startup’s ambitions in Australia have serious weight.

Speaking to pv magazine Australia, Chris Williams – who has now been appointed chief executive of 1komma5°’s Asia Pacific operation – described the move on Natural Solar as a “foundational acquisition in Australia that is hopefully going to redefine the industry.”

What he means by that is 1komma5’s intention is to set up not only what it is calling a ‘one stop shop’ in Australia – a company that retails and installs everything from solar, batteries, electric vehicle chargers, heat pumps and the energy management platform to integrate them into a fully optimised system – but also how it intends to grow its reach here.

1komma5° has allocated $100 million (USD 62.6 million) to make around six acquisitions in Australia within the next 18 months – replicating an expansion strategy it has employed in Europe.

“One of the challenges, but also the benefits, of Australia is just the pure size geographically of Australia,” Williams tells pv magazine Australia. This vastness of the country, alongside its maturity in terms of solar deployment, means it is home to a huge number of small to mid-sized solar businesses – something the German outfit is looking to leverage through partnerships to “really try to get that whole of country coverage,” Williams says.

“When I say partnership, I actually mean future acquisitions.”

“That EUR 65 million or $100 million that has been allocated for future investment in Australia is for the purpose of taking majority stakes in other businesses across the country that make sense geographically, with product type, abilities and key skillsets, profitability, growth and backing by strong entrepreneurs.”

The vision is for 1komma5 to break off between 25% to 35% of the market for households investing in clean technologies, Williams says.

A feat, he adds, no company has achieved to date in Australia.

Given that, Williams describes the Australian market as being “ripe” for consolidation.

“If you take the best bit of 70 or 80 companies, you’ve got a very strong outfit,” Williams says. “Essentially you take all these elements together, and you’ve got a really powerful machine that can make a significant difference across the world.”

With this strategy, the company is hoping to leverage economies of scale to supercharge its procurement abilities, giving it greater access to products and technologies. It is also seeking better operational efficiencies through elements like centralised logistics and warehousing.

Part of what 1Komma5 brings to the table, Williams says, is “the working capital to have three or four or five or six months of product in your warehouse,” which gives it far greater control over its margins.

 1komma5 has acquired 15 companies within the past year, and is already operating in 25 locations throughout Sweden, Germany, Finland, Austria and Spain, with over 750 employees. It has a planned revenue of EUR 600 million ($930 million) for 2023.

It is looking to make another 60 acquisitions or so globally in the coming year, including those in the Asia Pacific region – though Williams noted the focus  at this stage is primarily Australia and New Zealand. Thailand and the Phillipines could, in the future, hold opportunities too, Williams says.

‘The Apple store of energy’

1komma5 is planning to soon open a showroom in Sydney to showcase its range of solar, batteries, heat pumps, EV chargers as well as the German company’s signature Heartbeat energy management platform.

Heartbeat is an internet of things energy management device which controls major electrical appliances in the home. In Europe, the platform has managed to save customers up to 120% of electricity costs, according to the company.

These savings come, of course, through managing the appliances time of use, and also through what it calls “intelligent” EV car charging and as well as through virtual power plant arrangements.

“There’s not really a one stop shop in Australia that delivers all these technologies and integrates them all together,” Williams says. This integration, he adds, represents the “home of the future” and means households can maximise energy savings with one point of contact.

This feature of having a single point of contact for sale, installation and after sales service, Williams believes, will be a major drawcard for the Australian market.

“If [households] are going to be spending a large amount of money on their homes for the long term, they want certainty that the person they are getting these products from, that’s a long term relationship.”

In terms of any trepidations Australians might feel at 1komma5’s foreign roots, Williams believes German companies – and perhaps more so German technology – has well and truly earned its stripes here. He believes having had a strong presence in Australia’s solar market since its inception, not to mention in a number of other high-end technology industries, German brands are well respected and trusted.

Whether this vision of full ‘one stop shop’ integration will extend into manufacturing, Williams could not comment. He said simply that the company has key supply relationships with certain manufacturers around the world, and the intention is to continue working with them.

As for its product suite in Australia, Williams says there are already about 15 to 20 products which integrate with 1komma5’s Heartbeat and the intention is to be “product agnostic.”

Among the stocked brands there will naturally be Tesla, Sonnen, Enphase, and a number of key panel manufacturers, though Williams notes he is keen to ensure company focuses on products which work well in the Australian market.

“What I’m saying is I don’t think you need huge volume of products to cover the whole Australian market and tick the boxes of what Australia consumers really need,” Williams continued. “It’s a case of being quite targeted and having those economies of scale to invest in certain manufacturers.”