AGL Energy Limited (AGL) Earnings Call Transcript & Summary

All right. So, good afternoon, everyone, and thank you for joining us. I think we've got everyone on the call now. For those who don't know me, my name is Damien Nicks, MD and CEO of AGL. Joining me today from the U.K. is Kaluza and OVO Group Founder, Stephen Fitzpatrick; and Kaluza Chief Executive, Mel Gander. Alongside me here in Melbourne, I've got Jo Egan, my Chief Customer Officer; Gary Brown, my CFO; Andrew Haddad, my CIO; and James from IR. So firstly, a big welcome to everyone, and thank you again. Let me start by acknowledging the traditional owners of the land on which we have met today, the [indiscernible] people of the [indiscernible] Nation and pay my respects to their elders past and present. In terms of the format of the meeting today, we'll first hear from the Kaluza team, Stephen and Mel, who'll provide an overview of both the technology and the plans for future growth. And at the end of the presentation, we'll move to Q&A, and James will direct the questions. So let me first start by saying how excited we are about deepening our partnership with Kaluza as part of the retail transformation program. It is going to be absolutely critical for us as we focus on enhancing both the customer and the Asian experience, reducing our operating costs, improving speed to market, but also extending net profit -- I'm sorry, product that offers into the market is absolutely key for us as we think about delivering on our vision of connecting our customers to a sustainable future through both electrification, but with technology at the core of what we do. The investment we announced back in June extends our partnership with OVO Energy Australia, which we've held since June 2001 and since that time, we've grown our customer numbers from 5,000 customers to now over 100,000 customers. And moving forward, we plan to deploy Kaluza into our customer base for the next 3 years, transferring over 4 million gas and electricity services onto the platform. There were talks back in June about the estimated implementation costs at about [ $1400 ] million over the 4 financial years, and that started back in FY '24, and we expect the net benefits from this project to kick in from FY '28 with total cash savings of approximately [ $79 million ] annually from FY '29. We have been incredibly impressed with Kaluza through our OVO Australia JV and the performance of both the product and the customer feedback to date has been exceptional. So on that note, I'll now hand over to both Stephen and Melissa to provide a little detail on Kaluza. Over to you, guys.

Thank you, Damien, and hello, everybody, in Australia. It is a beautiful, almost sunny, morning here in London, 8 a.m., and I'm really delighted to be here with you today. I'm going to hand over to Mel in just a few minutes, I hope, and she's going to talk you through some of the key features and the technical detail of the Kaluza platform. But I just wanted to give you a quick overview from my perspective. As a finder of both the OVO energy business and at Kaluza, what brought us here? The inspiration and the philosophy behind the Kaluza platform and where we are taking it in the U.K. I think it's probably worth me just introducing Mel for a moment, as I'm sure it should be too modest to give herself a proper introduction later on. But Mel joined me in the OVO team more -- just a few days more than 15 years ago and was actually the second person that I hired onto the OVO team. Over that time, she has helped us build one of the U.K.'s leading and favorite energy companies. She's hold -- she's held almost every role in the business and has a deep knowledge of the energy retail space, running our customer services center, our smart metering division and rising to the role of COO over the time she spent at OVO. And just a few years ago, stepped into a leadership role at Kaluza and may be really proud earlier this year when we announced her to be the new CEO at Kaluza. So Mel knows almost everything there is to know about energy, energy retail and now energy technology, and she's a real expert and thought leader in this space. So I'm delighted to be handing over her in a few minutes. But for me, I'm going to talk a little bit about how we got here, the success that we have had at OVO. The first big implementation that we did, which was to replatform our acquisition in SSE and then to talk a little bit about the future opportunities and where we think the market is going and why Kaluza is so well set up to support energy transformation in the U.K. and Europe, but especially in Australia. So if we move on a little bit, I'll just talk you through just for a few minutes, the backdrop in the history. So as I just mentioned, I started OVO Energy in 2009. It was an idea that I had in my mind for quite a long time, thinking that the energy industry all over the world, was undergoing this enormous change, both in terms of the generation of energy, which is disrupting the traditional vertically integrated model, but also the digitization of the customer interface with energy. The rise and proliferation of new devices, the digitization of the customer experience meant that customers had a vastly different expectation of their service provider by 2009, 2010 than they had just 10 years ago. And so it seems to me like most industries that success would come to those companies that really put customer experience and understanding the needs of the retail customers at the core of their business and that new entrants would have this real advantage over incumbents, primarily because they would be able to take advantage of the new technology and new tools. So that was in 2009. we had a successful start, albeit there were lots of unforeseen challenges along the way as with every good start-up story. But by 2012-2013, we were really already motoring pretty well. We have signed about 0.25 million customers, which was, I think, the largest independent of that -- in 2009, the U.K. market had 6 very large vertically integrated ex government monopolies running the energy sector with only, I think, 1% of customers in the U.K. with an independent supplier, so 99% market concentration from the original 6 large energy companies. And when we launched in '09, we had an ambition to get to 1 million customers by 2020. And we were well on the way by 2013, one of the things that really stands out in that year wasn't just the continued trajectory of growth, but also the fact that we started to find real excellence in our customer operations. There is -- it's a very complicated industry. There's a lot to learn, particularly with rapid growth, a lot of things that can go wrong. But by 2013, we were really already on the path to excellence. We recognize the importance of smart metering and the digitization of the energy system very early on. Mel actually led our smart metering efforts, and we started installing our own finance smart meters for customers in 2014. And this was a big theme over the next 5, 6 years as we led the U.K. market in the rollout of smart meters. It had a really transformational impact on our customers, on our business, and in particular, on the need we had on our data and technology platforms. The increase in data that we saw through smart metering was a staggering increase in data. In the U.K., we take a read every 30 minutes. That's, I think, 17,522, I think, if I remember correctly, half early periods in a year. So it's a 17,000 times increase in the number of data that we would get from customers over and above the 1 read a year that we would normally take. And we'll come back to that in just a second. So we hit our first million customers in 2017, and I think this is when we really started to look to the future. We were 3 years ahead of our 10-year goal. Everything was running reasonably well according to plan. We've focused on happy customers and happy employees and scale, and it was a formula that was reasonably simple and really worked. And at this stage, we started to think about where the next big growth opportunities would come and what the future challenges would be. The platform that we had, the new technology stack that give us our advantage of our incumbents that we were so proud of in 2009, was already starting to creek. And we had scoured the world for new and contemporary energy operating systems. And in particular, -- we were very focused on finding an operating system that would give us a backbone of real-time data that would allow us to interact with our customers in a way that they expected, giving them the same service by their mobile, by web and indeed when they would call us into our contact center. And after approved the search of about 12 or 18 months and 1 almost attempted migration onto a new platform, we decided that there simply wasn't any software vendor anywhere in the world that shared our vision for what we thought the energy system would become. And so we started setting our sites on developing Kaluza and building our own in-house energy operating system. The big ambition for that, as I mentioned just now, was the ability to deliver real-time information to customers. One of the things that we had seen as a shortcoming in almost all energy operating systems that we looked at and in fact, all energy operating systems that we looked at was that each 1 of them still relied on a very high latency and low resolution data architecture and very well set up for batch processing -- efficient batch process in a very large amounts of data. But what it didn't allow to do was to have that real-time connection with customers and consumers and to show them what was happening in their home in real time. And that became really important as we started to look towards the increasing complexity of our relationship with our customers who were starting to install solar panels. We started to see a big uptake of electric vehicles for the first time in 2017-2018 in the U.K. Even back then, we were looking at domestic and behind-the-meter storage assets as well. So the real-time connectivity with those devices and being able to present that information to consumers was a really big important requirement for us to help build transparency and trust with those customers. So we didn't find a platform that we liked. We didn't see anything that had that real-time data architecture at its core. And so we set about building our own energy operating system and small steps at first, but by 2019, we'd find the confidence to start the platform that we now call Kaluza and we really started to invest in that and go all in on our own platform. I've skipped over 1 important milestone, and that was in 2018, we received an investment from the Mitsubishi Corporation, and they had seen our vision and what we were building with Kaluza. They were also very much in the mindset that with a shift to distributed assets, in particular, storage assets and behind-the-meter generation assets that a focus on the demand side of the energy equation and electricity system was where the value would flow. So in the past, we had a lot of investment in energy generation with the retail business primarily being not an afterthought, but it was the ugly sibling in the vertically integrated energy company family. When you look at what happens with renewable generation, intimate generation and then intelligent control of assets behind the meter and the customers' homes, then you really need to invest in the customer experience and also the systems that you use them to manage the customer relationship and those assets. So Mitsubishi were very much in agreement with us on the direction of travel there and they invested in the overall group to get exposure to Kaluza and then also to learn some of the lessons that we have picked up in the OVO retail business. In 2019, Kaluza launched, in the U.K., our first big project and customer proposition that we launched was a partnership with Nissan for their second-generation Nissan LEAF where we launched the world's largest vehicle-to-grid charging program. Vehicle to grid with Nissan's mark to LEAF allowed us to offer 500 electric vehicle owners the opportunity to use their EV to take advantage of the price swings that we saw between the peak and off-peak prices in electricity. And in the U.K., at this time, we were starting to see increasing intraday volatility, nothing quite like on the scale that we are observing as we launched into Australia, but still enough to offer incredible savings to those customers. And some of the higher-using customers that we had our top performers were able to achieve more than 400 pounds a month in savings, so more than offsetting not just the cost of charging their electric vehicle, but actually, they were able to use that arbitrage opportunity enough to offset the cost of the energy to the entire home. So an incredible technology. We built our own hardware. And through Kaluza, we built an AI-powered and algorithmic control of those assets, and we were able to shift over the course of the trial more than 2.2 gigawatt hours of demand using just 500 vehicles. So it's a very active, very successful trial. In 2020, we went through an unusual process of a reverse acquisition of one of those very large incumbents, SSE Energy Services was one of the big 6 in the U.K., and we were able to take over that company. We had the confidence in our Kaluza platform, but we did understand the size of the challenge in migrating a large incumbent customer base. But we set about doing that in 2020. We had -- you'll notice the dates here that we actually have closed the acquisition just, I think, 6 weeks before the first lockdown in the U.K. from COVID, and that definitely forced us to reevaluate and change our plans. But after about 12 months of getting to grips with the changes in the whole business world through the COVID pandemic, we went back to the plan of starting the migration. And in just 18 months, we were able to complete the migration of all of the SSE customers onto the Kaluza platform. It was a huge success. We went through a company rebrand. We went through one that's in 100 years energy crisis in Europe with retail prices increasing for some people by 400%. And at the same time, we managed to make this transition on to Kaluza. The migration then complete, we started to go by building new features and new functionality. And I'm going to talk to you a little bit about that today, just 2 of the opportunities that we've seen, and we've been rolling on. Just to give you a highlight of that transformation that we undertook with Kaluza and SSE. Some of the headlines of the migration that we achieved in the U.K. So as I mentioned, it was about 18 months to complete the migration. We did that at a time of extreme volatility in the energy market. There was an enormous amount of regulatory scrutiny in the energy sector in the U.K. It was the #1 headline subject in the U.K. press for more than a year. And we managed to complete this replatforming and rebranding in a relatively short time and very smoothly. And through that time, I'm delighted to say not only did we maintain high levels of operational integrity, we saw this big jump in customer satisfaction from the SSE business, which has been a relatively underinvested retail business, 34 points of Net Promoter Score improvement. Obviously, there's this reduction in the technology spend versus our legacy estate, GBP 125 million, it's a big number. But probably the thing that I'm most proud of that we underwent this huge technology replatforming at a time of quite a lot of uncertainty in the energy sector and coming out of COVID and trying to bring our employees back to the office. But in 2023, not only did we maintain a very high level of employee satisfaction, we actually scored our ever -- highest ever employee satisfaction score. We are listed in the U.K. is 1 of the top 10 places to work and the #1 place to work in the U.K. overall for women. And so we managed to make this transition work, not just for our customers but for employees. And I think that's something that we learned a lot of lessons about how to take our team with us. And as Damien and the team at AGL really know and have invested a lot in, you cannot have a happy relationship with your customers if you don't have a happy team in the office. So something that's very, very important to us and to AGL. With this last point I just want to talk about, we launched a new proposition not long ago called Power Move. It's to help reward customers that shift their demand to different times of the day when energy is cheaper. It's not just a simple peak to off-peak shift. We're being very precise and it's quite a high resolution prompt for customers. We were able to spin this up from conception to trial launch in just over 2 weeks, it was a really fast innovation. It was something that is powered again by the core architecture of Kaluza, something Mel's going to talk a lot about. We know that there are lots of options for energy retailers all over the world to choose an increasingly large number of platforms to run their energy operating system. We really believe that the architecture that we have designed at Kaluza that was built on 10 years of experience leading as a customer-centric energy retail business, a digital-first energy retail business in the U.K. has helped us to build a platform in Kaluza that allows for the kind of innovation that we've seen in the U.K., and we've demonstrated in the U.K. all over the world. If you move 1 slide, I'll talk very briefly about these 2 propositions. First, energy beyond on the right. We set up a new proposition just last year in OVO and the concept was to build a central platform to offer all of our customer awards to simplify our customer offering for our premium customers and to help give us many tools to engage customers as we look to a future where energy consumers have a much deeper and richer relationship with their energy retailer. We have been able to offer products like energy efficiency, expert home visits, installation of solar panels and installations, of course, the integration of EV charging, smart key products like thermostat and domestic heat control. But it's also given us a really rich platform to provide rewards and incentives for customers to engage with us and -- to help them save money and time. We've built that product on Kaluza, I think, over a 3-month period. And at the moment, we have got more than 0.5 million of our customers registered in just, I think, 6 months since our opening launch. So it's a massive ramp-up. I think for eligible customers, we're already at 25% and the numbers keep going up. Customer satisfaction is higher. Customer retention is higher. Our cost to serve these customers is much lower, and NPS overall is up, I think, by 6 to 7 points for these customers. So it's been an enormously successful tool and has given us a platform again for further rapid innovation. Another innovation, and I'm really excited by, is our AI-powered customer service platform, AVA or Advanced Virtual Assistant. And again, this is an innovation that we started about a year ago, recognizing some of the enormous opportunities behind generative AI. Obviously, we've had to be very careful in how we have deployed and developed this technology to make sure, a, it's for the customer's benefit; b, it's in a secure and resilient environment; and c, it's something that customers accept and feel comfortable with. But this is an enormous innovation that we're seeing to deliver even greater cost savings and operational savings than we were expecting just a year ago. One very simple tool that's an agent assist, this is not a customer-facing aspect of AVA, but it supports our agents. So it gives them tools to better serve customers. It saves us 1 minute per call per transaction with each customer, and that represents an 11% saving on our customer service time spent. It's translating into a very direct financial savings, but it also improves the agent experience and most importantly, improves the customer experience. We're up to about 35% of all inbound e-mails that can be answered with an automated response. And of course, we monitor very carefully, but the satisfaction, the customer satisfaction with that response is higher than it would be with a human-generated e-mail. So enormous opportunities on our virtual assistant platform. And this one, I think, is really important point. This isn't something that we anticipated when we developed the Kaluza platform, it wasn't something that was on our tech road map even 2 years ago. But the architecture, the data architecture and the customer service architecture that we built around the Kaluza platform has meant that this type of innovation is possible. And I think this is probably the biggest lesson that we learned when we were building the platform and through our years running OVO Energy as a digital-first energy retail business, that you simply cannot anticipate all the changes that are going to happen in the future, but we can build an architecture that will support that flexibility and innovation that you need to stay ahead of it. I think it's fair to say that through AI, the ever-falling price of electric vehicles, battery storage and solar panels, the ever-falling cost of data processing and storage, we have seen the rate of change of technology that companies have to keep up with. It's just accelerating all the time. And for us, we see these really exciting opportunities in the U.K., now in Australia and globally, the most exciting opportunities we see are not at the edge of any 1 technology, they almost always happen at the intersections of multiple technologies, meaning that you have to have a flexible open architecture, easy to integrate with other services in order to take advantage of that. I told you I was going to speak very briefly, and I've already overrun a little bit that Mel will be used to. I can see she's getting ready to step in now at any moment. So I think it's probably time for me to say thank you very much. I'll be here for questions, but I'm going to hand over to Mel and let her talk you through exactly what we've built in Kaluza and how it works. Thanks very much, Mel. Over to you.

Thanks, Steve. A great overview of the journey that OVO has been on, and it's a journey that many energy businesses that are going to need to go on over the next few years to be able to succeed in the new energy landscape. And while many legacy solution providers have been wrestling with adapting their outdated technology to be fit to the future, Kaluza has reimagined energy technology and created a platform ready for the future. By starting from scratch through designed a solution that is ready to deliver the outcomes needed today and tomorrow. So on to some of those outcomes. So Kaluza platform drives broader benefits in 3 key ways: first of all, by automating retail operations. So this is our key core billing or [ CAS ] solution designed to lower cost to serve through automating and streamlining key processes. Our sales and service layer enables the support of customers through a low-cost, high engagement service, enabling digital self-serves and tailoring of propositions to meet customers' unique needs. And then lastly, optimization. This is also known as our Flex solution, designed to unlock value for customers and retailers by optimizing when energy is used across millions of devices. In combination, the platform enables retailers to maximize the lifetime value of every customer, from lowering cost to serve, to boosting retention rates, maximizing cross-sell opportunities and optimizing trading performance. So diving into each of these areas. So automating operations. Kaluza is enabling agents to become trusted energy advisers, as customers navigate critical decisions about their health hold energy usage and wider electrification of the homes and transport. Kaluza provides agents with a clear unified view of customer accounts, which updates in real-time. And this has made agents altogether more efficient, reducing average handling time by 32% and increasing first contact resolution to over 40%, meaning fewer call backs. Another cost-reducing aspect of our Kaluza agent experience is the speed of onboarding. Agents can be up and running on the Kaluza system within a few hours, thanks to its intuitive interface and step-by-step guidance by next best action. And many of these benefits come from the underlying architecture of the platform that Steve was referring to. Kaluza has been built to handle the vast volumes of industry and customer data. Data flows in real-time across the platform, delivering the instant results customers have come to expect. We've moved beyond customers only seeing a static bill once a month, which arrived weeks after they've actually used that energy. And the most competitive market, there's a reliance on other energy businesses and other market participants to ensure that only clean and accurate data enters the system. And this isn't always the case. And so we have built Kaluza to identify and where possible, automatically resolve discrepancies in this data. We provide agents with machine learning supported tools to suggest the recourse of an issue and guide them through the resolution of it. And on to empowering customers and increasing customer lifetime value. Ensuring customers have a clear and up-to-date view of how they're using energy and how much it's costing is crucial as price volatility continues and customers adopt more EVs, HVAC and solar. This is something we've certainly seen when working in the Australian market. And thanks to highly personalized online experience leveraging real-time data, we've reduced inbound contact to OVO by over 1/3, increased self-served by 50% and over 4.3 out 5 for digital customer satisfaction. We're also working on streamlining the adoption of new technology in customers' homes. From EV chargers through to heat pumps, to increased home insulation, the electrification of [indiscernible] and heating or cooling is going to require new equipment to be installed in customers' homes. And whilst it's unlikely that much -- whilst it's likely that much of this work will continue to be carried out by local installers, there is an opportunity to create new package propositions that include financing, installation, service management and the right tariff to maximize the value to the customers. We've seen in the U.K. new government grants or subsidies for some of these solutions, which then brings new requirements around processing applications and payments. And that's where the open nature of the Kaluza platform plays vital, being able to connect up different parts in the ecosystem to give customers a seamless experience on adopting new solutions for their home. And bringing forward the future of energy. Using Kaluza's Flex solution, Kaluza connects to and controls devices in customers' homes to unlock the value of flexible load management. For example, Kaluza's powering OVO charge any time. This is the U.K.'s first type of use EV plan. The solution was designed and launched in a matter of weeks and have scaled tens of thousands of users in just over a year. Kaluza's advanced optimization enables connected vehicles to charge when energy prices and carbon levels are lower. The use in the telemetry data from a customer's vehicle or charge point, we can separate a customer's household usage from their EV charging from the rest of the usage to their home. The EV charging can be offered at 6p per kilowatt hour to about GBP 0.135 at any time of the day, whereas the rest of their home usage is at the standard rate closer to 30p per kilowatt hour. So the customer in return for allowing OVO to determine when to charge their vehicle then achieve a much lower rate for the charging of their EV. And this proposition has won a number of prestigious awards and the save drivers over GBP 10 million and over 580 tonnes of carbon so far. And over the last 5 years, we've created one of the world's largest portfolio of OEM partners across EVs, HVAC and more. These direct integrations allow us to offer superior customer choice and a smooth digital experience. And this is particularly exciting in the context of vehicle to grid, which creates the opportunity for customers to sell surplus energy back to the grid. As Stephen mentioned earlier, Kaluza has powered the world's largest domestic rollout for V2G, enabling a number of customers to earn enough to not only drive for free, but will be making us to cover their home energy costs, all while helping to balance the grid. And so on to Australia. We've successfully migrated 100% of the OVO Energy Australia customer base to the Kaluza platform and that was completed in April 2023. Since then, Kaluza has propelled the fast growth of the OVO Energy Australia business and high performance of agile energy challenger brand, launching multiple customer propositions at pace. And we're incredibly proud of the OVO Energy Australia's Trustpilot rating at 4.6 with many customer comments around the ease and speed of service. Through automating their retail operations by streamlining processes to reduce handling time and also supported a cost-to-serve reduction of 44% when compared to their legacy solution. And that's across a base that is now 72% digitally active and effortlessly self-serving. And thanks to effortless service, over Australia has highly engaged customers with an NPS score of plus 40 and 98% [indiscernible] overall. And these customers are seeing the rapid development of innovative new propositions, taking just weeks to launch with high uptake. For example, 1 in 10 customers of OVO Energy Australia are already on an EV plan. And this success has created a proven platform that will be the foundations of the AGL transformation. Through 3 years of collaboration, we have built a solution that is delivering strong results in the Australian market, one of the most complex markets globally. And we're incredibly excited to use this foundation to accelerate AGL's retail transformation plan. Building on our global experience, Kaluza will deliver technical and operational efficiency at scale, enabling AGL to reinvent the customer experience while unlocking new revenue streams. The partnership will deliver approximately GBP 70 million to GBP 90 million pretax annual cash savings from financial year '29. Will also allow AGL to build a best-in-class ecosystem with leading platforms with seamless integrations, enabling the acceleration of speed to market for innovative engaging propositions and most importantly, transforming the AGL customer experience. And so onto beyond OVO Energy, beyond AGL, what's next to Kaluza? Well, globally, the vast majority of energy retail are yet to move away from their legacy software providers, meaning the market size, the disruptors is huge. The location drops on this map indicate Kaluza's global hubs, now including 7 locations, enabling us to serve our increasingly international client base. So in the first mover markets of the U.K., Australia and New Zealand, there are approximately 14 million households. And although many of these forward-thinking utilities are already on replatforming journeys, 28% remains an addressable market opportunity. And in the U.K., Kaluza's scale and will soon be migrating million more meters in Australia through AGL. Our work with OVO Energy Australia in the last 3 years has primed Kaluza to scale in Australia. And our current engagements with other Australian retailers is being well supported by our strong proof points in the market. And over in New Zealand, we have led Flex-based programs with Mercury and Meridian in the last year. And then we've seen fast followers. So turning to France, Spain and Japan, there's a considerably larger commercial opportunity, which is over 104 million households and only a handful of utilities on modern platforms with over 95% still operating on legacy systems. We believe Japan to be a particularly interesting region. As energy meter competition intensifies and projections indicate that it will be the fourth largest EV market in 2035. It has 85 million residential meters, 100% of which are marked ready for the Kaluza technology. And Kaluza has made significant environs in Japan over the past few years. In partnership with Mitsubishi Corporation and a few weeks ago, we announced the launch of Kaluza Japan to support our growth within the region. This is a joint venture that will leverage Mitsubishi's deep market knowledge and Kaluza's proven software to enable Japanese energy companies to transform their retail operations and deliver market-leading billings and innovative low-carbon products to customers. From our [ take-care ] headquarters, Kaluza will expand on Kaluza Mitsubishi established partnership, building on its work Mitsubishi Motors Corporation and MC Retail Energy. And lastly, in the emerging markets, which includes the rest of the EU, Germany and the U.S., the opportunity is larger still. There are around 276 million households in this [indiscernible] with almost all utilities right for replatforming. And Kaluza has already established a strong foothold in the U.S. market through a smart charging program with a California retailer, East Bay Community Energy, recently granted to AVA Community Energy. And through our REDWDS initiative, where we have got funding from the California Energy Commission, we'll be pioneering dynamic tariffs in the market across V1G and V2G EV charging, including for low-income support customers. And we'll be delivering this work alongside PG&E, one of the largest utilities in the U.S. and also a leading hardware manufacturer, Wallbox as well as a major global automaker. So across Europe, Australia, the U.S. and Japan, we see considerable growth opportunities for Kaluza. The majority of it -- the majority of, if not all, energy businesses will switch to different technology solutions as the energy transition unfolds and there are not many solutions available that have been deliberately built to operate in this complex new world, which takes us on to Kaluza's position in this market. So we're often asked how Kaluza is different to our competitors? And we believe this quite perfectly encapsulates our key differences. So firstly, we're energy specific. We believe the energy transition can only be navigated with energy-specific end-to-end solutions. Gone on the days of a generic billing box that can rate everything from kilowatt hours to [ units of water ] to even toll roads. Energy warrants its own solutions and the market size is there to support this dedication. We're experts in this vertical and a design technology that can unlock value across the energy chain. And to our open architecture, the Kaluza platform, if you have heard, has been architected to enable seamless integrations of other solutions. We take a collaborative approach to shaping technology to fit the unique objectives of every individual retailer. And lastly, we have built a customer-centric solution. We know that building customer engagement trust of precursors to unlocking customer lifetime value, increasing adoption of new products from propositions and supporting customers to accelerate through the energy transition. That's why we have a relentless focus on ensuring easy, personalized and seamless end customer experiences. And we believe these differences that can Kaluza part from our competitors will enable Kaluza to rapidly expand our footprint as the shift to new platforms accelerate. And Kaluza is uniquely positioned to take on these opportunities with a scalable platform ready to deliver results for today and for tomorrow. And now I'll hand back to James to facilitate the Q&A.

Thank you, Mel and Stephen. We will now open for questions. [Operator Instructions] Let's go ahead. First off, we have Tom Allen.

Just came to understand Kaluza's customer orchestration capabilities more in an Australian context. So specifically, does the software currently have the capability to control customer side generation and interface with market bidding platform capabilities in Australia? We've seen with other technology providers, the Australian context presents some unique challenges. It sounds like your Flex solutions product was interesting in that regard. Just keen to hear more around what the product can currently do in that regard?

So in the Australian market, we're currently supporting managed charging program for electric vehicles, working closely with OVO Energy Australia, and we're keen to expand beyond electric vehicles into -- for example, solar management and also battery storage as well. So that's something that we're actively working on. In terms of the market integration, that's when will be -- that will be supported in partnership with AGL. And we continue -- we plan to continue to develop the platform service to support that going forward.

Thank you, Tom. Next up, we have Rob Koh, Morgan Stanley.

I guess, sadly I got a bit more of a boring Australian compliance question. I think we have a well reputation for being a bit tough on disconnection procedures, life support procedures hardship. And then we because we're 1 country, we make -- we have like 5 or 6 different systems across the NEM. Can you just give a sense of, with your global experience, how Australia rates? And then for Kaluza Australia, how you've -- how much of that is already built out through your OVO Australia experience?

It's interesting. I think every market globally has its individual complexities, but we found that a lot of the regulations are there to protect consumers and so many are similar. So if we take within the U.K. and Australia, there's rules around back billing of customers that can only be completed for a certain amount of time. And whilst in Australia disconnection is allowed in the U.K., it's not something that is supportive, but then we have complexity in prepayment customers who effectively can self-disconnect and require the same amount of support. So what we do find is the similarity across many of the markets. And the building to the U.K. regulatory landscape has enabled us to be able to adapt our solutions quite quickly to be able to support customers in Australia. But you're right, there is differences across the various markets, but we have worked closely with OVO Energy Australia to be able to ensure the platform is compliant and able to support all regulations and the customer needs within the Australian market.

Thank you, Rob. Next up, we have Ian Myles, Macquarie.

Just a question on the Kaluza Flex. It would seem like you have more customers signing up to the Flex product versus the total product. But sort of what's been driving the success of Flex or you're being able to sign up people onto the full platform?

They're quite different products in terms of the sales cycles or lead times for adopting the full billing solution versus the Flex solution. Flex tends to be a new add-on for a lot of energy businesses, where the retail product is a replacement of a core solution. And so we find that it's simpler and faster to launch a Flex trial, say for example, we can launch a trial on the Flex platform within 6 weeks and have retail, the retailers supporting customers on innovative propositions within that time. But what we do find is that by using Flex solution, a lot of businesses realize that they can't see the full value of that innovation because they're constrained by their existing billing solution, they can't support the types of tariffs or payments or credits that customers need to be able to unlock the full value is giving us the flexibility within their home. So we really see the adoption of the Flex solution as a precursor to be able to move forward on to the full retail platform. So that's where we see the key differences in adoption.

Mel, if it's okay, I might just add something there. I think this is probably the journey that we went on at OVO Energy as well. We actually acquired a company to help us deliver Flex-like solutions for customers that had more dynamic or complicated needs, particularly around EV charging. And what we quickly find was that we had 1 platform where we're very easily able to innovate, deliver opportunities for customers that they were asking us for and even something that they weren't, able to build great customer interfaces and really engaging customer tools, and we're able to take advantage of the flexibility of those assets. But when we tried to marry that up with a core accounting that was in our energy billing system, we find that we had 2 different sources of truth and sometimes may be more than 2. And then very quickly, we started to see a loss of customer trust when they would see 1 set of information from us delivered on a very light and innovative platform and then another one, whether it be a high lag or delays in information coming through. And so it was that breakdown in trust that we saw from having 2 different systems that highlighted the need to real-time data architecture in our core operating system and led us to build Kaluza. and I think, as Mel said, we see that where we have a lot of adoption, energy retailers understand they need and want to offer these flexibility solutions for consumers. But then they go on the journey to realize they have to re-architect their entire tech stack in order to fulfill the promise of the innovation and the flexibility that they can deliver on the surface to make that work long term, they have to go much deeper and build those stronger foundations. So Mel's absolutely right, the Flex product is an easier 1 to roll out, and it often turns into then a much bigger conversation with the retailer about how to make that work.

Thank you, Ian. Next up, we have Dale Koenders.

I was just wondering if you could maybe paint a picture of what the next 5 years looks for -- looks like for Kaluza in the success case? I guess some of your peers have put out some aggressive growth numbers and seem to be on that trajectory. But just wondering what you're targeting?

Thank you, Dale. So in terms of the next 5 years for Kaluza, we have ambitious growth plans, and we're seeing traction within the market that we believe can fulfill those plans. We do have an aim to reach GBP 100 million household supported by the Kaluza platform, whether that's with our billing solution or supporting devices within their homes on our Flex solution. And so we have, as you've seen through the presentation today, ambitions to be able to support that across multiple markets. We're seeing traction within the U.S. We have our joint venture within Japan. Great to be able to see an increased level of interest in Kaluza within the Australian market. And so we're confident that we can fulfill our ambitions over the coming years.

Dale, did you have another question? I think that's all the questions we have for today. And back to Jo. We've couple of more come in.

So I guess, you've given us a lot of detail on how the platform can save me. If you kind of convert all of the Flex customers into retail customers as well, can you give us -- I presume you're not going to give us forward numbers, but if you could give us a sense of what kind of revenue upsides you get from converting customers?

So I'm joined by Matt Johnson, who is Kaluza's VP of Finance, who is happy to take that question.

[indiscernible] Steve back in the room. So I think there's a huge opportunity here on both sides, actually. So converting Flex customers into retail customers. Clearly, the big differentiating factor there is scale. At the moment, clearly, there are nascent markets for EVs, particularly in Europe, and I know it's a growing opportunity in Australia. And so converting those Flex opportunities into retail sales for us really drives a much higher ARR in the first instance over the course of the next few years. As markets evolve and that opportunity on the Flex side really expands, not only does it give us access to a much greater scale for the Flex product itself, but also, it's a fantastic, as Mel and Steve have already articulated, additional module and additional capability that we have for customers on the retail platform that clearly allows us to charge a slightly higher subscription licensing fee that adds to our ARR.

Thanks, Rob. I think we'll have time for 1 more question from Ian Myles.

Just going a bit more specific to Jo. Can you maybe then run through -- you talked about OVO Australia being really successful, yet its profitability is pretty horrible, both as a joint venture and back through your account. Just sort of trying to understand how you're measuring that success when it's not actually generating profitability?

Yes, so I think a lot of the profitability metrics you're seeing is because that's a growth business and really the customer acquisition costs are all included in those financial results. So we do see indicators of value through those customer segments that do demonstrate to us it will be unvaluable over the medium term. So it's really that customer acquisition cost that's driving the profitability and scale.

Thanks, Ian. I think that's all we have for Q&A.

Okay. So we just want to say thank you so much for joining us this afternoon. We hope that you found the information provided by the Kaluza team helpful and giving you a bit more insight into the product and the offering. Here at AGL, we're really excited about the journey we're on together. We see huge potential for our customers and our shareholders in this partnership, and we'll look forward to sharing more with you all throughout the journey. So thank you so much for your time.

Thank you. Thanks, Steve and thanks, Mel.