Global, VC-backed technology provider helping gas network operators reduce gas leaks and save costs: £4.4m development contract with Ofgem and partnership with $128bn Honeywell International
DISCLAIMER – This deal has been arranged, reviewed and introduced by West Hill Capital. Investors are directed to the Important Notice at the front of the Private Placement Memorandum (PPM), which explains the respective responsibilities of the Company and its Directors, and West Hill, which approved the PPM.
What to expect post-investment: West Hill and the Company are responsible for shareholder updates and communications. The expectation is that shareholder updates will be provided once per year. Your investment will be held by Aldbridge Services London and they will be responsible for all corporate resolutions and communications relating to voting and pre-emption matters.
Regulating pressure is one of the big challenges for gas network operators distributing gas to homes and businesses. Too little pressure can cause outages, and too much can result in excessive leakage. Globally, it is estimated leaks cause as much as 655 million tonnes of CO2 equivalent being released – roughly 1.6x the total UK’s CO2 emissions – at a financial loss of £5.6 billion per annum.
Gas pressure is currently regulated by an army of engineers manually adjusting thousands of district governors throughout the country up to four times a year, based on seasonal averages. If demand is low or the weather is unseasonally warm, pressure can build up to unnecessarily high levels, which causes excessive leaks, which in turn result in additional costs and difficulties in meeting carbon emission targets.
Utonomy Limited (“Utonomy” or the “Company”) aims to address this. Backed by Foresight Williams and West Hill Capital, it is developing technology to enable Gas Distribution Networks (GDNs) to remotely monitor and regulate pressure within their network, potentially saving £28 million per annum and 252 gigawatt-hours in the UK alone – the equivalent gas usage of over 200,000 households.
The technology comprises hardware, which is retrofitted to existing governor stations enabling remote pressure control, and a scalable digital platform which allows operators to collect valuable data, as well as detect and resolve faults faster.
The technology is currently being used by one of the UK’s major gas distributors, SGN, whose network distributes gas to 5.9 million homes and businesses. At the same time, the Company is working with a consortium of all the major UK gas distributors to develop AI technology to autonomously optimise gas distribution pressurisation. The UK industry regulator, Ofgem, has awarded Utonomy a £4.4 million development contract to fund this. Meanwhile, international expansion is being pursued with field-based trials planned for the US, following successful lab trials as well as a strategic partnership with Honeywell International which could pave the way for trials with European networks.
The Company reports a strong pipeline including a potential £12 million contract with Cadent, a large GDN serving 11 million UK homes and businesses, extensions to the existing contract with SGN, converted pilot projects and sales conversations with potential European customers.
Predicated on converting its sales pipeline, the Company forecasts revenue of £2.3 million and an EBITDA loss of £1.7 million in the year ending 31 March 2024. It then forecasts to approximately break even in the following financial year and generate revenues of £44 million and EBITDA of £18 million by 2028 – this is an illustrative forecast and not guaranteed.
To fund its current losses and support its continued growth, Utonomy is now seeking to raise £5 million under EIS. The arranger of the fundraise and ongoing adviser to the Company, West Hill Capital, launched this round on 4 December 2023 and almost £4 million has already been committed by new and existing shareholders including West Hill Capital investors and Foresight Williams EIS fund. Shares are expected to be issued on a first-come, first-served basis and is expected to close on 29 February 2024, subject to capacity.
This is the second funding round led by West Hill Capital. The Company reports it has achieved 200% revenue growth since the first.
Based on the Company’s illustrative forecasts and on a 12x multiple of 2028 projected EBITDA plus surplus cash (supported by recent mid-market exits and a historic competitor sale to Roper Technologies in 2008), the target return could be c.10x – high risk and not guaranteed. The minimum investment is £19,980 (normally £49,998.60) and you can apply online.
Please note: this is currently an early-stage, loss-making company, hence high risk. Before investing, please read the PPM carefully to form your own view and ensure you are comfortable with the considerable risks.
The Company reports the following highlights:
- £4.4 million Ofgem development contract working in collaboration with all four UK GDNs
- £1.3 million contract with SGN (UK’s second largest GDN serving 5 million homes)
- Completed pilot project with GTI Energy (leading gas R&D organisation working with 11 US GDNs)
- Live pilot project with Wales & West in the UK – expected to convert to a full contract in 2024
- Honeywell International ($128 billion Fortune 500 company) acting as a reseller to market Utonomy’s products in Europe leading to potential deals across the continent
In future, Utonomy’s platform could use machine learning to make autonomous pressure adjustments to adapt to weather conditions and network demand.
The technology has also the potential to aid the integration of green gases like biomethane and hydrogen into gas networks – a significant step towards reducing emissions.
Watch video: Introducing UtonomyOne – Smart pressure management (produced by Utonomy in June 2023)
The Company is seeking to raise £5 million under EIS at £2.70 per Ordinary Share, equivalent to a fully diluted pre-money valuation of £16.1 million.
New and existing investors have committed £4 million in the round. The Company is now looking to fill the round on a first-come, first-served basis.
EIS investors in this round are investing in Ordinary Shares. Please read the PPM carefully for more details.
This private offer is being arranged by West Hill Capital, which will also be responsible for shareholder updates post-investment, expected once every financial year. Wealth Club will endeavour to ensure all investor queries are dealt with promptly.
Risks – important
This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.
This investment is high risk, so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. Many EIS shares are illiquid and hard to sell and value.
Before you invest, please carefully read the PPM which contains further details on the considerable risks – including, but not limited to, operating, technology, competition, market acceptance, product, employee, IP and financial – alongside the Wealth Club Risks and Commitments.
This is a single company offer with no diversification. It involves investing in an early-stage, loss-making business, which is by nature high risk and prone to failure. There is a risk that the capital raised may not be sufficient to achieve the Company’s objectives. You could lose the amount you invest.
The value of tax benefits depends on circumstances and tax rules can change.
An exit could take longer than the three-year minimum holding period. Equally, an early exit could affect tax relief.
Structure and fees
Investors will pay no direct initial or ongoing charges to invest. Fundraising costs are being met by the Company. Please refer to the Schedule of Charges for more details.
To invest, you will have to qualify as an Elective Professional Client of West Hill. The investment will be held via a nominee structure through Aldbridge Nominees (Woodside).
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- Single company
- Target return
- Funds raised / sought
- £4.0 million / £5.0 million
- Minimum investment
- 29 Feb 2024 for next close