07 Jan Shareholder Update: 8K Filing and REP Reconfiguration

Dear Zenergy Friends & Shareholders:

First of all, my apologies for what seems like an incredible amount of time filled with silence on our part. As you are all aware by now, based on our 8K filings in the past few weeks, there has been much activity – some of it great news and other not so great developments. As a result of those ongoing events, it was imperative that we remained quiet during that time while we completed all of our business activities and filed their respective 8K’s.

In this specific blog posting, I am going to address the 8K Filingregarding the changes that have occurred within our commodity sales business, all of which falls under our subsidiary, “Zenergy Power & Gas,” also referred to as “ZP&G.” However, before I get into those details, I do want to stress that this subsidiary is not to be confused with our energy brokerage business, which falls under our other subsidiary known as “NAUP Brokerage(NAUP).”

The primary difference between these two business units is that under ZP&G, we are actually taking title of the commodity (power and natural gas) and becoming what is widely and generically referred to as an “energy retailer” or “supplier,” whereas under the NAUP business, we are playing the role of a broker between the end-use customer and the energy supplier. The energy broker doesn’t take title of the commodity; they only earn the broker margin – however, ironically, the broker margin is a significant portion of the gross margin from the energy retailer. Of course, there are other characteristics, comparisons, and traits unique to each one of these business units; however, I will leave those for a separate blog posting.

From a strategy perspective, everyone should know by now that our flagship offering is our “Zero Cost Program” – this is what makes us innovative, solutions-oriented, and sets us apart within the entire energy industry. Our Zero Cost mechanism can be used for Conservation of Utilities (Electricity, Natural Gas or Water), Modernization (smart controls, automation, and other efficiencies) and Energy Infrastructure related projects (micro-grid, demand response, on-site distributed generation). The purpose of our commodity sales business is to complement our core flagship offering, which is the Zero Cost Program™.

By now, I am assuming that you are all familiar with the 8K filing from December 14, 2018, wherein we sold our book of business to another Retail Electric Provider and disclosed our decision to start the immediate cessation of our REP business that was “Enertrade Electric, LLC.” If you have not seen that 8K, I urge you to please access it by clicking here. As you will see from the filing, there is a longstanding history with the original Sellers, which has been the cornerstone event behind our decision to unwind the Enertrade operation. Furthermore, we are in the middle of settlement discussions so, for now, I am limited in my ability to provide any additional discourse surrounding those events.

Having said all of that, I definitely want to communicate to you all that, while we have ceased the REP operation, we are not pulling out of the commodity sales business entirely. We are merely taking a step back so we can re-enter the market under a new platform, with a new strategic wholesale partner in place, and a renewed focus on commercial, industrial, and municipal customers. To that end, over the past 120 days, we have been in discussions with two world-class energy trading companies toward becoming our strategic wholesale provider; these discussions will continue to move forward in alignment with our new dates and objectives for ZP&G.

Moreover, we plan to re-enter the commodity sales business sometime after June 2019 as a strictly B2B platform, and, as previously stated, to enhance our conservation technology offering (micro-grid, conservation, demand response, storage, on-site generation, IoT, etcetera).  Apart from licensing in new deregulated states and back office preparations to the same, which are occurring now, for the time being, 100% of our front and middle office focus is on our flagship offering, the Zero Cost Program, and all of the products and services it encompasses. This, of course, is highlighted by the fact that we recently closed on a long-awaited $10M Debenture facility – you can access that particular 8K Filing by clicking here; I will elaborate more on this in my annual shareholder newsletter due out very soon.

One other item that has come up in our dealings these past 90-120 days is the position or prospective idea that it may make more business sense for us to spin off ZP&G as a separate entity; while nothing is definitive in that regard, we have begun exploring the merits of this strategy. The primary driver here is that both the ZP&G and the Zero Cost business are very credit intensive and therefore require strategic financiers via senior secured lenders. We believe that separating these business units may make more sense for each entity and our shareholders. Again, I reiterate that nothing is definitive yet; we are still in the exploratory phase of this process. As things materialize over 2019 concerning ZP&G, we will provide those periodic updates accordingly.

In closing, I want to thank each of you for your ongoing and continued support of our business – we are very grateful. I hope that this update has provided you with a comprehensive grasp on the plethora of events surrounding our REP business, specifically, Enertrade Electric. If there are any synergies or opportunities that you may see, then, by all means, please let me know and let’s discuss those possibilities; as always, our door remains open.

Thank you for your time and, as always, please call me with any questions that you might have.

 

Sincerely and respectfully yours,

Alex Rodriguez

CEO & President

Zenergy Brands, Inc.

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