Announcement PDF 23 October 2023 Updated FY23 Annual Report Locality Planning Energy Holdings Limited’s (ASX: LPE) (the Company or LPE) updated 2023 Annual Report is attached. The only change is the addition of the Shareholder Information as required by ASX Listing Rule 4.10. Authorised by Justin Pettett, Chairman. For further information: Elissa Hansen Company Secretary investors@localityenergy.com.au 1800 040 168 Locality Planning Energy Holdings Ltd (ASX: LPE) Level 8, 8 Market Lane, Maroochydore BC QLD 4558 ABN 90 147 867 301 Telephone 1800 040 168 joinLPE.com.au 2023 Annual Report Locality Planning Energy Holdings Limited ABN 90 147 867 301 Smarter, Friendlier, Better electricity provider Contents Performance Highlights  02 Chairman’s Letter 04 CEO’s Report 06 Operating and Financial Review 08 Directors’ Report 10 Remuneration Report (Audited) 12 Independent Auditor’s Declaration 19 Financial Statements 20 Directors’ Declaration 48 Independent Auditor’s Report 49 Shareholder Information 56 Corporate Directory 59 Locality Planning Energy Holdings Limited 2023 Annual Report What we do LPE is an electricity provider to strata communities; leaders in innovation, with bespoke energy solutions, reducing community carbon footprints and energy bills with no upfront cost. Predominantly servicing the Queensland energy market, providing electricity, hot water, solar and battery systems, creating shareholder value through long term supply agreements that provide strong recurring revenue. LPE understand that our customers have specific needs individual to them. We believe that together through our innovative thinking we can create resilient, sustainable communities of the future, providing transparent energy solutions that are easy and risk free for the communities we serve. We are the leader in delivering embedded electricity networks, centralised hot water, behind the meter renewable energy generation, and EV charging solutions, for strata communities. From concept through to delivery we manage every step, delivering a hassle-free result making it easy for the body corporate, with a transparent and risk-free service. We achieve this by providing practical innovative solutions that adopt the latest renewable technologies, reducing grid dependency with behind the meter generation. We enable smarter and efficient water heating solutions, provide better EV charging options that are easy for the end user and not onerous on owners. We offer simple bills that are transparent and risk free for all stakeholders. Locality Planning Energy Holdings Limited 2023 Annual Report 01 Performance Highlights Improving operating performance in FY23, especially from the embedded network business, as the remaining balance of $7m of the $10m growth facility is deployed to fund capital works and acquire existing operations/ billing agents, should facilitate the transition to profitability in FY24 Significant debt restructuring, which included financing the closed hedge position for $17.8m, enabling all Blackrock related debt to be extinguished Due to higher wholesale electricity costs re-contracted during the height of the electricity market crisis and associated bad debt write offs, exit payments to Blackrock, and restructuring costs, LPE booked a net loss of $12.0m for FY23 Plans to exercise the option to acquire 50% of crypto-miner STAK Mining were dropped in late 2022 due to volatile crypto market conditions; LPE is continuing its discussions with Bundaberg BioHub to secure repayment of $5.75m (capital works fund and continuing to accrue interest) during 1HFY24 Locality Planning Energy Holdings Limited 2023 Annual Report 02 Improving customer traction facilitated the high value-add contracted embedded network business meeting FY23’s Successfully acquiring All Power To You Pty Ltd (AP2U) in June 2023, boosting billable customers by circa annualised revenue guidance, comprising $38.6m in electricity sales, $0.75m in accrued interest from the BioHub and $0.65m in other interest and other items (+14%) to circa 32,000 at year’s end, allowing LPE to generate higher customer receipts as FY24 progresses $40m 4,000 Completed strategic transition, enabling a shift in resources to focus on Creating value powering strata communities to deliver sustainable results Locality Planning Energy Holdings Limited 2023 Annual Report 03 Chairman’s Letter At the conclusion of FY23, LPE’s core embedded network business is well positioned to grow organically and through selective acquisition. Justin Pettett Chairman Dear Shareholders, The fiscal year to 30 June 2023 (FY23) represented the most challenging in our 10-year history, as we successfully navigated through the wholesale electricity crisis which saw 9 authorised retailers fail. As a result, our operating platform has been transformed onto more stable foundations focused on the embedded network business. Whilst unforeseen external factors adversely impacted LPE’s business during FY23, we continued to respond proactively. Through making some decisive strategic calls in FY22 and executing on those decisions in FY23, the operating platform was protected. At the conclusion of FY23, LPE’s core embedded network business is well positioned to grow organically and through selective acquisition. Moreover, we will see margin improvement in FY24, as higher wholesale electricity costs have now been factored into customer pricing schemes. Locality Planning Energy Holdings Limited 2023 Annual Report Overall, LPE produced a $12m net loss in FY23, attributable to one-off charges comprising $2.1m to close the Blackrock credit facility; $2.6m in interest expenses; and $7.3m from re-contracting electricity pricing schemes for some embedded network customers during the wholesale electricity market crisis in June-July 2022. A key accomplishment during FY23 was successfully acquiring AP2U for $900,000 in June 2023, as this boosted the customer base 14% to circa 32,000 and should generate at least $500,000 in incremental revenues in FY24. More importantly, many of the newly acquired customers have long-term service contracts – ranging from 5-to-10 years – which delivers LPE a high-quality recurrent revenue stream. A key focus for FY24 is to boost the quality of the customer base organically and through select acquisitions. As a result of debt restructuring exercises during FY23 and securing support from Roadnight Capital, LPE is well funded to progress expanding the customer base. The Company’s cash reserves will be further strengthened on settlement of the Bundaberg BioHub $5.75m in capital works funds. 04 FY24 has started on a positive cashflow note, as LPE received circa $11m from the Queensland government as a ‘cost-of-living rebate’ which will be credited against customer accounts as they become due. On behalf of the Board, our thanks to CEO Damien Glanville and his management team for steering LPE through some hazardous times in FY23 relatively unscathed. In addition, a huge thank you to our amazing staff for their tireless work effort throughout this intense period and to our shareholders for ongoing support. The Board looks forward to delivering a turnaround year in FY24 and expanding LPE’s customer footprint throughout Queensland as the preferred provider of electricity and utilities to strata communities. A key accomplishment during FY23 was successfully acquiring AP2U for $900,000, as this boosted the customer base 14% to circa 32,000 and should generate at least $500,000 in incremental revenues in FY24. Justin Pettett Chairman Locality Planning Energy Holdings Limited 2023 Annual Report 05 CEO’s Report Successfully navigating through the past two years will serve LPE well into FY24 and beyond. Damien Glanville CEO Dear Shareholders, Retail business exit The dislocation in the wholesale energy market, which saw persistently high energy prices through much of 1HFY23, resulted in the Company undertaking a wholesale reorganisation that delivers several key benefits: Although the decision to exit the retail business was taken in late FY22, an active off‑boarding campaign was implemented to transition legacy customers to new service providers. This was an intense process, requiring continuous follow up communication, that took until 1QFY23 to close out. • Materially de‑risked operating platform that is now focused on the core embedded network business; • Iron clad strategy to grow the customer base, currently circa 32,000, organically and via select acquisition; • Robust funding to support expanding the embedded network business; • Streamlined cost structure that should enable a resumption of EBITDA margin expansion as FY24 progresses; and Strengthening core embedded network business • Clear path to profitability in FY24. With many buildings wholesale energy agreements expiring during FY23, the team had to work extremely hard to protect the embedded network business from losing customers. This necessitated a delicate balance of explaining to customers (committees/corporate managers) face‑to‑face that while energy prices had tripled, LPE was prepared to smooth out the impact in return for agreeing to contract extensions. This proved to be a win‑win strategy as there was no net erosion in the customer base, while there is scope in the contracts for LPE to claw back lost margin in future years. Without question, the challenges LPE faced during 1HFY23 managing change were immense, as it comprised exiting the retail business, while concurrently renegotiating wholesale energy agreements with embedded network customers. Locality Planning Energy Holdings Limited 2023 Annual Report At the same time, we had the difficult task of rapidly realigning the cost structure with a much lower revenue threshold to avoid material operating losses. Pleasingly, this has now been completed and all reorganisation related costs have been factored into FY23’s accounts. 06 The acquisition of All Power 2 You (AP2U), which boosted the customer base by 4,000 to >32,000 was an excellent outcome during a tough transitionary period. It demonstrates that LPE has the foundations in place to grow the business via acquisition, complementing an already proven ability to expand organically. Outlook Successfully navigating through the past two years will serve LPE well into FY24 and beyond. The Company’s core focus is profitably growing the customer base inside strata complexes, delivering smarter utility services from selling electricity/hot water systems; providing utility billing services; and, overall, creating sustainable communities of the future. My sincere thanks to all of our dedicated LPE team members, who worked tirelessly to keep the operation running smoothly during a tough period, and ongoing support from shareholders. The group is now in a very strong position to transition to profitability during FY24. Damien Glanville CEO Locality Planning Energy Holdings Limited 2023 Annual Report The acquisition of All Power 2 You (AP2U), which boosted the customer base by 4,000 to >32,000 was an excellent outcome during a tough transitionary period. 07 Operating and Financial Review Operating Results Financial Performance Summary LPE read the market signals correctly during mid-FY22 and, fortunately, was an early mover in making the tough decision to exit the cash intensive on-market retail business. More importantly, excellent risk management – through hedging against rising wholesale electricity prices – delivered a significant buffer of approximately $6m to aid LPE’s re-focus back to the core embedded network business. Sales for FY23 were $38.6m, a decrease of 43% on FY22, due to LPE exiting the on-market retail business. Importantly, the high costs to service the on-market retail business have been largely eliminated and operating efficiencies increased. Drilling down, employee costs were cut 30% now the current team has been stabilised under the new structure. Elsewhere, IT and marketing costs were down a significant 65% and 46% respectively, due to the reorganisation. In line with guidance, the reorganised business platform delivered revenues of $40m during FY23 comprising $38.6m in electricity sales, $0.75m in accrued interest from the BioHub and $0.65m in interest and other items. The overall loss for FY23 was $12m primarily due to the Company’s reorganisation and largely explained by one-off charges including $7.3m for carrying high wholesale electricity costs through the financial year, $2.1m to extinguish the Blackrock credit facility and $2.6m in interest expenses. As a result of right‑sizing the business platform, operating costs were reduced by a significant 43% in FY23 to $8.2m (FY22: $14.7m). Notably, there was a material reduction in head count and associated costs resulting from exiting the on-market side of the industry to focus on the core embedded network business. In addition, shelving plans to move into the crypto arena should see $5m plus $750,000 in accrued interest flow back to LPE from the capital works funding during FY24 which will further bolster the Company’s’ cash reserves. The Board expects LPE to be profitable in FY24, which would represent a material turnaround compared to FY23’s performance. For FY23, the net loss was primarily due to the requirement to re-contract electricity for some of LPE’s embedded network customers, during the height of the wholesale electricity market crisis in June-July 2022. Due to significantly higher electricity costs and adverse impact on parts of the customer base, LPE agreed to subsidise the higher electricity charges in return for owner groups extending contract terms up to 10 years. This will enable LPE to recover the lost margin in subsequent years commencing in FY24, whilst stabilising the customer base. LPE closed the fiscal year with $1.5m in cash and cash equivalents and is well capitalised to fund growing its operations through FY24. AP2U acquisition boosts billable customer base >32,000 During 4QFY23, LPE closed the All Power To You Pty Ltd (AP2U) acquisition which currently services >4,000 customers located in 44 strata communities throughout south-east Queensland. Notably, many of the new customers have long-term service contracts ranging from 5 to 10 years which delivers LPE a high-quality recurrent revenue stream. The AP2U acquisition is expected to generate >$500,000 annually and should be earnings enhancing as LPE’s fixed costs are likely to remain relatively stable throughout FY24. In addition, bringing AP2U into the mix elevates LPE’s totally embedded billable customer network by 14% to circa 32,000. As a result of right‑sizing the business platform, operating costs were reduced by a significant 43% in FY23 to $8.2m (FY22: $14.7m). Locality Planning Energy Holdings Limited 2023 Annual Report Bundaberg BioHub The Board has been working with the Bundaberg BioHub to obtain early repayment of the $5m capital works funds and accrued interest (originally due to be repaid in October 2023). The repayment was due to be made during Q4FY23 but remains outstanding. LPE has notified Bundaberg BioHub it has until 30 September 2023 to pay all accrued unpaid interest and until 31 October 2023 to repay the $5m capital works funds. 08 $10m credit facility to grow embedded network business During FY23, LPE secured a $10m credit facility from funding partner, Roadnight Capital, to expand its embedded network customer base. The credit facility, which has a 3-year term, has been utilised to install and upgrade strata communities’ capital works, whether it be switchboard or metering replacement or upgrades, centralised hot water systems and/or renewable generation at no upfront cost to the community, in return for long-term stable supply contracts. Outlook In FY24, the Board expects further organic and acquisition driven growth from the core embedded network business. LPE remains a prominent supplier for Queensland’s strata communities through offering an innovative product suite and service to all decision makers and, importantly, to owners. Overall, with a stronger operating platform, expanding customer base, normalising margins due to re-pricing in line with market and stable costs, the Board is optimistic LPE can successfully transition to profitability in FY24. Incrementally, LPE will continue to pursue acquisition opportunities (like AP2U) to further expand the embedded electricity network, centralised hot water customer base through existing retailers and billing agents looking to exit the industry or join forces with a well-established ASX-listed Queensland strata service provider. During FY23, LPE secured a $10m credit facility from funding partner, Roadnight Capital, to expand its embedded network customer base. Locality Planning Energy Holdings Limited 2023 Annual Report 09 Directors’ Report Your directors submit the financial report of the consolidated entity (referred to hereafter as the Group or Consolidated Entity) consisting of Locality planning Energy Holdings Limited (referred to hereafter as the Company or LPE) and the entities controlled at the end of and during the year to 30 June 2023. Directors and Company Secretary The names of directors who held office during the year and up to the date of this report are: Justin Pettett Non‑Executive Chairman Justin is a co‑founder of LPE and has over 22 years of ASX company experience having founded and helped companies from start‑up to take over/acquisition/public‑listing stage. He has a proven track record in identifying and maximizing business opportunities in the energy sector having led teams to deliver successful results, working closely with key stakeholders, investors and industry partners. Justin’s ethos is to support the transition of fossil fuels to a dependable, renewable form of energy resource for future generations to come. Damien Glanville Managing Director and CEO Damien has 19 years’ experience in senior management, logistics, and Executive Director roles. He engineered the business cases for the deployment of the Sunshine Coast 16MW Solar Farm. Damien is co‑founder and architect of the electricity retail model that successfully enabled LPE to obtain their Australian Energy Regulator Authorisation. Damien is the CEO of the LPE and the listed responsible person for the management components of the Australian Energy Regulator Authorisation to retail electricity. Barnaby Egerton‑Warburton Non‑Executive Director Barnaby has over 25 years of trading, investment banking, international investment and market experience with positions at JP Morgan (New York, Sydney, Hong Kong) BNP Equities (New York) and Prudential Securities (New York). He is an experienced investment banker and corporate advisor, having held managing director and non executive director positions in the investment banking, technology and resource sectors. Mr. Egerton Warburton holds a degree in economics and is a graduate of the Australian Institute of Company Directors. Kathryn Giudes Non‑Executive Director Kathryn was previously the Senior Director of Xbox Games Marketplace, as well as the Microsoft Store online where she managed the profit and loss and global expansion in over 200 geographies, with both having an annual revenue budget in the mid US$1 billion range. She holds a Bachelor of Science (BSc) in International Marketing from Oregon State University and Associate of Science (ASc) – Computer Science and Information Systems from Shoreline Community University. Kathryn is a member of the Australian Institute of Company Directors. Locality Planning Energy Holdings Limited 2023 Annual Report 10 Directors’ Report continued Simon Tilley Non‑Executive Director Simon has been working in the hospitality industry for over 30 years. He started his career in the USA and has been focussing his attention solely on hotels since 1996. Further, Mr Tilly is a passionate and focused business owner whose knowledge and experience allows him to continually raise the bar in customer experience. David Jarjoura Non‑Executive Director David has over 30 years of executive and non‑executive board level experience in unlisted public, commercial and for purpose organisations across the retail, property, manufacturing, financial, legal, education and disability sectors. Elissa Hansen Company Secretary Elissa has over 20 years’ experience advising boards and management on corporate governance, compliance, investor relations and other corporate related issues. She has worked with boards and management of a range of ASX listed companies including assisting companies through the IPO process. Elissa is a Chartered Secretary who brings best practice governance advice, ensuring compliance with the Listing Rules, Corporations Act and other relevant legislation. Director Meetings Board Meetings Audit and Risk Committee Meeting Nomination and Remuneration Committee Meeting Eligible to attend Attended Eligible to attend Attended Eligible to attend Attended Justin Pettett 12 12 3 3 1 1 Damien Glanville 12 12 – – – – Barnaby Egerton‑Warburton 12 9 3 2 1 – Kathryn Giudes 12 10 3 3 1 1 Simon Tilley 2 1 – – – – David Jarjoura 2 2 – – – – Director Locality Planning Energy Holdings Limited 2023 Annual Report 11 Remuneration Report (Audited) The Company is committed to attracting and retaining the best people to work in the organisation, including directors and senior management. A key element in achieving that objective is to ensure that the Company can appropriately remunerate its key people. Remuneration Practices The Company has established a remuneration committee as a committee of the Board. The primary purpose of the Committee is to support and advise the Board in fulfilling its responsibilities to shareholders by: a) reviewing and approving the executive remuneration policy to enable the Company to attract and retain executives and Directors who will create value for shareholders; b) ensuring that the executive remuneration policy demonstrates a clear relationship between senior executive performance and remuneration; c) recommending to the Board the remuneration of executive Directors; d) fairly and responsibly rewarding executives having regard to the performance of the Company, the performance of the executive and the prevailing remuneration expectations in the market; e) reviewing the Company’s recruitment, retention and termination policies and procedures for senior management; f) reviewing and approving the remuneration of the Chief Executive Officer and, as appropriate other senior executives; and g) reviewing and approving any equity based plans and other incentive schemes. The remuneration committee shall have the right to seek any information it considers necessary to fulfil its duties, which includes the right to obtain appropriate external advice at the Company’s expense. The key management personnel (KMP) of Locality Planning Energy Holdings Limited and the consolidated entity includes the directors of the Parent Entity. Remuneration Policy The Board’s policy for determining the nature and amount of remuneration for KMP of the Consolidated Group is based on the following: • The remuneration policy is to be developed by the remuneration committee and approved by the Board after professional advice is sought from independent external consultants. • • All KMP receive a base salary (which is based on factors such as length of service and experience), and superannuation. The remuneration committee reviews KMP packages annually by reference to the Consolidated Group’s performance, executive performance, and comparable information from industry sectors. The Board’s policy is to remunerate non‑executive directors at market rates for time, commitment, and responsibilities. The remuneration committee determines payments to the non‑executive directors and reviews their remuneration annually, based on market practice, duties, and accountability. Independent external advice is sought when required. At the 2022 Annual General Meeting (AGM), 98.98% of votes received supported the adoption of the remuneration report for the year ended 30 June 2022. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. Details of the remuneration of key management personnel of LPE are set out in the following tables. The key management personnel of the Group consisted of the following directors of LPE: • • • • • • Justin Pettett, Non‑Executive Chairman Damien Glanville, Managing Director and CEO Barnaby Egerton‑Warburton, Non‑Executive Director Kathryn Giudes, Non‑Executive Director Simon Tilley, Non‑Executive Director David Jarjoura, Non‑Executive Director Locality Planning Energy Holdings Limited 2023 Annual Report 12 Remuneration Report (Audited) continued 2023 Remuneration Short Term Employee Benefits Post Employment Benefits Salary & Fees Superan­ nuation Long Term Employment Benefits Equity based Payments Total Directors Justin Pettett $220,000 – – $20,518 $240,518 Damien Glanville $442,242 $25,292 $44,973 $20,517 $533,024 Barnaby Egerton‑Warburton $60,000 $6,300 – – $66,300 Kathryn Giudes $60,000 – – – $60,000 – – – – – $20,000 $525 – – $20,525 Melissa Farrell2 $98,565 $9,119 – – $107,684 Total $900,807 $41,236 $44,973 $41,035 $1,028,051 Simon Tilley1 David Jarjoura1 Executives Equity‑settled benefits include the full assessed value of the performance rights issued in the year. These performance rights are at at‑risk, and none have vested by year‑end. 2022 Remuneration Short Term Employee Benefits Post Employment Benefits Salary & Fees Superan­ nuation Long Term Employment Benefits Equity Based Payments Total $220,000 – – – $220,000 Directors Justin Pettett Damien Glanville $461,774 $23,568 $8,149 – $493,491 Melissa Farrell3 $318,992 $23,568 $2,235 – $344,795 Barnaby Egerton‑Warburton $60,000 $6,000 – $30,000 $96,000 Kathryn Giudes4 $20,000 – – – $20,000 Executives Toby Mills5 Total $221,482 $22,148 $484 – $244,114 $1,302,248 $75,284 $10,868 $30,000 $1,418,400 Notes: 1. Appointed 17 May 2023. 2. Resigned as an executive 30 September 2022. 3. Resigned as a director 1 March 2022. 4. Appointed 3 March 2022. 5. Appointed 23 September 2021 and resigned on 1 July 2022. Locality Planning Energy Holdings Limited 2023 Annual Report 13 Remuneration Report (Audited) continued Equity Based Compensation There were no shares or options issued to directors and other key management personnel as part of compensation during the year ended 30 June 2023. The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of directors and other key management personnel in this financial year or future reporting years are as follows: Name Number of Rights granted Grant Date Vesting date and exercisable date Justin Pettett Damien Glanville Share price hurdle for vesting Fair value per right at grant date Expiry Date 3,500,000 19 December 2022 On achievement of milestones 19 December 2025 $0.15 $0.0367 3,500,000 19 December 2022 On achievement of milestones 19 December 2025 $0.15 $0.0367 Performance rights granted carry no dividend or voting rights. Vesting of Performance Rights is subject to the Director’s continued role with the Company and upon achievement of either of the following Performance Milestones within the 24‑month period from issue: • the volume‑weighted average share price (VWAP) over any 10 consecutive day period (in aggregate) exceeding 15 cents per share, representing a 150% increase in share price from 22 November 2022; or • net profit after tax being achieved from operations in any two consecutive 6‑month reporting periods of more than $1 million combined from and including 1 January 2023 (together the Milestones) There were no performance rights over ordinary shares granted to or vested by directors and other key management personnel as part of compensation during the year ended 30 June 2022. Share Holdings The number of shares in the Company held during the year ended 30 June 2023 by each director and other key management personnel of the Consolidated Entity, including their personally related parties, is set out below: Balance 30 June 2022 Shares Acquired Shares Disposed Balance 30 June 2023 Directors Justin Pettett 9,409,102 9,409,102 Damien Glanville 8,400,995 8,400,995 60,000 60,000 Kathryn Guides – – Simon Tilley1 – 21,300,000 David Jarjoura1 – 200,000 Barnaby Egerton‑Warburton 1. Simon Tilley and David Jarjoura were appointed as directors on 17 May 2023. Locality Planning Energy Holdings Limited 2023 Annual Report 14 Remuneration Report (Audited) continued Option Holdings The number of options over ordinary shares in the Company held during the year ended 30 June 2023 by each director and other key management personnel of the Consolidated Entity, including their personally related parties, is set out below: Balance 30 June 2022 Options Acquired Options Disposed Balance 30 June 2023 Directors Justin Pettett 1,400,000 1,400,000 0 0 Damien Glanville Barnaby Egerton‑Warburton 1,000,000 1,000,000 Kathryn Guides 0 0 Simon Tilley1 – 0 David Jarjoura1 1. – 0 2,400,000 2,400,000 Simon Tilley and David Jarjoura were appointed as directors on 17 May 2023. Performance Right Holdings The number of Performance Rights over ordinary shares in the Company held during the year ended 30 June 2023 by each director and other key management personnel of the Consolidated Entity, including their personally related parties, is set out below: Balance 30 June 2022 Performance Rights Acquired Performance Rights Disposed Justin Pettett 0 3,500,000 3,500,000 Damien Glanville 0