Aurora Downstream Energy — Business Model

How Aurora Energy makes money, the revenue streams, the unit economics and margin architecture, the cost structure and the scalability underpinning the business model.

Aurora Downstream Energy Business PlanSection 6 › Business Model

Section 6 · Business Plan

Business Model

How Aurora Energy makes money, the revenue streams, the unit economics and margin architecture, the cost structure and the scalability underpinning the business model.

6.1 How Aurora Energy makes money

Aurora Energy operates an integrated, asset-backed distribution
model. Revenue is earned on the spread between the landed cost of
product (import-parity supply plus logistics) and the regulated or
contracted price at which it is sold, after operating and financing
costs. Because the Company controls storage, bottling and last-mile
delivery, it captures a larger share of the value chain than a pure
trader, and it can defend margin through procurement timing, inventory
positioning and service premiums. The model blends recurring,
relationship-driven revenue (cylinder exchange, industrial contracts,
managed-fuel services) with higher-volume trading revenue (bulk LPG and
diesel).

6.2 Revenue streams

Table 10. Revenue streams, drivers and margin
character

Stream Pricing basis Margin character Revenue quality
LPG cylinder retail Regulated max retail price Higher spread Recurring, sticky
Bulk LPG (industrial/commercial) Contract, MRGP-linked Moderate, volume-scaled Contracted, recurring
Fuel supply (diesel) BFP-linked, contract/spot Thin, volume-driven Contracted / spot
Storage & logistics services Fee / lease Attractive, capacity-based Recurring fees
Tank rental & managed services Fee / rental Attractive Recurring

6.3 Unit economics & margin architecture

The integrated model lifts blended gross margin from roughly 16.0% in
the commissioning year to about 19.5% by Year 5 as the higher-margin LPG
and services mix grows and procurement scale improves. Operating
leverage then converts margin into cash: with a largely fixed
infrastructure and overhead base, EBITDA margin expands from 2.5% to
12.1% over the plan. This margin architecture — modest at the gross line
but scaling strongly at EBITDA — is characteristic of well-run
integrated downstream operators and is deliberately conservative
relative to LPG-heavy pure-play retailers.

Figure 5
Figure 5. Revenue scale and EBITDA-margin expansion as the integrated, asset-backed model gains operating leverage.
Analyst note — margin assumptions

Margin discipline is central to credibility. The plan assumes blended
gross margins in the high-teens — below the level a pure LPG cylinder
retailer might achieve, but appropriate for a mix that includes
thin-margin fuel trading. EBITDA margins reaching ~12% by Year 5 are
consistent with integrated LPG-led distributors; they are not the
inflated 18–22% margins sometimes assumed for this sector and which the
Company regards as unrealistic for a fuel-inclusive book.

6.4 Cost structure

The cost base comprises cost of product (the dominant variable cost,
linked to import parity and the rand), logistics and distribution,
storage and bottling operating costs, employee costs, and corporate
overhead. Financing costs are significant in the early years given the
senior debt facility, then decline as the facility amortises. The
Company’s asset-backed model means a meaningful share of cost is fixed,
which is what drives operating leverage as volumes scale.

6.5 Scalability

The model is designed to scale in deliberate phases (detailed in
Section 10, Implementation Roadmap): an initial Gauteng-anchored build,
expansion to coastal and additional inland depots, then deeper rural
penetration and value-added services, with regional SADC opportunities
assessed in later phases. Each phase reuses the same operating platform
— procurement, storage, logistics, safety and IT — so incremental volume
is added at declining marginal cost, reinforcing returns over time.

Confidential — this business plan is provided to prospective investors and lenders for evaluation purposes only and may not be reproduced or distributed without the written consent of Aurora Downstream Energy (Pty) Ltd.