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ENERGY


CREDIT WHERE CREDIT’S DUE


Over the next few editions we’ll be looking at energy-related issues from utility procurement to renewable products. This issue, The Energy Desk’s managing director Ian Edwards takes a look at the best way of getting credit to pay for energy use


sector. This has been particularly noticeable in relation to the issue of energy procurement.


T


Even an organisation with a high credit rating will wince at the prospect of a utility company’s credit check. If you haven't undergone one of these credit checks yourself, you may ask why. For most the answer will undoubt- edly be the same – the depth and detail of the credit check is incompa- rable to any other, and a poor credit rating can pose a host of challenges when it comes to purchasing energy. Methods of energy procurement


have changed significantly over the past few years. An organisation was once able to pay for the energy it used in arrears, but must now calcu- late projected energy consumption, sign contracts for anything from


Sustainabilitylive! l


he global financial down- turn affected all aspects of business and consumer life, including the energy


two- to five-year terms and pay hefty deposits of three to six months to the utility company up front.


POTENTIAL PROBLEMS FOR YOUR BUSINESS Your credit rating determines the terms of your energy contract, includ- ing the tariff, deposit value and contract timeframe. If you're a new company, without historical accounts, you will have little or no credit rating. If you have a high credit limit of £1m but your credit score from Experian falls below 51, your potential supplier will probe into your accounts, and this has become a common problem within the leisure and retail industry. Having a low credit rating will undoubtedly result in your business being tied into a con- tract on a higher tariff. With the UK sport and leisure


industry spending an estimated £700m every year on energy use, this can present huge challenges with the


22-24 May 2012 l


At the heart of the Sustainabilitylive! event is a three day conference, which will examine the corporate sustainability agenda in detail. Key topics to be discussed include water efficiency, sustainability reporting, resource scarcity, supply chain man- agement, employee engagement and the CRC efficiency scheme. Speakers include Peter Madden, CEO of Forum for the Future; Dax Lovegrove, head of Business &


62 NEC Birmingham, UK


Industry, WWF; Katie Chapman, head of sustainability and report- ing, Virgin Media; Eric Lounsbury, strategy manager, Carbon Trust; and Peter Bragg, general manager of Environment and Energy at Eurostar. The Environment Energy Awards, which celebrate excellence and innovation from businesses and technology providers in the market, will take place on 22 May. Details: www.sustainabilitylive.com


Read Leisure Management online leisuremanagement.co.uk/digital


The sport and leisure indus- try spends £700m per year on energy (Carbon Trust)


management of cashflow. But providing energy is not without risk to the supplier. Utility compa- nies will buy your energy up front and your credit rating is the only factor that can indicate the risk you pose to them. For example, a £500k spend on a three year contract adds up to a £1.5m energy spend that the sup- plier will have to purchase up front. If you have a low credit rating, you will – in the eyes of the supplier – be at risk of defaulting. Without a guarantee of payments, utility companies will risk taking on the financial burden should you not use or pay for the energy they have invested in on your behalf. What’s more, if you are unable to enter a contract with a utility com- pany, you won't benefit from lower contract rates and your tariff could rocket to three or four times higher than the contract tariff.


Consultants and purchasing con-


sortiums are, of course, in a position to speak to your utility provider on your behalf to negotiate the terms of


ISSUE 2 2012 © cybertrek 2012


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