FEATURE SPONSOR
WEATHER DOWNTIME
TURNING FINANCE INTO SUPPORT FOR WIND ENERGY SUPPLIERS
The wind energy sector is offering big opportunities to rebuild the UK’s manufacturing base. It is already a significant part of the rural economy and is giving a boost to often-deprived coastal areas. It can – and will – be even more significant in the future.
However, while wind holds great promise, it needs an incredibly supportive financial landscape. The size of deals in this sector and the level of complexity in the supply chain mean that financial support and reliability is crucial all the way down the supply chain.
2 Unpredictable demand – due to the difficult nature of planning in the sector and a lack of clarity about future policy, projects are often treated as “one off”, so suppliers don’t have a reliable pipeline of business. Companies may therefore need to adjust investment levels and hiring quickly
3 Weak balance sheets – a report by Matthew Chinn, of Siemens, found that in some cases a weak balance sheet was a reason for a developer not selecting a supplier. This is particularly problematic as developers move to a
financial toolkit there is a lot companies can do all the way along the supply chain to build in safeguards to their balance sheet and weather financial storms.
As a rule, the UK financial industry has not innovated in such a way as to support manufacturing, or indeed SMEs and so this has left many businesses feeling that finance is not their true partner. However, there has recently been widespread development in alternative (non-bank) providers.
OTHER FINANCE OPTIONS Today, there are many more options for supplier companies to boost their balance sheets and access finance than there were just a few years ago. But that message – that the finance industry is finally adapting – does not always reach SMEs and they sometimes miss out on opportunities that are available.
Added to this are a host of factors suppliers must contend with…
1 Weather – weather makes project costs and timescales unpredictable. It also creates demand peaks and troughs. The operations and maintenance sector in offshore wind, for example, could represent a sizable opportunity for SMEs in particular, if government projections that the sector will be worth £2 billion per year by 2025 are borne out. But the cyclical nature of scheduled maintenance to reduce weather downtime risk poses cash flow and demand challenges
project finance model and become unwilling to take risk on suppliers’ balance sheets
4 Performance bonds – the same report identified that performance bonds increase pressure on balance sheets for suppliers, putting UK suppliers at a direct disadvantage to their international competitors
FINANCING
Financing for the wind energy industry will never come from one source. The projects are too big and complex. But, with a broad
With finance and wind energy working more closely together, we can convert our unique island’s resources into green energy that can power this nation – and its economy.
Urica
www.windenergynetwork.co.uk
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