sporting - Leisure Opportunities

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
T
he global financial downturn
affected all aspects
of business and consumer
life, including the energy
sector. This has been particularly
noticeable in relation to the issue of
energy procurement.
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 undoubtedly
be the same – the depth and
detail of the credit check is incomparable
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 calculate
projected energy consumption,
sign contracts for anything from
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, including
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 contract
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
Sustainabilitylive! 22-24 May 2012 NEC Birmingham, UK
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 management,
employee engagement and
the CRC efficiency scheme.
Speakers include Peter Madden,
CEO of Forum for the Future; Dax
Lovegrove, head of Business &
Industry, WWF; Katie Chapman,
head of sustainability and reporting,
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
The sport and leisure industry
spends £700m per year
on energy (Carbon Trust)
management of cashflow.
But providing energy is not without
risk to the supplier. Utility companies
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 supplier
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 company,
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 consortiums
are, of course, in a position
to speak to your utility provider on
your behalf to negotiate the terms of
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Read Leisure Management online leisuremanagement.co.uk/digital ISSUE 2 2012 © cybertrek 2012