Client: Bizspace

Title: Energy Procurement -  Low Risk Flexible Solution

Saving: £140,000

Bizspace is a multisite property company, specialising in the rental of industrial and office space to tenants across the UK. They have a HH electricity portfolio of circa 20GWh with an August renewal date. They have been our client since 2012.

The client has traditionally opted for fixed price contracts – it is practical to have known prices for the duration of a contract for the purposes of recharging tenants. 

In early 2014, we were considering the electricity renewal. As the wholesale power market was in decline, the expectation at that time was that we would lock in a fixed rate contract in May or June.  However, this strategy was scuppered by events in Crimea. The build up of Russian troops in the territory which eventually led to annexation caused electricity markets to spike 8% in early March. Whilst the market soon reverted to bear territory, prices were significantly higher than expectation had been in February. The ongoing crisis in Ukraine meant that there was still the liability for further spikes.

We thus considered flexible options with the client in order to take any advantage available in this slowly easing market with the August renewal date looming. We settled on a flexible contract that is locked in prior to the contract start – this allowed the client to lock in fixed charges and a proportion of the wholesale volume whilst floating the additional volume to exploit market downturns, whilst at the same time knowing the preferred p/kWh would be in place for the contract duration. We agreed percentage movements with the client at which point we would lock in the remaining volume. Upfront we locked out 25% of volume along with non-commodity - Renewables Obligation, Feed in Tariff, Standing Charge and Capacity Charge. The remaining 75% was fixed in approximately three weeks prior to renewal, a week before the next major energy spike caused by events in Ukraine.

At the time of the original Crimea crisis, renewal costs worked out at £2.09m per annum. The calculated cost from using the flexible product was £1.95m. The client thus saved £140,000 / 6.7%.