No Wonder The Bosses Are Worried

Today we are told that 4 gas suppliers are meeting with the government and regulator to discuss the recent rise in gas wholesale prices that affecting food production in the UK. Over the weekend 18 electricity players went into default with the market operator, Elexon.

So these are the headlines but what is the real issue ?  So if you are the boss of a company then pretty soon by now you will see that your company is running out of cash.  The energy industry has never optimised or made efficient its cash flow capital.  So energy prices are high what do you expect from the most volatile commodities in the world?

Last summer, We analysed the 170 companies that have had a supply licence and we found the following: Only ten companies made a profit of more than 5% find another 12 broke even.  The rest were lossmaking or had left the business.  

When  is the industry going to take cash flow risk seriously and manage its credit lines with more efficient instruments other than letters of credit ?  For the past 20 years we’ve been trying to alert the industry to best practise which if you had tried you may still be in Business Today .  Your customers deserve better.  There is probably not one single counterparty that is not maxed out on their trading lines.  Credit risk in the energy sector has never been so high.

Also, all the traders will have to find cash to margin against their traded positions as they will be affected by either the MTM margin calls, or as physical players by the Elexon credit price cap which increases to £113/MWh today. I can sympathise with the industry because it is not easy for any business to “magic up” hundreds of millions of cash for credit cover: but to stay in business most power firms will need to become super intelligent about how they manage their trading collateral but in reality, some players can’t manage it at all. The credit risk in the power industry has always been high: CENTRE is a solution. Talk to us.