As fixed, long-term energy contracts come to an end, many companies in the UK are being exposed to price rises of up to 40%. This is most keenly felt by energy-intensive users or multi-site businesses such as manufacturers, retail and leisure chains respectively, but also impacts on the bottom line of many businesses across a wide variety of different sectors.
This is leading many businesses to assess ways in which they can reduce energy costs through proven smart energy solutions, such as voltage optimisation. However, many businesses do not have the ability to prioritise such projects and get the necessary capital expenditure available to make the initial investment. Powerstar has recognised this and offers flexible finance options, such as a serviced business model and revenue share agreements to allow businesses to enjoy the full benefits of smart energy solutions, such as reduced energy consumption and costs, without upfront capital outlay.
This article will highlight the main benefits of a serviced business model such as its ability to allow a business to implement smart energy solutions whilst spreading the cost over an agreed service term, negating any potential complications caused by unattributable cash flow. This enables companies to remain cash positive from day one of the project while also allowing any existing capital to be invested into the company’s core operations, which could allow a business to gain or sustain a competitive advantage.
Additionally, the flexibility of a serviced business model is highlighted by the ability to make stepped payments. Stepped payments are payments which increase or decrease at specific times to accommodate the impact of seasonal pressures on operations. Serviced business models also reduce the burden of responsibility on businesses that invest in smart energy solutions. This is because all responsibility for the equipment, its performance, upkeep, maintenance, and servicing falls on Powerstar under the terms of the service agreement.
The benefits of a serviced business model in comparison to utilising capital expenditure to fund the project are shown in the example below.
This shows that an upfront purchase, such as that by Company A, only begins to profit from the investment after the final systems have been installed whereas the utilisation of a serviced business model enables the full project savings to start immediately. This is represented in the above example through the inefficiency expenses, which state the savings that Company A has missed out on over the five years the project takes to implement.
As energy prices continue to rise, many businesses that need to reduce energy consumption may be unable to do so through their available capital. Serviced business models, however, can enable such companies to benefit from smart energy solutions with no capital outlay and allow for a positive cash flow position from the moment of installation.
26 February 2019