Advisory & Consulting Services Case Studies

Cost-at-risk analysis

Issue

The senior management of one Europe's largest electricity users needed to respond to a major increase in costs caused by the expiry of advantageous long-term electricity supply contracts. Deregulation of the local electricity market had forced the company's traditional supplier to adopt a much more commercial focus in their pricing and supply contracts, so a review of alternative strategies for electricity procurement was urgently needed.

Solution

The company's finance and business operations team selected Lacima for its experience and reputation in the energy risk management marketplace. Lacima conducted a strategic review to identify the company's best strategy for buying electricity.

This review identified the pros and cons of current methods and suggested a range of alternatives. An important additional element of Lacima's work was knowledge transfer and further boosting the expertise of key staff concerning risk management in the area of electricity trading.

Benefits

The strategic review highlighted an opportunity to benefit from more sophisticated strategies for electricity trading, which the company adopted. As part of this work, the company acquired much greater abilities to evaluate proposals from electricity generators, and as a result was able to obtain much better pricing and terms.

By increasing its energy risk management capabilities, the company has been able to reduce the variability of the company's profitability which its previous energy trading regime was not able to address adequately.

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