Energy procurement in tough financial times
Companies struggling financially often face additional fees and deposit requirements from energy suppliers. This case study recounts Summit Energy’s aggressive negotiation on behalf of a global printing company in bankruptcy.
Complex Financial Situations Require Proactive Energy Management: For companies facing bankruptcy, continuing to provide goods and services to customers without interruption can be a challenge. The difficulties are often compounded by suppliers that charge bankrupt organizations higher fees to recoup lost profits and minimize risk. In particular, without a third party negotiating on their behalf, companies in bankruptcy often face escalating energy-related costs that can exacerbate an already fragile financial position.
With the recent recession and global economic breakdown at its peak, Summit’s client, a global printing company, filed for bankruptcy. It was not long before the company’s individual printing plants began to feel the effects of the filing. For example, the natural gas supplier for the New York plant wanted to increase its original 60-day deposit from $500,000 up to $800,000. Summit Energy, the printer’s energy consultant, was able to use its market influence and knowledge to help its client deal with this critical issue.
The printing company, not in a strong position to negotiate with the supplier, felt that its hands were tied. Summit asserted, however, that even in a position of bankruptcy, the printer could still leverage energy suppliers to create competition. Summit contacted another supplier that could possibly present a more competitive bid. The supplier responded quickly with an interest in participating; however, Summit determined that this supplier’s initial bid was too high as well. Summit aggressively negotiated with both suppliers to reduce the deposit fee.
Summit negotiated terms resulting in a cash deposit $275,000 less than the incumbent supplier’s initial offering. Summit not only freed up capital for the printer, but also allowed the plant to remain operational as it navigated through a tumultuous economy.