RHI deploys Beond’s
procurement service
and decides to fix electricity
prices but buy gas on the
spot market

RHI is a globally operating supplier of high-grade refractory products, systems and services, which are indispensable for industrial high-temperature processes exceeding 1,200 °C.

RHI

They employ around 8,000 staff in 32 production facilities and more than 70 sales offices globally.

RHI serves more than 10,000 customers from the steel, cement, nonferrous metals, glass, energy and chemical industries and they produce more than 1.7 million tons of refractory products per year.

Our Challenge

RHI first engaged with Beond in 2008.  At that time they had enjoyed the cost benefits of exporting from their UK sites following the fall in the price of sterling, however, rising energy costs were putting their exports under severe pressures.

By presenting a workshop to the main stakeholders RHI were able to explore the new risk products available from the energy industry and establish a strategy for managing their £1.2m UK energy account

The Results

Nine electricity suppliers competed in Beond’s fixed-price reverse auction which forced RHI’s incumbent supplier Eon to improve prices by 3.8% compared to their initial renewal quote.  Despite ferocious competition and relentless underbidding, the incumbent gas suppliers’ best and final fixed bid lost out to Gazprom by just 0.2%.

Having secured the keenest fixed quotations Beond then used sophisticated in house software to automatically assess all other options available for RHI on a like for like basis.  These included fully flexible purchase offers, multi purchase contracts and 50% tracker propositions.

Assuming the market remained at current levels the flexible electricity purchase contract could have delivered a 3.2% additional cost saving compared to the best fixed price contract. However, the flexible gas purchase contract was assessed to deliver a potential 14% or £122,135 saving compared to the best fixed price contract.

Beond delivered all the options to RHI and helped them decide their risk management strategy. The strategy involved accepting a fixed price electricity contract and a flexible contract for gas. The rationale behind this decision was to create a natural hedge by fixing electricity prices with a small premium and taking some risk on the potential rewards of cheaper gas spot prices.

Beond will continue to manage RHI’s gas spot risk exposure over the coming years. The concern at that time was to monitor the risk drivers and global economic growth concerns which then included Middle East tensions, post- nuclear rush for gas and new gas supplies coming online around the world.

Beond’s monthly Price Risk Report will be an important tool to ensure RHI’s energy risks are managed going forward and their rewards are met.

Testimonial

“Beond has again provided RHI UK with new options to manage risks and rewards in an extremely volatile energy market, as they have done for the past 6 years.

By using Beond’s reverse auction process RHI UK were able to force our incumbent electricity supplier to sharpen their pencil.  

By understanding all our options we were also able to develop a strategy and hedge our exposure by using very competitive gas spot prices in a flexible contract. I would fully recommend Beond’s methodology and expertise to other industrial energy users as we are not specialists in this market but as a not in-significant part of our costs it is essential to have a trusted and knowledgeable advisor.”

Alexander Barr (Managing Director)

Case Study Highlights

By understanding all options and by adopting some risk, RHI were able to create a natural hedge to produce in excess of £120,000 savings within 12 months.

Beond continue to work successfully with RHI after winning a second competitive UK energy consultancy tender.

Both parties continue to explore new innovations in energy tendering and risk reward opportunities.

Beond Services

Beond are a privately owned specialist energy market consultancy – offering innovative and bespoke services to a wide range of energy and carbon consumers. Our business is built on offering tailored energy management and purchasing solutions, supported by our proprietary software and managed by our dedicated team of experts.

Our staff are the key to our success and significant investment has been placed in recruiting and retaining the best talent in the industry sector – with our Consulting Directors holding an average of 20 years’ individual energy market expertise and experience.

With over 500 major energy consumers under management we have an excellent track record in delivering:

  • Innovations in energy procurement to deliver best value to our clients
  • Dedicated portfolio management and on-going data collation and analysis
  • Tailored and bespoke risk management hedging strategies – able to adapt to the ever changing markets
  • Studies on the impact of future changes to an organisation to mitigate risk
  • Structural site works, upgrades and network connections
  • Bill validation, reporting and analysis
  • Compliance to carbon schemes such as the CRC and ESOS with an excellent track record of success
  • Innovations in energy management to bring bespoke solutions with strong financial return
  • Energy auditing and technology services to introduce the right technology to reduce energy consumption

For more information regarding our latest innovations please contact the consultancy team on 020 8899 7385.

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