Strategic and efficient energy risk management

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Summit’s Expertise Enables Global Organization to Manage Energy Risk Across 18 Countries

Learn how Summit Energy transformed the energy risk management approach of a global manufacturer from decentralized and inefficient to strategic and coherent. The global manufacturing company leveraged Summit’s energy risk management opinion to mitigate exposure to market volatility and cut costs by nearly 10 percent.

A Strategic, Centralized Approach Mitigates Exposure to Worldwide Energy Volatility: Global companies seeking to deal with the unpredictable nature of the energy industry around the world face additional hurdles related to geographic diversity and company politics.

SITUATION
A new Summit client was facing a major challenge related to its global energy risk management. This company’s portfolio included 44 sites in 18 countries, and each site handled energy management independently. Without a formal strategy, this decentralized approach created inefficiencies by diverting key staff from primary objectives and failing to leverage time-sensitive opportunities. To further complicate matters, many of the site-level personnel were suspicious of “corporate” taking control of energy-risk management, necessitating a delicate approach to changing the status quo.

LEADERSHIP
Summit began by identifying countries in the site portfolio that offered potential opportunities for enhanced energy risk management. For facilities located in these countries, Summit reviewed risk management and tariff and sourcing options, in addition to collecting billing and accounting data. After thoroughly analyzing this information, Summit identified opportunities for better managing energy price volatility.

During the discovery process, Summit encountered a large site in Singapore that was about to enter into a new contract. The contract would lock in an electricity price that the Summit team anticipated would go even lower. Summit quickly presented a more compelling financial option, one which recommended waiting to take advantage of expected downward market movements that would save the company money. Summit informed the corporate and plant level staff of the risks and benefits of the option and negotiated with local suppliers to secure the most advantageous agreement.

RESULTS
Under Summit’s guidance, the company took a bold step forward in centralizing its approach to energy risk management. Site-level personnel came to see the inherent value of consolidating risk management decisions at the corporate level. By implementing a global strategy, the corporate energy leader was able to make more informed financial and physical hedging decisions across all 44 facilities.

At the Singapore site, the company was able to take advantage of receding electricity prices and lower its long-term costs for electricity. As electricity prices decreased, just as Summit had predicted, the Singapore site lowered its long-term costs for electricity and eliminated potential volatility. Hard savings were nearly 10% of the site’s annual spend. For this company, Summit’s leadership and risk management opinion proved critical to limiting exposure to volatile energy prices.

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