Yu Group has entered an agreement to exclusively buy gas and electricity from Smartest Energy, freeing up cash that would have otherwise been set aside for hedging.
Until now, the company has relied on a number of trading arrangements to buy energy on the wholesale market.
The new agreement is structured so that the credit line grows in line with the business. This, the group says, will reduce the amount of money it needs to hold onto to cover price movements, allowing more of it to be spent on growth areas. Up to £13 million of cash reserves will be released once its outstanding contracts are transferred to Smartest Energy during 2020.
Robert Groves, Smartest Energy’s chief executive, said: ” After an extensive period of due diligence, we were impressed with the breadth of management team, the strategy in place to scale the business and the available opportunities for the business.
“Through this partnership, Smartest Energy will support Yu Energy in managing the complex risks associated with volatile and challenging market conditions. We look forward to working together with the leadership team at Yü Energy as they continue to grow their business.”
Bobby Kalar, chief executive of Yu Group, said: “Traditional trading arrangements create significant cash collateral requirements in a declining energy commodity market, and overcoming this barrier was the main reason the business listed in 2016.
“Removing cash volatility with trading counterparties removes the need for the group to ring fence cash. This agreement means we no longer have a need to tie up our cash and instead use our position to unlock new opportunities whilst scaling our customer base.”