Navigating out of the
COVID-19 risk zone

Revenue development in the utilities industry –
manage it better with msg advisors’ liquidity compass.

Covid 19 Rapid Reaction
Covid 19 Rapid Reaction

Navigating out of the COVID-19 risk zone:
Revenue development in the utilities industry –
manage it better with msg advisors’ liquidity compass.

How quickly COVID-19 sent the economy into shut-down mode can be seen by a key figure published by the BDEW (German Federal Association of Energy and Water Management): power consumption fell by almost nine percent in Germany in a month, first and foremost as a result of production lines and supply chains in the industry coming to a complete or partial stand still.

For the utilities industry, losses in industrial customer business are just one of the many challenges resulting from the dynamic progression of the crisis, a progression that is nearly impossible to predict. On top of that, significant payment losses in the private customer segment could also be seen if a large number of customers stop paying their premiums – as is currently allowed, e.g., until June 30, 2020 in the region of North Rhine-Westphalia for all contracts concluded before March 8.

Decision makers in the utilities industry thus now need to identify and employ the right crisis management measures. Ideally, this would be done in coordination with every area of the company that is relevant to the successful continuation of the business model, both in the context of and beyond the crisis.

Expertise for crisis maneuvers: msg advisors’ liquidity compass

The msg advisors utilities team has long-term experience with projects in the utilities industry and is well versed in the needs and strengths of private and public companies, supervisory bodies, as well as other government institutions. We have the capacities necessary for helping decision makers develop crisis management strategies and operationalize them in the short and long term.

msg advisors’ “liquidity compass” helps you gain an initial sense of orientation. We have examined best practices, case studies and current projects in the market and used them to identify five key starting points, incl. initial, concrete recommended actions, to help decision makers at utilities companies equip their revenue development to withstand the effects of Corona.

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Starting point #1: Business

Reduced working hours and shutdown production lines mean that producing companies in particular are reducing their energy consumption considerably. This leads to both decreased revenue for utilities companies, as well as decreasing prices on the utilities marketplace. Positions or quantities that were already purchased (at higher prices) may now even have to be sold at a loss. To deal with this, the msg advisors team recommends different measures, including the following:

  • Create scenario calculations that simulate the potential financial impact of sinking sales volumes on the procurement portfolio (loss and liquidity risks from open positions)
  • Continue developing business strategies that integrate extraordinary macroeconomic situations into the long-term management planning
  • Optimize energy trading risk management, perhaps through improved risk management or auditing and expand or modify KPI sets, if necessary
  • In addition, management approaches for extraordinary factors should be developed and the aforementioned points closely integrated with the liquidity planning and management.
Starting point #2: Production
Starting point #3: Sales
Starting point #4: Customer service
Starting point #5: Accounting/receivables management
20200508_mad_Grafiken_Liquiditaetskompass_EN-01.jpg

Utilities companies and public utilities enjoy a certain amount of trust from their customers and should position themselves as a strong partner in times of crisis. This ensures a lasting customer relationship and is extremely relevant for revenue development. By working with the msg advisors team, decision makers in the utilities and supply sector can apply these strategies to master success-critical fields of action. The focal points include energy trading and production, distribution, liquidity and sales & customer service.

Find out more.

Michael Ertel 249 5x7

Michael Ertel

We are looking forward to hearing from you!

Alexander Littwin 345x380

Alexander Littwin

We are looking forward to hearing from you!

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