Home Joint energy solutions Contractual instruments

Contractual instruments

Contractual instruments support multiple companies to achieve better results from an economic point of view by jointly procuring energy services.

Joint purchase of electricity

What is it:

The purchase of electric energy represents a major voice of cost for the EU industries and any reduction of its cost would increase the competitiveness of the companies.

The habitual approach consists of each company getting in touch with multiple energy retailers and then identifying the most convenient one according to their needs. Joint contracting of energy could result in a significant benefit for all the industrial parties involved.

The successive step consists in proposing the identified supplier the purchase of its services by the entire group in exchange for a discounted rate. Crucial point is to obtain a discount enough to pay, the companies in the group, the difference between the best offer they received and the one received from the most convenient retailer for the entire group.

In case this condition is met all companies would be satisfied. Deploying this kind of solution, each company has its own contract not binding the entire group, and it is able to obtain a discount on the best price received from the different suppliers.

Companies cooperation benefits:

The joint purchase of electric energy represents a reduction of its costs what drives the companies to increase their competitiveness.

Joint purchase of energy carriers

What is it:

The possibility of jointly purchasing energy carriers like fuel, gas, wood pellets can be investigated, and different schemes envisaged if an area dedicated to their warehousing or not is available within the park premises.

The joint purchase of energy carriers can provide an economical advantage for the involved companies as the purchase of a larger amount of the energy carrier can result in a lower price per unit, following the principle of economy data.

Regulatory solutions should not be neglected:

  • The park purchasing and storing the energy carrier and then redistributing it to the companies
  • The companies themselves jointly purchasing it and storing it in a common area
  • The companies themselves jointly purchasing it but individually storing it between their premises
  • The companies/park negotiating a discount in exchange of an exclusivity agreement

Companies cooperation benefits:

Considering the first solution, the entity representing the park would contact retailers and negotiate the price and amount of the product to be purchased.

It would then store it and redistribute to the different companies. The second and third ones require the companies to directly negotiate with the retailers, just presenting themselves as a unique entity willing to buy the energy carrier and subsequently storing it in a shared space.

The latter option does not require any warehousing space, leveraging on the assumption that different companies could switch supplier if economically incentivized and the supplier would be prone to grant the discount in exchange of and increased turnover.

Joint purchase of raw materials

What is it:

The joint purchase of raw material could result in a discount from the suppliers based on the economy of scale principle and a simplification in the logistic.

Companies cooperation benefits:

The main differences are linked to the fact that while warehousing should be already planned by each company in its premises, this solution is appropriate only if several companies employ the same raw materials.

Moreover, this option is appropriate in case that the companies to be involved in such agreement are not direct competitor, otherwise they may be reluctant to share raw material price and/or supplier.

Joint insurance provider

What is it:

From the oil and gas industry to manufacturing, energy, telecom and other technology sectors face specialized risks that are peculiar to their work environment and the materials they handle. To cover these risks, manufacturing and production companies need industrial insurance risk protection.

Insurance cover primarily two kind of risks: those related to employees’ health and those more related to industrial activities. Worker insurance is a policy that covers an employee in case they suffer from a work-related injury that prevents them from working and earning income. The specific coverage plan facing each company needs will depend upon a range of factors, such as the materials it handles, risks in the work environment, risks to customers, and the size of its workforce.

Generally, an organization may need some combination of: general liability (bodily injury and property damage claims by non-staff visitors and customers), property insurance (damage to the building and grounds from a range of causes, including fire and severe weather), equipment breakdown insurance (protects the company from potential breakdown of electrical infrastructure and key pieces of business equipment that the company relies on for productivity), business interruption insurance (loss of income due to causes such as fire that require business downtime), product liability (claims against your company due to injury or illness related to the use of your products) and commercial vehicle insurance.

Companies cooperation benefits:

While it is clear that the specific needs of each company in the same park can be extremely different according to their production, products and size, a scheme similar to the one envisaged for the electricity supply, consisting in a negotiation phase with different provider as a cluster of company, could be effective in obtaining competitive prices for the different companies involved.

Consisting in a negotiation phase with different provider as a cluster of company, could be effective in obtaining competitive prices for the different companies involved.

Joint ancillary services providers

What is it:

“Ancillary service” it can be assimilating any service that is not directly integrated in the production activities, but it is nevertheless necessary for the normal course of company activities.

Some examples are:

  • Surveillance service
  • General building maintenance
  • Specialised maintenance

Every company usually have some personnel dedicated to these activities and/or they are subcontracted to specialised supplier. It is not uncommon that the surveillance services are subcontracted to the same society for the entire park.

Companies cooperation benefits:

It can be analysed how effectively it is employed (downtime analysis) and evaluated whether cooperative solutions such as multiple companies’ employment or operating in-park subcontracting could be viable options.

Moreover, a potential benefit could derive from a further standardisation of procedures and equipment in this framework due to a multi-company vision.

Creation of a park ESCO

What is it:

Energy service companies (ESCO) develop, design, build, and fund projects that save energy, reduce energy costs, and decrease operations and maintenance costs at their customers facilities.

In general, ESCOs act as project developers for a comprehensive range of energy conservation measures and assume the technical and performance risks associated with a project. ESCOs are distinguished from other firms that offer energy-efficiency improvements in that they use the performance-based contracting methodology.

The three main characteristics of an ESCO are:

  • Guaranteeing energy savings: A performance guarantee can take several forms. It can revolve around the actual flow of energy savings from a project, can stipulate that the energy savings will be enough to repay monthly debt service cost.
  • The remuneration of ESCO is directly tied to the energy savings achieved.
  • ESCOs can finance or assist in arranging financing for the operation of an energy system by providing a savings guarantee.

Companies cooperation benefits:

A joint ESCO could be created involving the different companies in the park, in order to exploit the assets already existing in the parks’ premises or to finance efficiency intervention inside the park.

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