Small energy companies are going bankrupt at an alarming pace as natural gas prices rise, making power prohibitively expensive
However, Yu Group, a £40 million AIM-listed minnow, is defying the trend. The firm announced today that revenue increased 44 percent to £65 million in the previous six months, resulting in a profit of £920,000.
Bobby Kalar, the company’s founder and CEO, told the Standard today, “I sleep good at night.” “I’ve got a good hedging book up to 2023,” he says.
Yu was able to escape the discomfort of rising power rates through hedging, which is the practice of purchasing electricity in advance at set pricing. But one of the main reasons is that Yu is in the commercial energy and utility industry, which means it is protected from the consumer pricing restriction, which has hit many businesses hard. Household-serving businesses are banned from raising prices sufficiently to bring them in line with wholesale pricing.
“The price restriction is putting a lot of pressure on suppliers,” Kalar remarked.
However, the price cap isn’t the only problem. According to Kalar, many smaller businesses do not hedge.
“They are selling a thing, but they are not purchasing it.” That’s a fantastic approach in a declining market, but you don’t want to do it in the commodity market.”
Experts predict that up to 50 suppliers might go out of business this year, with clients being moved to competitors. Yu, who is headquartered in Nottingham, is reported to be sniffing about for purchases, according to Kalar.
“In terms of the opportunity, there is increasing hunger,” he added. “There are B2B providers that are cash-strapped, and there are B2B suppliers who haven’t hedged their bets.”
Yu has looked at a few previous failures, but the most of them included both consumer and business accounts, and Kalar has no desire to enter the price cap industry.
He cautions that rising energy costs might last “a couple of years” as wealthy Asian and Latin American consumers pick up shipments of liquefied gas.
“I’m really cautious,” he explained. “We’ve got an issue if we have a cold winter this year.”
Yu’s stock is up 0.8 percent today.