Economy Power


There are high barriers to entry for new supply businesses and, five years after the market was opened to competition, the number of new entrant supply businesses can be counted on the fingers of one hand. The main barrier is the amount of ‘up front’ cash required for investment in IT systems and the bonds or security deposits payable to generators and distribution companies. These companies insist on cash deposits being placed with them and will not allow suppliers to trade if not. Economy Power tried to obtain £1million from a venture capitalist prior to trading but were turned down because, in their opinion, the firm was too risky! The directors of the company financed the company with little assistance from banks and lack of cash was the overwhelming challenge faced during the start-up phase of the business. As the business grew, many banks across the UK were contacted to attempt to agree a working capital facility, but without success. Ironically, the directors were put into contact with the Bank of Wales, only 600 yards from their offices. Whilst most banks felt unable to offer the firm any facility, the Bank of Wales offered Economy Power a £1.5 million facility, which has helped to grow the business. In 2003, the bank provide the company with an increased facility designed to enable the company to grow further. Current major customers include: Leonard Cheshire (the largest disabled charity in the UK); the University of Luton; Moben Kitchens; Kentucky Fried Chicken; Specsavers; Royal British Legion; Autoglass; Forestry Commission; and the Gap Group. As of October 2003, Economy Power is now in its sixth different office in Cardiff, occupying three floors in Churchill House in the city centre. It currently employs approximately 180 staff based in Cardiff and is approaching an annualised turnover of £90 million. It is a profitable electricity supply business and is looking forward to further growth in the future.

Success Factor

Economy Power chose a niche sector of the market, which has seen less competition and little reductions in price from existing competitors. As a result, the firm was able to offer lower prices to customers and still make a profit on each deal. The firm also generated a good team spirit and had a committed management team and staff. It kept its overheads low which also allowed the business to offer low prices on a profitable basis. Most importantly, Economy Power learnt the lessons of previous failures - for example Independent Energy - by ensuring that it had all the necessary information’ up front’ that would allow the firm to bill customers and hence collect cash. Without the industry standard data flows (which are often difficult to obtain), billing is difficult and without billing, Economy Power would not be able to collect cash.

The Future

The firm aims to develop Eco2 into a significant renewable energy generation company, primarily based upon wind farms but also opportunistically on other forms of renewable energy generation. The directors of Economy Power are currently considering offering a telecoms and a gas product to the small to medium sized business market, and it is likely that these products will be established during 2004.