Good Energy braces for challenging winter with heavy hedging strategy
The energy crisis is not over for retail suppliers, with companies continuing to adopt conservative hedging strategies ahead of winter as they look to navigate challenging market conditions driven by soaring wholesale costs.
Challenger supplier Good Energy has reported losses for its first six months of trading, funnelling a huge boost in revenues into funding customer’s energy supplies well into 2023.
The firm reported a hefty increase in revenues over the first six months of trading, which have climbed to £107.6m – reflecting a year-on-year spike of 58 per cent.
This was powered by higher energy bills for customers following record wholesale prices and additional fees levied on customers following a market crisis that has seen 30 suppliers collapse.
It has also completed the sale of its generation portfolio of wind and solar assets for £21.2m.
However, the funds have been allocated towards leveraging supplies this winter with wholesale costs expected to remain historically elevated from continued conflict in Ukraine and fears of supply shortages.
This means that, overall, Good Energy has posted a loss of £0.7m for the first six months of the year, a downgrade from profits of £4.8m this time 12 months ago.
It has also confirmed a steep decline in earnings per share from 20.5p to 7.4p.
This is despite the Government planning to pay the difference between wholesale costs and the proposed price cap freeze at £2,500 per year, which funded through a £150bn scheme to freeze the price cap for the next two years.
While this package protects customers, it does not protect suppliers which will need to continue hedging over the coming months.
Good Energy chief executive Nigel Pocklington told Morning Wire: “Whilst the Government Energy Price Guarantee is a welcome mechanism to shield customers from the high commodity costs of the market, it does not shield suppliers from its continued volatility.
“Robust hedging remains extremely important for suppliers to keep costs down wherever possible. Good Energy is successfully over 90 per cent hedged going into winter 2022, having built up the position each month, a strategy we will take into 2023.”
Alongside hedging, the revenue has been used to buff up its cash reserves, with the energy company remaining substantially debt free with a strong cash position of £22.2m.
The firm’s position and losses were seemingly expected by shareholders, with the company posting a 0.78 per cent gain in share price on the FTSE AIM All-Share this morning.
Good Energy continues investment plans
Good Energy is also continuing its plans to back future facing technologies such as electric vehicle (EV) servies.
It has continued to invest in the EV smart phone service, Zap Map, investing in its successful £9m fundraise with Fleetcor earlier this year.
It made an initial £1.08m investment in Zap – Map in 2019 for a 50.1 per cent equity stake.
Subsequent investment of £1m via a convertible loan was made in 2021, followed by a further £3.7m in the recent Series A round. Total investment made by Good Energy to date of £5.7m.
Good Energy now holds a 49 per cent stake in Zap – Map.
Meanwhile, customer numbers increased marginally in 2022, growing 0.8 per cent to 276.9k with a focus on collections and long-term relationships.
Overall Good Energy customer numbers increased by 0.8 per cent to 276,900 customers, although business customers dropped 10 per cent to 9,800 – feeling the pinch from the company’s premium model.
Customers at Good Energy chiefly pay via feed-in-tariffs, which operates at a slightly raised price from the price cap, with customers picking up energy from domestic indepednent suppliers.
Domestic customers under the price conventional price cap increased 2.6 per cent to 86,600 customers, while feed-in-tariff customers rose 9.7 per cent to 180,5000.