The production and transportation of energy is a highly capital intensive industry, with significant investment required in energy production and network infrastructure. As such, the needs of the end customer, and the retail businesses and markets that support them, can sometimes be forgotten. However, with innovative technologies now enabling customers to produce their own energy and better manage consumption, rising demand for energy services to meet these new needs, and increased competition in more traditional commodity retail markets, FTI Consulting has a team of dedicated professionals focused on this area.
How We Help
Working with our subsidiary, Compass Lexecon, FTI Consulting provides expert advice and testimony across a full range of complex competition and regulatory issues that arise within the energy sector. We use cutting-edge industrial organisation theory and sophisticated econometric analyses to understand the dynamic nature of energy markets, the interactions between consumers and energy providers and the implications of structural and regulatory change across the supply-chain. Clients seek our advice for:
- Understanding Market Dynamics. Energy suppliers are facing major changes in their business from both increased competition from new entrants and new technologies changing the way they interact with consumers. All this is happening alongside a continued stream of scrutiny from competition authorities and regulators. FTI Consulting and its subsidiary, Compass Lexecon are experts in understanding these changes and challenges and understanding how these markets work. Compass Lexecon specialises in competition economics with experience assessing issues relating to market power, closeness of competition, consumer behaviour, vertical integration and tacit-co-ordination in the context of sectoral investigations, merger analysis and antitrust proceedings. In a recent case, for example, we have worked with a large utility supplier in the context of a market investigation to assess the impact of new entrant pricing models on demand and to demonstrate the restriction on competition resulting from ineffective regulation.
- Consumer Behaviour. Politicians and the media have continued to focus on empowering consumers in their critiques of the retail energy markets. Understanding consumer behaviour is therefore key to engaging and shaping these discussions and in particular the remedies proposed by regulators to try and engage customers in the retail energy market. FTI’s subsidiary, Compass Lexecon has used industrial organisation and behavioural economic theory as well as economic modelling and econometric techniques to assess customer engagement and switching behaviour in response to pricing levels, pricing structures and product offerings. Recent work has, for example, used econometric analysis to consider both the magnitude of bill savings that would trigger a consumer response and consumer preferences for price and non-price product attributes.
- Pricing & Profitability Analysis. At all levels of the supply chain, energy producers and suppliers are facing competing pressures to cut costs, meet regulatory requirements and improve efficiency and services. Fundamental to understanding the implications of these is pricing and profitability analysis. Our subsidiary, Compass Lexecon and FTI Consulting have undertaken detailed assessments of earnings, return on capital, efficiencies, asset valuations and profitability benchmarking. In a recent example, FTI Consulting has undertaken an analysis of the cost and margin assumptions used by a National Competition Authority in its profitability benchmarking in order to both rebut the analysis and understand the implications for our clients’ future earnings.
- Regulatory Interventions. The energy market faces a complex and changing matrix of regulatory requirements. Understanding the interplay between these regulations and the, potentially unintended, implications on consumer and supplier behaviour, is vital to helping suppliers work proactively with regulators to ensure any interventions are effective without resulting in unnecessary restrictions. FTI Consulting and its subsidiary, Compass Lexecon work with clients to provide the analytical frameworks and modelling to demonstrate the impact of regulatory intervention as well as providing the strategic support needed for energy companies to effectively engage with and shape their regulatory environment.
Performance Optimisation, Merger Integration & Interim Management
FTI Consulting has deep expertise in enhancing company value. We have extensive experience across the deal lifecycle and with critical corporate situations that gives us a clear perspective on where value exists and how it can be optimised. We consider deal structure, industry sector and specific client requirements such as filling management vacancies to customise the integration approach to deliver maximum value. Clients seek our advice for:
- Interim Management. The success of a restructuring, merger, acquisition, spin-off or divestiture may depend on how quickly management voids can be filled or missing management capabilities can be added for a certain period. The seasoned energy professionals with C-level experience at FTI Consulting are prepared to fill the void when clients face leadership, financial or operational challenges. At a moment’s notice, our experienced senior executives assume C-level roles, providing the leadership and strategic decision-making ability to transform companies processes or organisation, maintain momentum, establish corporate priorities, build morale and provide critical continuity. Our C-level executives serve in the following roles: Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Restructuring Officer, Controller and Treasurer.
- Project Management & Optimisation. Companies often lack the resources to properly manage the budget and timetable for critical programmes. FTI Consulting is able to offer those resources to ensure that a client’s budget and timeline are met. Through our exclusive Project Management Office (PMO) approach, we identify the root costs of deviations, define measures to get back on track, and support the implementation of those measures. We also set up a specific governance structure to track the implementation of the measures to assure that final targets are achieved. All of this is based on our long-term experience in these situations and secures, and that results are achieved with minimised additional workload for key staff.
- Profit/Operational Improvement. Companies that have a retail energy business that is up and running but not meeting expectations — i.e. disappointing cash flows, technical failures, etc. — call on the highly experienced professionals at FTI Consulting to analyse existing conditions and propose and implement financial and operating improvements. This process helps our clients maximise efficiency and achieve improved profitability levels and operational standards. Based on our long-term project experience we identify the most relevant operational improvement levers and secure that they are successfully implemented.
- Cash & Working Capital Management. For energy retail companies it is critical to manage cash and working capital. The difficulty is that many companies do not have the resources or the experience to develop the required methods and processes. Drawing on our extensive experience with energy retail clients, FTI Consulting is often called upon to help. Our professionals include energy retail experts with strategic, operational and financial background to provide a realistic, fast and optimised plan to improve cash and working capital positions. We customise cash flow forecasting, modelling, monitoring processes and working capital management. Most evaluations of working capital management require inventory control. We ensure that minimisation of inventories is done without jeopardising the client’s production process. Our experience guides us in developing and implementing capital optimisation strategies for our clients that are practical and operational.
- Merger Integration & Carve-out Planning. The success or failure of a merger usually depends on what is accomplished after the deal closes. Merger integration of cultures, processes, organisation, assets, personnel, IT, and business activities is a complex process that can take months or years to complete. FTI Consulting professionals, in our Corporate Finance and Economic Consulting Practices, have wide experience — in the retail energy and related industries and can provide the critical integration support necessary to sustain the merged business’s operational and financial performance. Where a retail energy company needs to acquire only a portion of another retailer, FTI Consulting carve-out specialists can prepare a deal that will deliver the right people, the right assets and the right infrastructure to the acquiring company and then follow up with the integration of the carve-out assets.
- 100-Day Plans. In transformation phases, for example, when a new CEO, COO or CFO joins a company, there are many issues that need to be addressed and prioritised urgently, reviewed quickly, or tabled until later. Due to our established experience, we are often called upon by new management of a retail energy company to create a plan for the first 100 days. This is very detailed and structured, and prioritises specific tasks. It is also accompanied by an actionable plan for key tasks. The plan incorporates past efforts with current needs that support attainable goals, including responsibilities of others involved and a related timeline. The result is a fast, controllable and efficient ramp-up or change process for new management.
Operating effectively in retail energy markets has become increasingly complex. With incumbent utilities being challenged by new entrants, innovative technologies allowing energy consumers to become more empowered and mass participation in smart metering and community energy schemes, effective strategies to create value are ever more important. Clients seek our advice for:
- Strategic Market Entry. When retail markets were first liberalised across Europe, the business of supplying energy to customers was largely dominated by the incumbent utilities. More recently however new players have been entering these markets to challenge incumbents, both on price and customer service, but also by offering innovative new products and services. FTI Consulting specialists have helped a range of new entrants identify and exploit gaps in the market and secure market share. This support is built around defining and executing on a competitive differentiator, e.g. low cost on-line only customer service, community energy led, pre-payment customer focused, enabling customer self-generation, and offering other innovative products and services. Our professionals have also advised incumbent utilities in one country on entering markets in adjacent countries, requiring new strategies more focused on “attack” than “defense.”
- Strategic Decision Making – War Gaming. Energy retailers are increasingly facing major change within their markets, ranging from threats due to greater competition from new entrants and regulatory interventions, to opportunities from deploying breakthrough technologies. FTI Consulting helps retailers navigate such changes and make informed decisions through its War Gaming capability. In a recent example, our professionals supported a large utility facing the threat of major pricing regulation. War gaming allowed the client to “play” different competitors and other stakeholders (e.g. government and regulator) in a real-time game. The game enabled them to test different strategic responses to the potential regulatory interventions they faced and assess optimal responses to each. The work included development of an economic model to assess how price, investment and strategic choices made by different players impacted market share and EBITDA across a range of different scenarios.
- Customer Segmentation. Customer segmentation is critical, both for existing players defending market share and new entrants planning to enter and compete in a market. For incumbents, identifying the most valuable customers and which are at risk of leaving for a rival supplier is key. FTI Consulting Retail Energy professionals provide the advanced data analytics to segment customers, and insight to develop strategies to retain them, e.g. through changing pricing, product or customer incentives. Equally, FTI Consulting supports new entrants in deploying the same analytical tools to segment and target those specific customer groups most likely to be attracted away from the incumbents.
- Product Development & Innovation. Retail energy has become highly commoditised, making retailers ever more keen to differentiate themselves, either through pricing, product or customer service. Companies are also differentiating themselves in new ways by offering customers a range of energy services. These include higher efficiency boilers, home-generated power, and home energy management products (often linked to smart meters). Companies deploying such services generate value by enabling customers to take more control of their energy needs and reduce their usage and costs. FTI Consulting Retail Energy professionals have helped utilities take advantage of these innovative offerings and move beyond technology-only products to develop integrated services that generate value for both the customer and the retailer.
- Smart Metering. One of the most significant trends in the retail energy sector is the deployment of smart metering, both to help customers control their usage, and to enable energy distributors to manage their networks more efficiently. Often driven by a policy or regulatory mandate, the objectives for a smart metering rollout vary country by country. Some deployments are more customer-focused and designed to enable consumers to access benefits from reduced energy consumption and more accurate billing, and act as a platform for home automation. Other deployments however are designed to provide data for network and grid operators to allow them to plan their investments more efficiently better manage outages and control energy flows more effectively. FTI Retail Energy professionals have advised large utilities on smart metering (commercial strategy, regulatory engagement and business case), as well as smaller players focusing on communications technology, asset financing and field force solutions.
- Community Energy. Often there are challenges in securing local community acceptance to operate or to build a new energy asset. One way of overcoming or mitigating this challenge is to enable local residents and/or business owners to benefit financially from the asset. Rather than just consuming energy, these customers can also become part-owners through a split in the revenues or profits from producing the energy. FTI Consulting advises utility clients on how to develop community energy projects and engage communities, for example through the design of new financial structures that enable local communities to actually own a share of a retail energy installation or facility. Our professionals have evaluated a broad range of community benefit schemes including shared revenue, split ownership, crowd-funding and use of structures such as Cooperatives, Community Benefit Societies and Community Interest Companies.
The Retail Energy industry team within the FTI Consulting Strategic Communications Practice includes sector experts with experience representing a broad range of organisations and companies, from start-ups to multinationals. Our clients benefit from the team’s relationships with key influencers to seize opportunities, manage crises, navigate market disruptions, articulate brands, stake a competitive position, and preserve a client’s permission to operate. We have the breadth and depth of experience to help clients clarify, persuade and ensure that the right message reaches the right audience at the right time. Clients seek our advice for:
- Corporate Communications. Historically, the energy industry in general and its participants have not always communicated their narrative as effectively as they could. External communications have often been non-existent or guarded at best. As a result, corporate reputations and public trust in the industry has become low. Companies need to tell their story, not just after a regulatory fine or some other crisis, but on an ongoing basis to communicate what they’re about, what they’re doing (and why) and why they are competent and can be trusted. Corporate communications essentially boils down to undertaking the everyday “heartbeat outreach” to build, sustain and defend an organisation’s reputation. FTI Consulting Strategic Communications professionals are highly experienced and well equipped to help individual companies and entire industry sectors defend their licence to operate by highlighting innovation, sustainability, corporate responsibility and the enormous economic contribution they make to society, both as employers and providers of essential services.
- Financial Communications. Financial communications tend to be either defensive or offensive. On the defensive side, for example, companies may be experiencing a declining share price or a rising bond price. FTI Consulting Strategic Communications professionals are experienced at reaching and communicating with those stakeholders that influence financial performance — investor institutions, mutual and hedge funds and security analysts. It is critical that these audiences receive and understand a company’s key messages about corporate strengths, management strengths, corporate strategies and steps being taken to improve corporate performance. On the offensive side, financial communications should be ongoing, reinforcing the same company key messages — corporate strengths, management strengths, corporate strategies and steps being taken to improve corporate performance — usually in support of an IPO, acquisition, or to simply sustain existing share price performance.
- Private Equity. FTI Consulting has represented private equity clients in the retail energy sector both proactively and reactively. Whether our client is a company that is the target of a hostile takeover or a private equity firm or hedge fund attempting to acquire a retail energy company, we perform the same level of reputational due diligence. Our Strategic Communications professionals provide unparalleled business intelligence/privileged insight for client management and counsel. We then develop possible representational outcomes and apply our expertise in transaction communications, investor relations, public affairs, digital media and employee engagement.
- Issues & Crisis Management. There are basically two types of crisis situations — a crisis of reputation where important audiences are losing faith in a company, its performance, and its leadership; or a high impact/low probability crisis, such as an explosion at a production facility or the death of a senior executive. To help clients prepare for such eventualities, FTI Consulting professionals take a campaign-like approach to these challenges, closely coordinating with management teams, as well as legal, financial and other advisers, to provide strategic counsel on all aspects of internal and external communications. We help identify, prioritise and track issues — economic, financial, political, industrial, or technical — that can impact on the client’s performance, its reputation, and its value. We then advise on how to address them proactively to achieve a positive outcome.
- Stakeholder Communications. Companies must consider each stakeholder group separately to engage in a proper dialogue with them. It is critical that all stakeholders are identified, including the less obvious. FTI Consulting strategic communications specialists research all possible stakeholder groups, not just establishing who they are and how important they are to the company, but also what they want and need to know and what information the client can give them. This includes examining how our client has been communicating to them in the past and what it should be saying to them today and in the future. In addition, and just as importantly, clients need to listen to their stakeholders so that relevant messages can be crafted and addressed to each specific audience. FTI Consulting analyses and prioritises stakeholders and messages and develops programmes for clients that help facilitate audience-specific messaging to create a proper dialogue with those stakeholders with the greatest financial influence on the client’s business.
- Public Affairs & Policy. Legislation and regulation have an enormous impact on the retail energy industry. As a result, political stakeholders, elected representatives at local and national levels, civil servants, people who work within the executive arm of the government, advisers, policy think tanks, commentators, and academics all play an important part in the public debate on energy issues. It is critical that a retail energy company’s communications help it be better known among these groups, help it be listened to more, and help its interests be better understood when decisions are being made that affect its business. FTI Consulting works both with individual companies, and their trade associations, to seek to affect government policy regarding permitting and licensing issues for retail energy operations, as well as issues affecting existing installations such as State Aid, patent discounts, etc. We also conduct grassroots campaigning in local communities to overcome potential resistance to a client’s new installations or assets.
- Research. The reputation of a company or organisation rests on the opinions of stakeholders such as investors, partners, employees, the media, customers, policymakers and the general public. Insights gained through research enable retail energy clients to better understand how their reputation impacts key organisational goals such as raising capital, attracting employees, evaluating new markets and maintaining credibility in crises. FTI Consulting uses a unique set of analytical tools to measure stakeholder beliefs and track progress based on reputational goals. Our research provides a fact-based approach to the conception, execution and measurement of corporate messaging. By understanding current stakeholder attitudes, clients can develop optimal messaging and the channels to convey it.
- Government Relations. Legislative and regulatory pressure is becoming more prevalent in the retail energy sector, which increases a company’s compliance obligations and can jeopardise its licence to operate. Managing political risk is a growing imperative for effective corporate governance and business planning. FTI Consulting combines public policy, capital markets and sector-specific expertise to offer a unique capability for retail energy clients operating at the critical intersection between business and government. Our involvement can extend from specific retail energy issues to on-going government campaigning in support of client positions on tax, environmental or public policy issues.
- Competition Investigations. From time to time, participants in energy retail markets may find themselves involved in some way in competition investigations relating to alleged antitrust violations, regulatory scrutiny of an M&A transaction, claims of state aid, or sector inquiries. Communicating effectively to the press, to relevant regulatory and legislative stakeholders, and to a firm’s investors and employees is a key component of protecting the firm’s reputation, allowing the business to function normally while the investigation is ongoing, and securing a rationale outcome. In these situations, FTI Consulting Strategic Communications professionals specialise in helping clients to interact constructively with political and regulatory audiences in articulating the larger business and political contexts in which the company operates, and the ways in which the public benefits as a result.
- Rebranding & New Message Development. Rebranding can be a defensive or offensive strategy for a retail energy company. The company may need to distance itself from a negative perception that exists in the minds of consumers, investors, competitors, and other stakeholders. On the other hand, the company may want to communicate a new corporate strategy and messaging that the old brand cannot support. In either case, rebranding usually involves radical changes. FTI Consulting Strategic Communications specialists work with our clients to develop a consistent message framework for addressing key issues that affect the new brand. At the same time, we take a structured, research-based approach to identify, map and prioritise stakeholders to help create tailored messages that will strengthen stakeholder support. We can then develop the new brand's logo, name, legal names, image, marketing strategy and advertising and public relations themes.
Even though there are taxation principles widely recognised and applied on an international and global basis, much of tax law is specific to local jurisdictions. It is important that energy retailers have access to local tax advice and this is particularly so with the myriad of energy sector specific measures. FTI Consulting has a team of international tax professionals and a network of local tax law specialists. Clients seek our advice for:
- Transaction Tax. Retail energy companies involved in mergers, acquisitions, divestitures, or restructuring face a myriad of costs, including taxes related to the transaction. Transaction taxes can be direct — corporate and energy sector taxes — and indirect — VAT and stamp taxes. FTI Consulting professionals, ideally armed with vendor due diligence and buy-side due diligence, develop strategic solutions to tax issues that present possible risks or opportunities in the transaction. Our goal is to help our clients understand and optimise their position. Supporting this goal is the recognition that many retail energy companies operate in more than one jurisdiction. In these cases, we work with local tax advisers as part of a Global network known as WTS which covers more than 100 jurisdictions.
- International Tax. When dealing with international tax matters, it is vital to combine local law with the international tax framework (particularly around ownership and financing issues) and the nuances within the retail energy sector. FTI Consulting has a team of seasoned International Tax professionals and through its global network has access to local tax law specialists in more than 100 jurisdictions. These teams work together to successfully deliver realistic and pragmatic advice across energy sector projects.
- Corporate Tax Compliance/Reporting. It is important that retail energy companies have access to local tax advice that can support them in managing their tax obligations. FTI Consulting, along with its international network of local tax law specialists, are able to essentially act as an outsourced tax department to assist retail energy clients with their corporate and indirect tax compliance and reporting.
- Research & Development Tax Solutions. The retail energy sector has benefited from various R&D and intellectual property incentives in different parts of the world. In addition to tax credits for R&D, there are opportunities like “Patent Box” regimes in a number of jurisdictions designed to encourage R&D and innovation. However this landscape is complex and difficult to navigate, with government subsidies changing and sometimes drying up altogether. FTI Consulting has accounting and tax professionals who are well versed in the changing R&D tax environment. We advise our clients on current tax conditions and the future planned changes, giving them the insight to make intelligent R&D decisions and investments.
- Transfer Pricing & Tax Valuations. Transactions should take place at an arm’s length price because, otherwise, the parties, acting together, are in a position to use pricing to manipulate where profits are realised. The natural inclination is to realise profits in lower tax jurisdictions. FTI Consulting has a team of economists and tax specialists that has extensive experience in all aspects of transfer pricing and tax valuations, from tax authority audits to comprehensive transfer pricing studies supporting complex transactions and Advance Pricing Agreements.
- Tax Policy & Strategic Communication to Stakeholders. Tax policy and tax strategy have become much more of a boardroom and a stakeholder issue in recent years. Approaches to tax management that were accepted as commonplace in the past are now being seen through a different lens and are having a material impact upon our clients’ businesses. With more stakeholders scrutinising tax strategy and tax policy, both within and outside the corporate world, FTI Consulting Tax and Strategic Communications professionals now work closely together. Our collaboration supports boardroom understanding and generates targeted communications efforts that ensure that stakeholders (including tax policymakers) know and understand our client’s position.
Transaction Advisory & Restructuring
Regardless of where a retail energy company may be in the deal cycle — from pre-announcement planning to post-merger integration — FTI Consulting professionals, whether representing buyers, sellers or lenders, offer comprehensive due diligence advice and hands-on support in evaluating opportunities across the risk/return spectrum. As part of a global consulting firm known for success in high profile, high-stakes transactions, we help our clients maximise value and minimise risk. Clients seek our advice for:
- Restructuring and Refinancing Lead Advisory. Whether a client’s transaction is a restructuring or refinancing of its existing debt obligations, it requires someone at the centre of the deal, making it happen. FTI Consulting professionals have functioned as lead adviser in countless energy retail restructuring and refinancing transactions. We start at the very beginning in terms of articulating the transaction rationale and developing the process and timetable, and then leading that process through all phases. Typically, the process has two core stages — a financial due diligence stage, in which identifying and sharing all relevant financial information is identified; and a lead advisory stage, in which we coordinate the client’s efforts to liaise with the shareholders, financing parties (existing and incoming), their lawyers, and their stakeholders. Our goals as lead adviser are ensuring that the process runs smoothly, that the process unfolds on the established timetable, and to extract maximum value for our client.
- Financial Due Diligence. Retail energy companies face transaction opportunities and challenges across the entire risk/return spectrum. Most are inexperienced and ill equipped to understand or manage the demands of these opportunities or transactions. FTI Consulting professionals are well-placed to lead our clients — buyers, sellers and lenders — through an entire transaction life cycle, offering comprehensive financial due diligence advice and hands-on support, including — quality of earnings analysis, underlying working capital and net debt profile, forecast sensitivity analysis, and Sale & Purchase Agreement advice to name a few. The result is that our clients complete transactions that are sound and sustainable.
- Contingency Planning & Insolvency. The ultimate goal of contingency planning for a company in financial distress is value preservation. A well-conceived plan will help a company minimise adverse impacts on its business; will help the company act quickly to attempt to avoid creditors unilaterally derailing a turnaround plan; and will help company management and directors identify viable plans to avoid insolvency (a credible “Plan B” may be necessary in order to persuade stakeholders to support a “Plan A”). FTI Consulting has a large Insolvency and Failing Businesses Practice and has the resources to provide any retail energy company in any kind of financial distress with a comprehensive contingency plan for recovery.
- Stakeholder Management. A merger, acquisition, divestiture or major restructuring will have a significant impact on a company’s stakeholder communications. FTI Consulting Strategic Communications professionals are widely experienced and well versed in stakeholder management. Since it is imperative to the success of the transaction to have open channels of communications with stakeholders, we help our clients keep them fully informed, we develop key messages, we also listen to fully understand stakeholders’ positions and concerns, and we bring stakeholders together when necessary to talk to each other. We also act as a conduit for negotiations, we deliver hard messages, and, quite often, we help those who are inexperienced in mergers, acquisitions, divestitures or major restructurings (CEOs, CFOs and various stakeholders) to better understand the processes and nuances that can affect the transaction outcome.
- Crisis Stabilisation. Crisis stabilisation tends to come into play shortly after a company begins to have liquidity and cash flow problems. Many companies have not experienced this challenge and those that have could probably have handled it more effectively. FTI Consulting has professionals who know how to create a stable environment by starting to manage cash flow and working capital, and negotiating waivers and ‘standstills’ to avoid rushes to recover assets. If the crisis is more serious — facility closures, redundancies, etc. — our crisis stabilisation professionals help clients prepare to communicate with employees, local and regional and national politicians and regulators, the public and the media about what the company is doing, why it is doing it and what effect it will have on restoring the company’s health and stability.
- Vendor Assistance. Vendor assistance is essentially M&A support for the seller in the sale of a project or asset. FTI Consulting professionals are well versed in providing vendor assistance services to clients, including helping vendors with presenting consistent and comparable financial information, highlighting key trading trends, assisting with quality of earnings analysis, and challenging forecast assumptions to ensure robustness, before providing such information to potential buyers.