Yu Share Discussion Threads

[powerslave1] 18/10/2021 15:50

I believe they were. They were also the no1 supplier for customer service, according to which.

[sparky333] 18/10/2021 15:39

Another domestic gone.Go to energy 22,000 domestic wonder if they are linked to CNG ?

[sparky333] 18/10/2021 13:22

Hedging is a great de riskier for times like this as we are all finding out but this does have negatives like when COVID hit and the price collapsed but that was due to the usages falling so dramatically In an ideal world the hedge was 100% match the usage so irrelevant but we are realists and this never happens and always margin for error in under or over hedging.It's the nature of the beast and always will be. Currently YU are reaping the rewards of back to back contract hedging but it cost them 1.8m in 2019 and now made them 1.2m so far.Ultimately all you can hope is that over say a 5 year period it evens out

[powerslave1] 18/10/2021 13:11

Thanks Sparky.

That is the key point for me, is this recurring income, as without it they remain loss making.

If the reason if that for some reason they are overhedged, and they remain that way, the next results will have a really big number in that box. But if their process remains the same it will turn to a negative in a falling market.

If it is a one off mtm gain on Bristol it will disappear once the Bristol contracts have expired. An equivalent deal with CNG wouldn’t give this benefit.

I’m interested in this point as it is fundamental to their profitability and I don’t understand why it is there and whether it will disappear in future periods……;

It certainly seems disproportionately large for a back 2 back hedged book of this size.

[sparky333] 18/10/2021 12:33

You seem to know your stuff, I am not into derivatives and that level of detail.Either way nice bonus which I hope is repeated

[powerslave1] 18/10/2021 12:27

Hey Sparky

So you think this is energy they have sold back because customers are consuming less, nothing to do with MTM profit on the Bristol deal( there was one, and it was pretty substantial, so is in the numbers somewhere, and is non recurring).

Remember that the big spike in prices came in September, the last results were for the half year to June.

My thinking was, average price in 2020 about 45/MWh, average price in H1 21 about 65.

The derivatives gain was 1.2m, so would have been power bought for 2.2m and sold for 3.6m (roughly, if the 45-65 2020-2021 delta caused the gain).

£3.6m is roughly 15% of the energy they would need to supply a £65m book.

Not sure why this would be an ‘unrealised217; gain, surely if it were sell back of an over hedge it would be realised.

This is why I think it relates to hedges bought for Bristol. E.g Bristol sold deals at, say, 55, and made, say, 5. Yu bought those deals unhedged, bought hedges separately at 45. The 5 margin on the normal deal sits in their normal p&l, the 10 one off mtm gain is the derivatives line, and is unrealised as the delivery period of the contract hasn’t completed yet. If this is correct the derivatives line will drop to £6-900k next time, as the hedge gradually delivers. If it is an over hedge, that is structural and continues it will be much higher next time……

[sparky333] 18/10/2021 10:14

How do you get 15% when energy has risen hundreds of percent ?So if clients average 90% usage in Q2 and they bought say £15m worth That is 1.5m they sell back which has risen 300% so they sell back for finger in the air 4.5m I am making these numbers btw But currently it is more profitable to sell back usages hedges that provide to the client so operating below estimated budgets is a good thing, but the opposite if they are consuming more than estimated

[sparky333] 18/10/2021 10:09

No idea powerslave all I know is they took a hit of 1.8m during lockdown as selling back bought power as clients used less.I assume the 1.2m is again selling back as they built back up towards normal usage as the energy price was rising fast from Q1 21 yet usage was still not at 100% If usage is still slightly below pre pandemic levels I see another large derivative gain coming.

[powerslave1] 18/10/2021 09:59

Does anyone have any insight into the £1.2m derivatives gain showing on the interim results.

I thought it reflected hedges bought to cover the Bristol acquisition (as the wholesale market was lower priced at that time, than when Bristol signed the customers). However the accounts say it reflects energy bought for customers, but not needed and sold back….. this doesn’t add up. To create that gain they would need to be selling back energy equivalent to 15 % of their supply. That wouldn’t be necessary with a back to back strategy

[sparky333] 17/10/2021 21:20

Agreed on CNG customer base being small 40,000 turning over £100m YU have 21,000 and will turnover at least 130m and maybe a lot higher heading towards 140m +

[powerslave1] 17/10/2021 19:18

I can’t think of too many competitors for the SOLR, Drax or EDF perhaps.

Not so convinced by the organic acquisition of CNG customers argument. They are 40,000 customers out of a 2m + customer market. Approx 100000 of those 2m will come to market in an average month. If you look closely at their most recent results, it appears that they haven’t picked up many (net)new customers in the last year. I’m not sure what would make these CNG customers any different.

Other thing is, for B2B, CNG’s customers are pretty small.

I guess I am saying, YU are doing pretty well, and if they stay stable should benefit from the struggles of other suppliers, but let’s not get carried away

[sparky333] 17/10/2021 17:27

Either way powerslave , one to watch and if YU do not buy the book for the reasons you state some will migrate over naturally and if SOLR YU can claim back any losses if they won that.

[powerslave1] 17/10/2021 15:31

Regarding CNG’s supply business, only time will tell whether they are hedged. However, I imagine the trade from would be Glencore sell to CNG shipper, CNG shipper sell to retailer clients, including CNG retail. Therefore ( and this is joining quite a few dots…..) if Glencore have pulled the plug in the shipper, causing them to go bust, allowing Glencore to cancel their trades, then the CNG retail business is high and dry.

The counter argument, that suggests this might not be true, Is that they are trying to sell. Unhedged the mtm is so negative that they would be crazy to even try and sell.

You are correct B2B isn’t capped.

[sparky333] 17/10/2021 13:13

Also B2B is not price capped by OFGEM as far as I am aware.

[powerslave1] 17/10/2021 09:50

Not fair to say bust domestic suppliers were badly run/unhedged. It is an unhedgeable price cap that has done for them.

Here’s the situation, early 2021.

Small domestic supplier has 100,000 customers, on fixed contracts. 5000 per month reach the end of contract. Most renew, some move to another supplier, a handful do nothing and move to higher priced cap. The proportion moving to cap is small and predictable, and can be included in hedging strategy.

5000 are hedged.

Wind forward to September. Market is up 300%. 5000 fixed deals per month seeing a choice between their £1000 fix moving to a new fix, at £2500, or taking price cap at £1300. Vast majority take price cap. Company cannot hedge this exposure, because cap is based on pricing window from historic period. During cap pricing period there were no signals to suggest market was going to spike, causing huge increase in cap hedge requirement.

Cap is Ill conceived and is causing well run small suppliers to fail

[powerslave1] 17/10/2021 09:39

If CNG is for sale without hedges it’s value would be seriously negative. Like -£200m negative.

If it is for sale hedged it will have some value.

The fact that Glencore have pulled the plug on CNG’s shipper business suggests the B2B retail business will be unhedged. In that case it will not sell, it will go into SOLR instead.

[sparky333] 16/10/2021 20:32

Glencore are not very nice but where owed a lot by CNG 35m I think.Bank rolling then further and losses would have been a lot higher, but I do see you point

[1me me] 16/10/2021 17:26

I think Glencore have screwed CNG. They purchased gas for around 50,000 customer (50p) and can now sell it for 250p Glencore chose to take a hit on their investment with CNG and flog this cheap has for a massive profit.

[sparky333] 16/10/2021 11:43

Both of you have very valid points it's is going to be interesting one way or the other .

[1me me] 16/10/2021 11:03

Managing debt will be an issue. Customers will see price rise of 300% over night. How many won't pay or cannot pay.

[sparky333] 16/10/2021 09:37

YU can take on 100,000 plus, the only issue would be migrating over they did 4000 in 48hrs if a very large batch would take weeks.Also they would need to bolster customer services significantly to maintain high standards.