Sale of Flow Group energy supply business moves forward
Flow Group, the listed Chester company which provides a range of innovative energy technologies, has entered into an exclusivity agreement for the sale of its energy supply business.
Having received a number of indicative offers for Flow Energy, the group has chosen a preferred bidder and entered into an exclusivity agreement, with a further announcement expected in a few weeks.
Flow Energy has customer fuel accounts either on supply or processing through the switching cycle of over 270,000, with annualised revenues of more than £135m.
In an update last month, the group admitted that gross margins for Flow Energy had come under pressure as it priced to compete with new entrants offering reduced tariffs to customers to gain market share.
It said it was investigating several new routes to market to reduce its reliance on price comparison sites but added that if the trend of new entrants offering reduced tariffs persists, its 2017 growth outlookwould be reduced.
Flow Group was originally considering the sale of its environmentally-friendly domestic micro combined heat and power boiler business.
Its Flow boiler is a gas-fired domestic boiler that generates electricity at the same time as it uses gas to heat a home, at less than 36% of the cost of electricity from the grid.
However, a long drawn-out Government review of feed-in-tariffs could have dramatically affected its commercial potentential in the UK.
In February the Department for Business, Energy and Industrial Strategy published its long awaited review of support for the microCHP Feed-in-Tariff (FiT), which concluded that the feed-in tariff rate would remain the same at 13.61p/kWh, while the proposed reduction in the number of units supported by the FiT from 30,000 units to 3,500 has been amended to a reduction to 15,000 over the remaining period of the to April 2019.
The company’s own review concluded that the microCHP business has the potential to be market-leading and that the work and investment that has been made in it should be preserved within the group.
Meanwhile, having received approaches, it decided that the sale of Flow Energy could provide sufficient funding for the microCHP business through to the point at which the technology is commercialised in Europe.
