Flow Group may sell pioneering domestic boiler business

FLOW Group has said it will consider selling its domestic micro combined heat and power boiler business, as a long drawn-out Government review of feed-in-tariffs could dramatically impact its commercial potentential in the UK.

The listed Chester company pioneered the environmentally-friendly microCHP boilers for domestic use. 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.

But a government review of support for the microCHP Feed-in-Tariff, whereby the number of qualifying microCHP units would be capped at a much lower level – coupled with increasing manufacturing costs due to the fall in the value of sterling against the euro and dollar – has forced the company to review its microCHP business.

A decision from Government on the scope of ongoing FiT support for microCHP was expected in October but any revised scheme will now not come into place until April 2017.

Flow Group slowed down the production of the Flow microCHP boiler in September and reduced the level of sales and marketing activity to offset the risks of carrying a large inventory of boilers that could be potentially uneconomic to support in the UK.

The company is now considering whether to further reduce production at its manufacturing partner Jabil’s production facility in Livingston, Scotland in order to prioritise the commercialisation of its technology in Europe ahead of the UK.

Flow is engaged in active discussions with French, Italian and German market players for the distribution of our technology.

“Whilst the uncertainty of the outcome of the consultation and the weakness of sterling has created issues, support for the technology in Europe remains very strong. Potential incentives vary across Europe, with Italy understood to offer personal tax rebates, while Germany provides grants and other tax incentives to support deployment of the technology,” it said.

If this is found not to be feasible, the group would consider the sale of its microCHP business.

The group also provides energy supply and energy services, and in the midst of all this uncertainty, its Flow Energy business has seen more than than 150% growth in customer fuel accounts this year, with £127m revenue in annualised sales.

Its energy hedging strategy provides protection against rising wholesale energy prices for both the customer base and the business, the group said.

Tony Stiff, group chief executive, admitted that the ongoing uncertainty around the  microCHP business was “frustrating” but added that the business is taking steps to find a solution.

He added: “While we do that, we are continuing to grow the business as a whole, producing good results in our energy business and generating the first sales of the Flow Eco RF boiler, both to new leads and to existing energy customers.

“This element of our strategy is very clear – to take advantage of a seismic shift in the energy market, and a heating market that is ripe for disruption, to deliver a successful company that spans both markets and generates significant value for customers and shareholders.”

Stiff underlined that while the microCHP technology platform has significant potential value for the business, it has built an organisation that can flourish without it, with diversification one of Flowgroup’s fundamental strengths.