Yü Group, the independent supplier of gas, electricity, meter asset owner and installer of smart meters to the UK business sector, has entered into a new structured trading agreement with Shell Energy, with an initial five-year term.
Entry into the hedging facility represents the conclusion of a twelve-month selection and due diligence process. The hedging facility replaces the previous arrangement entered into in 2019 with SmartestEnergy Limited.
The old facility enabled Nottingham-based Yü Group to effectively scale up and formed a key tenet of the Group’s risk management approach allowing the business to procure gas and electricity at fixed prices to support its growing customer base.
The unprecedented volatility in the energy markets, and Yü Group’s rapid growth, has recently resulted in the Group exceeding its available credit under the old facility resulting in the requirement for the Group to post cash on deposit to support its hedging strategy, with £49.8m posted as collateral at 31 December 2023.
The hedging facility with Shell Energy has several benefits for Yü Group. It is structured to allow access to commodity markets to support the Group’s ambitious growth agenda, and has the potential to support further expansion opportunities should they arise.
Further, while the Group meets its ongoing obligations in the hedging facility, Yü Group will not be required to deposit cash as collateral to support mark to market movements, due to energy price fluctuations, as has been required under the old facility. Finally, Yü Group will benefit from Shell’s considerable commodity trading access to liquid commodity markets, at market reflective prices.
Yü Group says the hedging facility “fundamentally transforms” its working capital profile releasing cash that would previously have to be held on balance sheet to support the Group’s robust hedging policy. £52.25m of cash previously lodged under the old facility has now flowed back to Yü Group, with further material cash benefits to be realised over the next month.
Bobby Kalar, Chief Executive Officer of Yü Group, said: “I’m very excited for the future of the Group and look forward to working with Shell Energy Europe Limited, one of Europe’s largest traders of gas, power and environmental products.
“This new strategically important facility is the result of a thorough selection process and is further validation of the strength and maturity of Yü Group following the extensive due diligence and stress-testing of our business model.
“The new hedging facility unlocks over £50m of cash currently posted as collateral and removes a material working capital constraint to the business lifting exposure to mark to market movements from future energy market fluctuations.
“This provides us with substantial strategic and financial benefits, enabling increased distributions whilst continuing to invest to deliver our ambitious growth agenda.
“I recognise it’s been a very busy period for my team and would like to thank them for their continued support. I look forward to the future with absolute confidence.”
