In cooperation with the insurance broker Aon Risk Solutions, the energy law firm Becker Büttner Held (BBH) has developed a concept allowing energy supply companies to effectively minimise their financial risks in the event of non-recoverable receivables or transactions contested by an insolvency administrator. By means of a risk management process advised on by BBH, companies and their procedures are structured so as to effectively transfer to an insurance company the risk of bad debt or repayment claims of an insolvency administrator.
A modular advisory process will minimise the risks municipal utility companies are exposed to and make them more calculable. BBH’s task in this process is to make sure that municipal companies qualify for insurance or, as the case may be, retain their insurance policy. Insurance policies against credit default stipulate strict criteria that are principally hard to meet for municipal utilities. One condition, for example, is that a request for payment be sent out once a client has been in default for 14 days. “We conduct an individual analysis of each company as well as an in-depth risk management procedure thus laying the foundations for companies to effectively transfer their risks to an insurance company,” says BBH Partner Oliver Eifertinger, who established the cooperation with Aon Risk Solutions.
The Teldafax and Flexstrom cases show that municipal utilities are regularly facing outstanding payments under energy supply contracts as well as a higher risk of transactions being contested when companies are subject to insolvency proceedings. In the Teldafax and Flexstrom cases, the insolvency administrators requested the repayment of high amounts of grid charges and tried to enforce these contestation claims in court. BBH alone represents more than 200 grid operators in the Teldafax and Flexstrom proceedings in court. In such insolvency proceedings, the total repayment claims may easily amount to between six- and seven-digit figures. Therefore, it may be favourable for suppliers and grid operators to identify financial risks of such nature and to transfer them to an insurance company in advance.
“With Aon, the market leader in this area, we have an experienced and strong partner at our side and are able to offer customised hedging solutions. Municipal companies now have a chance to benefit from such models”, says Mr Eifertinger.
Becker Büttner Held is a leading provider of advisory services for energy and infrastructure companies and their customers. Energy and supply companies, particularly public utilities, municipalities and local authorities, industrial companies and international groups are among its core clients. BBH advises these and many other companies and organisations in all legal matters and also assists them with business and strategic advice.
Oliver K. Eifertinger
Lawyer, Tax Advisor, Partner
Tel + 49 (0)89 23 11 64-180
Dr. Ines Zenke
Tel +49 (0)30 611 28 40-179