ABB Grain's history dates back to 1939 as the Australian Barley Board. Following privatisation in 1999 and ASX listing in 2002, in 2004 ABB merged with South Australia's major storage and handling company AusBulk and its grower-owned holding company United Grower Holdings, to create the company that exists today, which employs over 850 permanent staff.
Expense Reduction Analysts started working with AusBulk in 1999 reviewing a number of cost categories and in 2004, ABB Grain engaged ERA to work with the company to implement findings of a detailed analysis of the energy and electricity requirements for the organisation.
The Cost of Compliance
For any large organisation, cost and compliance represent two of the main challenges associated with electricity and energy usage.
For many years in South Australia, the state electricity provider ETSA had run a tiered tariff system, which encouraged companies to operate with power factors of more than .85 in order to take advantage of better tariff levels.
ETSA launched a rigorous campaign to target companies operating meters under .85, enacting `incentive' charges for companies deemed to be non-compliant in relation to the Electricity Distribution Code of South Australia.
Many companies were issued with noncompliance letters from ETSA, including ABB Grain in 2006, which required the company install Power Factor Correction Equipment or otherwise fix their power factor.
ETSA provided calculations that suggested the payback on the necessary investment to bring the affected meters into line with new requirements would be four years. The payback period was exceptionally long for the necessary capital outlay, so ABB Grain requested a review and analysis of the figures.
Ultimately it was determined ETSA's calculations were incorrect and the payback period would be closer to 12 months, making it a viable and desirable opportunity for ABB Grain to move quickly to install the necessary equipment. The analysis also took a proactive approach identifying additional sites, previously not identified by ETSA as non-compliant, therefore ABB Grain was already actively addressing the requirements by the time ETSA issued its second round of notices.
Tender is the Supply
ABB Grain also used the expertise of ERA to review the cost of existing energy supply, following which ERA worked with the company to develop a tender document.
The tender was issued in 2004 (originally by AusBulk prior to the merger) and ERA was closely involved in the analysis of responses from the market.
Finalised at the end of 2004, the tender as awarded involved the supply of electricity to 342 supply points and the scale of the supply conversion has meant ERA is still working closely with ABB Grain to complete the project.
Six sites are still pending migration to the new supplier, which serves to underpin that getting control of electricity costs can be a long term, detailed process.
As part of the ongoing process conducted by ERA on behalf of ABB Grain, review of large sites has identified further opportunities to reduce costs. The largely seasonal nature of ABB Grain's business meant ERA was able to project likely consumption patterns and make a series of recommendations that would control demand from a number of large sites. ABB Grain has engaged ERA to implement the identified savings which have been significant and, importantly, achieved without any reduction in service standards or unforeseen, adverse consequences.
26-Nov-2007