Utilities like ScottishPower and Scottish Gas have come under renewed fire recently after announcing bumper profits that have rubbed salt into the wounds of many of their customers who have been struggling amid wintry economic conditions.
In this week’s SME Focus, a man who worked his way from the shop floor into a big job at ScottishPower before taking an entrepreneurial new direction joins the call for regulators to end the stranglehold that the giants now have on key markets.
Name: Bill McClymont
Age: 49
What is your business called?
Energetics Networked Energy.
Where is it based?
Hamilton, with an office in Warrington.
What does it produce, what services does it offer?
We design, build, own and operate utility networks for residential, industrial and commercial developments. Energetics Networked Energy is the holding company for three complementary divisions –Electricity, Gas and Design and Build.
To whom does it sell?
Our customers span a wide range including private, social and council housing developers, and industrial and commercial developers of projects ranging from broadcasting centres to sewage networks.
What is its turnover? £15m plus.
How many employees? 115 and rising.
When was it formed? January 2007.
Why did you take the plunge?
I saw it as a great opportunity to build a new business from scratch in an emerging and highly-competitive market. As an independent company working in an industry that has traditionally been dominated by ‘big guns’ such as Scottish-Power, EDF and Scottish and Southern Energy, I also recognised a chance to challenge some of the outdated and restrictive practices that have tended to dog the utilities sector, and in so doing providing what I believe is a first-class, value-for-money service.
What were you doing before you took the plunge?
I was running another multi-utility company – Core Utility Solutions Ltd (Core). I was responsible for establishing Core as a joint venture company between ScottishPower and Alfred McAlpine, the major construction and civil engineering firm. The company was formed in February 2002 and I ran the business as managing director until October 2005. At this time Scottish Power had a complete change of heart, going from its original position of wanting to exit the multi-utilities sector to playing a major role in it and decided to buy out the McAlpine shareholding.
The decision to take Core back in-house was probably down to the fact that the business had more than doubled its turnover, market share and staff numbers over the three and a half years I was in charge. With more than 700 experienced utility staff, ScottishPower probably wanted to retain operational control to service other aspects of its business.
But this wasn’t the direction I had expected or wanted to go. I decided to leave because I thought there was a real opportunity and demand in the market for an independent company such as Energetics to provide a comprehensive solutions service both in the residential and commercial fields. It was a wrench because I had worked with ScottishPower for more than 30 years, joining as a craft apprentice under its previous incarnation as the South of Scotland Electricity Board [SSEB] in 1977, but I’m glad I took the plunge. Before setting up Core, I held a number of senior management positions with ScottishPower and benefitted from their training and development programmes at prestigious business schools such as Harvard, Wharton, Kellogg and London.
I am proud of the fact that I began my career on the shop floor and worked my way up. The route I took has equipped me with real frontline experience and in this business, as with many others, there is no substitute for experience.
How did you raise the start-up funding?
The company is owned by four principal private shareholders, all of whom shared my vision and confidence that there was a gap in the market for something like Energetics. They provided the necessary investment to get the company up and running in the form of loans and have continued to support the operation.
What was your biggest break?
Securing the contract to design and build the primary substation and distribution network infrastructure at The Rock Triangle project in Bury, Lancs, a 47,000 square metre shopping and retail centre due to open this year. The £3m contract was delivered ahead of schedule and the client is delighted with our work there. The company has built up a portfolio of more than 500 utility networks across the UK and we are currently targeting a number of major contracts both in Scotland and south of the Border worth tens of millions.
What was your worst moment?
Getting through the credit crunch in 2009. It was tough for everyone but as a comparatively new company operating in a fiercely-competitive market it was particularly challenging. However, I am glad to say that we came through the recession with our business model intact. We didn’t clear people out when things got rough, we stuck by them and, largely because of that, we are in good shape to take advantage of the upturn in the market.
What do you most enjoy about running the business?
The freedom to manage the business without being bogged down in bureaucracy. Although we have been in business for just under four years, we are already the largest independent operator in the sector and I particularly enjoy the fact that we are able to compete successfully with some of the larger, long-established outfits. At the same time as growing the business, we believe it is vitally important to continue challenging barriers within the industry which stifle its potential and we have a very good working relationship with the industry regulator Ofgem.
I know that by challenging some of the old standards that have prevailed in the sector for a long time this does not always make us the most popular of people among the big guns, but I think that what we have already done in this field has helped make the industry far more competitive.
What do you least enjoy?
The long winter drives down the M6 to Warrington and the Midlands.
What is your biggest bugbear?
Dealing with professional services organisations who don’t understand the utility industry.
What are your ambitions for the firm?
I want to see the workforce quadrupling in the next few years and offering more apprenticeships and graduate placements.
What are your top priorities?
First, to secure further investment finance to support our growth plans. Second, to establish a strong market presence in the Midlands market. Third, to expand our skills base to cater for growth in market share. Fourth, to find investment for new IT systems and fifth, to expand customer offerings to include the management of renewable technologies.
What single thing would most help?
Urgent regulatory intervention is needed to create a more competitive electricity connections market across the UK. Recent data from the industry regulator Ofgem shows that in the 12 months to March 2009 only 5% of all new metered connections were owned and operated by independent network operators.
Over the same period in the gas market over 50% of all new metered connections were owned and operated by independent operators. Most of the problems stem from the fact that the independent operators have to rely on the monopoly companies to provide timely information on aspects such as connections charges to their network. In many instances the information can take months to come through, by which time customer-developers become frustrated and sometimes revert to the incumbent utility provider.
Also, when the independent operator is successful in securing a project we often find that the charges levied by the monopoly companies for using their network are so punitive as to leave the independent operator with little or no margin. These are examples of the kind of practices that we have been challenging. We have enjoyed some success but there is still much more to do and we will go on fighting our corner.
What could the Westminster and/or Scottish governments do that would help?
Affordable access to the capital markets remains a major concern for growing companies such as Energetics. Although there are banks willing to lend, all too often the levels of security required are so punitive they become a major barrier to securing working and/or investment capital. Government intervention is required in this area, perhaps through some form of extension to the Enterprise Finance Guarantee scheme.
What was the most valuable lesson that you learned?
Know your friends!
