Never leave money on the table - CFOs get energy-savvy

Leading CFOs gathered for dinner at the exquisite Marble restaurant on 20 March 2018 to share insights and experience around the topic of energy efficiency.

”Energy efficiency projects are absolutely worth it and can improve profitability and preserve scarce energy resources,” said Sibanye-Stillwater CFO Charl Keyter, one of South Africa’s most eminent finance leaders. “With the 12L incentive we have returned significant value to the business and the bottom line. It’s far from fuzzy maths in our world.”

With leading energy services company BBEnergy as a sponsor, the Johannesburg dinner made for a high-quality and intimate conversation between finance leaders. How can CFOs become more energy-savvy? How do businesses make sure they don’t leave money on the table? All these questions and more received attention over a scrumptious multi-course meal.

After a 23-year career at Sibanye-Stillwater, there is very little CFO Charl hasn’t seen or experienced. “We’re a top-10 Eskom client and our business relies on increasing efficiency to ensure the best returns. Over the last decade we’ve reduced our electricity consumption by almost 20 percent through continuous improvement initiatives. Of course, global commodity cycles and Eskom’s reliability and cost challenges have forced this issue but it’s ingrained in our DNA as a business”

With CFOs all at different stages in their energy efficiency evolutions, the conversation was dynamic and practical. Loveness Khunou, CFO Dow Chemicals was the first admit that they are in the early stages and asked the other guests about how to build cohesion towards these 

“Buy in at the very top is essential - without it you may as well not even start. This can’t be an effort driven by finance or engineering alone” noted Charl, when queried by CFO South Africa MD Graham Fehrsen, who hosted the dinner with the newly appointed CFO community manager Liezl Berry.

With an impressive 18-year career at Afrisam, CFO Awards 2018 nominee Leon Serfontein was in full agreement, “We have multi-disciplinary teams that lead these projects and I stay close to all of them but it has to become part of company culture”.

 

 

The conversation then turned to consultants - every CFOs bugbear - and risk based engagement models. “This is a non-negotiable in our business, said Pushpender Singla, CFO Vedanta Resources and another nominee for this year's CFO Awards. "Any consultant that has a proposed solution must be prepared to have skin in the game and back their expertise to move the needle on our baseline measures. Without this we won’t even start and engagement.”

BBEnergy director Jurgen Prange and Tshego Sefolo, founding CEO of investor Agile Capital, brought their own unique insights into the discussion, with CFOs keen to get another expert perspective. 

“Once organisations see the benefits of the savings they tend to move towards pay per outcome or project models, probably feeling that they give too much away in pure risk/return models,” said Jurgen. “Our experience shows that this often leads to a slippage in the efficiency and I’ve lost count of the number of times we’ve been brought back in to help reset some of the simple behavioural practices”.

With the 12L rebate window expiring in 2020 there was some debate about whether there would be an extension. Much will depend on whether Eskom’s additional supply will come online soon which the experts around the table agreed would probably be the main factor in the extension. 

Either way, there is not time to wait. If your organisation is making a move towards improved efficiency and alternative energy sources it is only a matter of time before global pricing parity comes to bear on Eskom’s pricing and adds even greater costs to business. All the CFOs admitted that their organisations were looking at alternative energy sources to bolster their consumption.

As the evening wound to a close the questions was asked - If you could go back and do it again what would you do differently?

Charl Keyter identified some key lessons any CFO could borrow:

  1. Get your executive team to understand the strategic importance of energy efficiency rather than seeing it as a project. 
  2. Take your first step as soon as you can. 
  3. Partner with reputable organisations and share risk. You’ll never have enough knowledge or capital to do it all yourself.
  4. Keep the payback and implementation periods as short as possible (2-3 years). You’ll keep everyone honest and help your organisation make significant strides.