Case Study

Client: National Restaurant Franchisee

Background: This client has seen energy demonstrate the fastest growth rate of all their expenses. Strategically they needed to hold in check their energy expenses for 2007 and early 2008 at the 2005 level. This was during a period of energy prices being about 15% higher than 2005.

Strategy: Monitor the market through our proprietary EnergyWatch Program© and identify a period of time (term) that would produce the desired results. We advised the client to stay in a short position due to the current Contango natural gas market. We evaluated the risk tolerance of the client and determined the product to fit the profile.

Results: Six months prior to the end of the client’s contract the EnergyWatch Program© identified a term that actually started two months after the desired start date, but still allowed a ten-month price to be lower than the 2005 fixed price. Hence, the challenge was reduced in finding two summer months (June & July) priced at the lower rate. As time passed no further opportunities presented themselves, so with the deadline approaching we met with the client and recommended a specialized product in the market. This product produced a high level of risk for the client, but on a limited basis was within the risk tolerance band of the client.

Bottom line, we delivered on a very tough goal to our client. Currently, the client is actually experiencing pricing less than the 2005 level they established as a goal.

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