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Unique Feedstock Supply Chain Insurance Service

February 19, 2014

Savills and CLA Insurance provider R K Harrison, have developed a new insurance product to support developers and operators of bioenergy plants by providing insurance against lost income arising from previously uninsurable failures within the feedstock supply chain. According to research commissioned by the Department for Energy and Climate Change, by 2020 this supply chain will have grown to include 23 million tonnes of biomass feedstock.

If a feedstock supply chain fails, a plant has to seek alternative inputs to remain operational, potentially on the spot market, depending on timing, which can compromise its capacity to service debt or generate profits. Despite these potentially costly financial implications, traditional business interruption insurance, which covers loss of income as a result of physical damage, does not cover many of the risks a biomass supply chain faces.

Ashley Lilley, Associate Director of Savills Agribusiness consultancy, said: “Working with developers, funders and users it is very clear that, in many cases, the perception of feedstock supply chain risk has been holding back expansion and, more concerning for the industry as whole, the development of new biomass plants.”

The full supply chain insurance service incorporates insurance and risk management advice in a three phased approach:

 

This insurance differs from traditional business interruption insurance as it designed to indemnify the operator for any reduction in turnover as a result of an interruption or failure in the supply chain. This means it is not reliant on an event or damage as a trigger to the reduction and can include such risks as a supplier’s insolvency or inability to provide sufficient feedstock, political risks or extreme weather events, which are all excluded under traditional insurance.

Miles Thomas, Director and Head of Operations for Savills Energy, added, “By managing the financial implications of supply chain disruption, we think this product will help with the development of new plants in the pipeline, as well as potentially opening the door to interesting refinancing options for existing operators.”

For more information about feedstock supply chain management or to arrange a risk assessment. Please contact:

Ashley Lilley
+44 (0)1242 548 012
alilley@savills.com

Miles Thomas
+44 (0)20 3107 5466
mthomas@savills.com

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