With companies around South Africa already sustaining significant financial setbacks as a result of the current five-week COVID-19 lockdown, returning to full operation and addressing profit margins are going to be top-of-mind for business owners for some time. For companies with processes that rely on refrigeration, switching to outsourced refrigeration or cooling as a service (CaaS) can be a meaningful step towards recovery of the business.
This is according to Cala van der Westhuizen, Head of Sales at EP Refrigeration – a division of Energy Partners and part of the PSG group of companies – who says that the COVID-19 pandemic and the current nationwide lockdown have forced many businesses to re-evaluate their largest cost drivers. “For refrigeration-heavy operations, cooling is a significant cost factor that is going to become much more difficult to bear.”
He notes that companies now need to put aside much more capital for unexpected additional costs, and there are still numerous challenges that lie ahead. “Switching to CaaS removes the need for capital expenditure while ensuring the lowest and predictable operational cost for cooling possible. Our clients only pay for the cooling they need at a guaranteed price. ”
Van der Westhuizen explains that CaaS is very similar to the Power Purchase Agreement (PPA) that many businesses have already become familiar with. “The service provider acts as the owner of the plant and sells the utility produced (refrigeration, in this case) at a guaranteed competitive cost. For a business that wants to switch to purchasing cooling as a service, rather than operate their own plants, partnering with a company like EP refrigeration can take one of three forms. We could build a new state-of-the-art refrigeration plant on the client’s premises, we could upgrade the client’s existing refrigeration plant, or we could simply take ownership of the client’s existing plant.”
The one thing that each of these scenarios have in common, according to Van der Westhuizen, is that it does not require any capital investment on the part of the client. “We take on all of the cost and risks associated with running and maintaining the plant. EP Refrigeration is a highly experienced refrigeration solutions specialist and for the past five years, we’ve been one of the foremost pioneers of CaaS both locally and globally.”
To this, he adds that a capable CaaS provider also plays an important role in improving overall cost efficiency – the CaaS product plays a significant role in improving up-time and temperature compliance. This improves product quality and reduces waste. “By allowing a company like ours to design and invest in the plant, the client is assured that the best technology is installed to ensure optimal efficiency (which is guaranteed throughout the lifecycle of the plant). By improving overall efficiency, the energy cost (which is the biggest cost of running a cooling plant) and maintenance costs are reduced. As the service provider guarantees the cost of cooling, the business is also reimbursed for the electricity used by the plant while only paying for the actual cooling used.”
One client that can attest to this is Lynca Meats CEO, Brent Fairlie. “Our operation consists of 28 temperature-regulated rooms that run 24 hour a day. Managing the refrigeration requirements of a facility of this scale had become increasingly time-intensive, requiring specialised knowledge. We realised that handing this managerial responsibility over to outsourced specialists would therefore be in the best interest of the business, as it would allow us to focus solely on the company’s core activities. This decision paid off almost immediately after the new installation concluded, with our business achieving a 30% reduction in the cost of our refrigeration”
With companies being under pressure to recover and adapt to an entirely new economic landscape, Van der Westhuizen says that there has never been a more important time to simplify operations and improve cost efficiency. “Whether it is food production, retail, farming or any other business, now is the time to focus on the company’s core skills, while putting essential utilities like refrigeration in the hands of experienced service providers. EP Refrigeration supplies direct support services to companies which qualify as essential services and it is our duty to continue to support these essential parts for our economy and our country. Energy Partners is powered by results and our core service support teams will continue to operate,” he concludes.