Andersen

The energy crisis marked by soaring prices for gas and electricity has confronted many companies with daunting challenges. Its impact extends beyond operating and production costs and includes the reliability of business relationships with customers and suppliers. Indeed, the energy crisis is bringing considerable change to relationships with employees and to risk management, compliance, and finance – change that demands a response from every company.

At the same time, companies can tap into many support and funding programs from local, state, federal, and European governments in order to better weather the crisis or at least retrospectively obtain compensation for financial losses.

To help you tackle this challenge, Andersen has developed an “Energy Crisis Quick Check” that encompasses law, taxes, and finance. It can be completed reasonably quickly and provides an initial sense of what tasks your company faces so that you can discuss possible solutions with us.

Our Energy Crisis Quick Check covers the following areas:

Review of your key contracts with electricity and gas providers

• Are announced or implemented price increases, terminations, and (mandatory) switches to less favorable rate plans lawful?
• Would it be allowed to unilaterally reduce the contractual supply volume or even stop supplying gas or electricity completely?
• Initiation of immediately effective legal action against the breaching energy supplier in order to prevent damage to your company
• Defense against unlawful pressure tactics

Supply chain disruptions with your key suppliers

• Ability to take action when deliveries are late or short
• Applicability of special contractual clauses (e.g., force majeure)
• Defense against unjustified requests to adjust prices

Impact on contracts with your customers

• Continued obligation to take delivery in the event of a price increase
• Your customer’s options to terminate the contract due to the energy crisis
• Action to take if your customer appears likely to default (collateral check)
• Managing price risks in tender procedures

Special considerations regarding your commercial real estate leases, development and construction projects

• Passing on skyrocketing gas and electricity prices to tenants, subtenants, and other occupants of commercial real estate
• Restrictions on supplying energy to leased properties
• Modification and early termination of commercial real estate leases as well as project development, construction, and planning contracts due to steep increases in gas and electricity prices
• Options for modifying services and prices due to the crisis (e.g., price escalation clauses for wages and materials)

Support for successful crisis management

• Business analysis and execution of stress tests based on various scenarios
  - Determination of the impact on contracts, cash flow and continued operation of the company
  - Development of options
  - Development of tools for continuously monitoring future developments
• Recommendations for reducing and avoiding personal liability risks for managing directors and other officers

Impact of the energy crisis on existing employment relationships

• Use of flexible working time models and short-time work to adapt staffing requirements
• Introduction of required work-from-home days
• Required wintertime personal/company vacation to minimize staff downsizing due to the energy crisis
• Lowering of temperatures in your company’s offices and production areas
• Payment of the tax-free “inflation compensation premium”
• Wage adjustments due to the economic threat that high energy prices present to the company
• Observance of the works council’s co-determination rights if the employer has to take action to weather the energy crisis

Impact of the energy crisis on your corporate taxes

• Possibility of adjusting advance income tax payments (income, corporate, and trade tax)
• Use of equity measures, including deferral and stay of enforcement
• Correct sales tax treatment for contract amendments, contractual penalties, and customer defaults as a result of the energy crisis
• Use of the discounted VAT rate for gas and district heating

Support and funding programs to reduce the impact of the energy crisis

• Identification of planned and existing support and funding programs from the EU, federal, state, and local governments to reduce the impact of the energy crisis on your company
• Clarification of funding requirements and procurement of application documents
• Support when applying for specific funding programs and during the application process
• Review of funding decisions
• Appeals of funding denials

Fines and administrative orders against your company

• Defense against regulatory orders to reduce the volumes and time windows of your company’s gas and electricity purchases
• Contesting of fines for failure to conserve gas and electricity
• Application for compensation for property losses and expropriation due to actions taken under the German Energy Security Act (EnSiG)

Insurance coverage for damage inflicted by the energy crisis

• Review of the company’s existing insurance contracts (e.g., business interruption insurance, accounts receivable insurance, etc.) with regard to damage inflicted by the energy crisis

Some of these areas will probably not apply to your company. However, responsible risk management – which management is ultimately responsible for – means it is always a good idea to check the key points and minimize the threat that this dramatic energy crisis poses to your company. Our Energy Crisis Quick Check is an excellent tool for doing just that.

Contact us today!