Utility contractor finance for network and streetworks firms

Yes, though the set up costs come well before the first connection pays. Moving into contestable electricity connection work means paying for accreditation assessments, authorised and competent staff, jointing and test equipment, design software and insurance. A term loan or the owners' own investment usually funds the set up, asset finance covers vans, jointing trailers, test kit and plant, and invoice or contract finance can support stage payments from developers once projects are running. Lenders want evidence of an order book, the scopes of accreditation held or being sought, the key staff the business depends on and the retentions or bonds developers ask for. We help contractors present the move into connections work to lenders who fund specialist engineering firms.

What accreditation does an independent connections provider need?

An independent connections provider building the contestable parts of an electricity connection must be accredited under the National Electricity Registration Scheme, known as NERS, whose register of accredited providers is published by LRQA, and may only carry out the types of work its accreditation covers. Network operators expect the provider to be accredited for every contestable element of a particular connection, such as cable laying, jointing or substation work, and they set their own design and inspection requirements on top. Gas connection work has a separate scheme, the Gas Industry Registration Scheme. Gaining or widening accreditation involves assessment of the firm's systems and staff, so it needs planning into the funding timetable.

• Accreditation plan. Scopes sought and the assessment timetable.
• Order book. Developer contracts and agreed stage payments.
• Key staff. Authorised persons, designers and jointers.
• Equipment list. Jointing, test and plant items with costs.

LRQA publishes the NERS register of accredited providers. Kit can go on asset finance, a working capital loan can carry the set up, and civil engineering firms can compare construction finance. Instant Quotes shows a utility contractor which panel lenders could fund the move.

Most network work is let under term or framework contracts, very often NEC forms, and paid monthly against measured work or a schedule of rates. The contractor submits an application, the client or tier-one contractor assesses it, and payment follows on the contract's terms, often 30 days or more after assessment. Disputed measurements, compensation events still awaiting agreement and contra charges for reinstatement defects all reduce what is actually paid. Retentions are still common in tier-two and tier-three subcontracts.

Meanwhile the costs are immediate: gangs paid weekly, plant hire or finance payments, materials such as cable, duct and fittings, fuel, traffic management and permit fees. A contractor that wins a new framework lot can find itself funding two or three months of work before the first payment arrives. Payment rights for this kind of work are set by Part II of the Housing Grants, Construction and Regeneration Act 1996, which covers pipelines, power lines and telecommunications apparatus, so payment notice and pay-less notice rules apply.

• Mobilising onto a new framework or call-off, with gangs, vans and plant needed from day one.
• Adding specialist kit: vacuum excavators, cable winches and pullers, directional drilling rigs, mole ploughs, fusion welding equipment or jointing vans.
• Replacing a fleet of crew vans and tippers as a client tightens its vehicle emission requirements.
• Absorbing a slow-paying tier-one contractor or a large disputed final account.
• Funding a contestable connections business, where developer clients pay in stages and the network operator adopts the assets on completion.
• Riding out a sudden fall in volumes when a network owner pauses or reprioritises its build programme.

Network programmes are driven by regulatory price controls and the owner's investment plans, and work can slow at short notice when a programme is re-phased. Fibre subcontractors saw this when several network builders cut back their rollouts. Financing a fleet sized for peak volumes leaves fixed repayments if call-offs fall, so keep some capacity on short-term hire. Invoice finance with one dominant client means a dispute with that client affects both your income and your funding at the same moment. Personal guarantees and an all-assets debenture are common; read the terms carefully before signing.

Before borrowing, check whether a client offers early payment or supply chain finance on certified invoices, and whether the wider range of business finance would serve better than adding to an existing facility. Electrical installers working inside buildings rather than on networks should see our electrical contractor finance page, and fibre specialists our page on telecoms business finance.