Iceland food warehouse

Iceland Foods is converting its estate of chiller cabinets to more energy efficient fridges, as part of work to combat its soaring energy costs.

The retailer is working with refrigeration manufacturer The Bond Group to convert open chiller cabinets to fridges with doors in 150 Food Warehouse stores. The works are set to be completed by November. A spokeswoman for Iceland confirmed “it’s an energy saving initiative” but declined to comment further.

Like other frozen food retailers Iceland has been particularly susceptible to rising energy costs following Russia’s invasion of Ukraine.

In September executive chairman Richard Walker told the Mail on Sunday that its energy costs had grown by more than £20m, leaving the business “fighting to keep the lights on” due to its reliance on chillers and freezers.

That prompted concerns about the supermarket group’s ability to refinance its £550m bond debt, following the decision by French insurer Coface to withdraw cover to Iceland suppliers in February. It was the third to do so in the space of a few months, after Atradius and Allianz also limited exposure.

Iceland insisted that it remained incredibly well positioned, and has been working to reduce its energy costs.

Walker told Bloomberg in January that the retailer was looking to cut back on the amount of chilled products, in favour of ambient foods, as a way of reducing costs.

Those efforts led to “better than expected” outlook during Iceland’s third quarter results, according to credit-rating agency Moody’s. Iceland posted revenues just short of £3bn in the nine months to December 2022, a 5.6% increase on the same period the previous year.

The supermarket expected to reduce its overall energy outlay by £25m during the 2024 fiscal year, through its energy saving initiatives and the signing of long term discounts on energy deals, Moody’s said.

In March, Iceland signed a 10-year with Octopus Energy to provide solar power to 150 Iceland stores. The contract secures 14% of Iceland’s energy needs until 2033.

The deal “gives us some clarity on our energy costs for the coming years, at a significant discount to the current wholesale price,” CEO Tarsem Dhaliwal said.