Next Generation Integrated Treasury and Trading for Energy and Commodity Companies

Commodity markets have always been uncertain and have often exhibited extended periods of volatility. Events such as the collapse of Enron and other marketers, the financial crisis, and more recently, BREXIT, have all had massive impact, and yet, after each event, measures have been put in place, both regulatory and in terms of controls, to protect markets, margins and profits. Each tumultuous event has brought learning, innovation and improvements in business processes. The energy industry has also learned from these experiences; adopting better and improved risk controls, systems and tools to predict, protect and profit. Yet, now may be the time to innovate once again to better protect margins amid increasing costs and lower commodity prices.

Energy producers, traders and consumers today face a challenging trading environment with more regulatory oversight, lower prices, increasing costs and almost constant volatility. As a result forward thinking energy companies are already adopting a more closely integrated treasury and trading approach, a potentially overlooked opportunity by many. Typically, trading and treasury are separate areas of business with limited or no integration between them. The traders work to sell commodities at the best price or to profit from trading, while the treasury function with its concern over available cash, navigating future investments and doing so in the right currency and at the right location, has a range of responsibilities, including FX and IR hedging, broader credit management, debt and capital management and more. Usually, the treasury department gets a fixed time view of trading positions to work with and can miss opportunities to protect profits or control costs as a result as these exposures change rapidly. Even large oil and gas majors have experienced the situation where trading has a good month but FX rates moved against them to give an entirely different result. Despite believing that they were hedged, FX markets went against the company leaving it with significantly eroded traded profits.

Read the document online or download it from the CTRM Center Next Generation Integrated Treasury and Trading for Energy and Commodity Companies

New Age Energy Markets – Challenges for Utilities, IPPs and Traders

The North American power and gas markets are undergoing an accelerating evolution driven by increasing regulation, new and emergent technologies, and a persistent surplus of natural gas brought about by the “shale revolution.” The transformation from a coal-centric power market to one reliant upon renewables and natural gas for baseload power generation has had profound operational and commercial implications for both the electricity and natural gas markets.

Much of the change that has emerged has been catalyzed by regulation at the federal, regional and state levels, including emissions/greenhouse gas regulation and renewable portfolio standards. These regulatory mandates have been largely answered by technology – cheaper and more efficient solar and wind generation, abundant sources of natural gas from long-reach lateral drilling and massive hydraulic fracturing, smart grid technologies that improve grid efficiency and reliability, and more efficient industrial and consumer appliances that reduce system load. In aggregate, these changes have had massive and ongoing impacts across the energy industry in the US, increasing complexity of operations and affecting the business models of many of its participants.

For power utilities, IPP’s and traders, this New Age Energy Market presents a number of challenges that must be addressed to operate profitably.

Read the document online or download it from the CTRM Center New Age Energy Markets – Challenges for Utilities, IPPs and Traders

Responding To Continual Energy Market Change

The European power and gas industry is currently going through a period of very rapid change that has potentially far reaching consequences. While change is certainly no stranger to the industry, it requires players in the industry to constantly re-evaluate their business process and technology infrastructures in order to adapt and thrive. Examples of the drivers for change include:

  • Changes in the regional and national political landscape in terms of both environmental issues and the overall structure of the industry,
  • A host of new regulatory and governance regulations,
  • Decreased profit margins and,
  • Major shifts in all aspects of technology from generation to computing,

Energy companies will need to rapidly respond to these changes and this response will certainly include a review and perhaps upgrade of their Energy Trading and Risk Management (ETRM) and related software.

Read the document online or download it from the CTRM Center Responding To Continual Energy Market Change

Deriving Business Value from Big Data using Sentiment analysis

‘Big Data’ are two small words that are widely used to describe the massive growth in data of all forms and that hold; the promise of delivering huge potential business impact. The question is, how?

Today, and increasingly in the future, businesses are surrounded by masses of data and raw information. Some of this data is very relevant but much of it is not. Further, most of that data is unstructured in the form of email, documents, images and different types of social media, blogs, and so on. Unstructured data is notoriously difficult to access and query, it is scattered across many different locations and formats, and it requires some form of preprocessing before it can be analyzed and used. Yet, it is this unstructured type data that is primarily exploding in quantity, representing around 80 per cent of the annual growth of data and doubling in quantity every two years.

Read the document online or download it from the CTRM Center Deriving Business Value from Big Data using Sentiment analysis

Buy? Build? Why Not Both?

A recent survey and report by analyst firm ComTech Advisory suggests that a majority of users of ETRM/CTRM software might consider building custom software to meet their business requirements. In fact, around 70% of the survey’s respondents suggested they would consider such an option. As ComTech noted in the report, about 35% of the respondents were representatives of the top tier of the industry who have extremely complex, global, multi-commodity supply chain operations to manage. Nonetheless, given the maturing market for commercial E/CTRM solutions, the idea that anyone would chose to build a solution is perhaps surprising. ComTech concluded that especially in todays’ business environment of rising costs and diminished profits, a more appropriate solution might be to build around a commercially available solution.

This white paper examines the pros and cons of build versus buy while also examining other approaches that in the end may offer a cost effective, yet superior solution. It looks at the Brady cloud offering in particular as a potential starting point for a hybrid solution and examines why a hybrid solution may make commercial and functional sense.

Read the document online or download it from the CTRM Center Buy? Build? Why Not Both?

2016 Vendor Perception Report

Commodity Technology Advisory’s 2016 Vendor Perception Study was conducted to establish end-user views and perceptions of available CTRM vendors and products, including brand awareness, and to determine market leadership perceptions as well as buying criteria and demand levels. The research, conducted via a web-based survey, was comprised of a comprehensive set of questions that sought the informed views of industry participants including end users and consultants. Vendor personnel were specifically excluded from participating in this research. The survey was open for responses between January 14th and May 3rd, 2016 and collected some 230 gross responses.

The survey was promoted in several ways to attract bone fide respondents. ComTech Advisory used email notification, blog articles, web advertising and verbal requests to encourage participation. CTRM vendors and service providers also promoted the survey of their own accord.

Read the document online or download it from the CTRM Center 2016 Vendor Perception Report

A Managed Services approach to Trading IT Excellence

How Delta Energy Supports Its Best-in-Class Trading Operations

Companies that trade, or buy and sell, commodities face a myriad of complex business and technical challenges these days. One typical conundrum is often around Information Technology (IT). A trading firm is, after all, a trading firm and not an IT shop and yet, it needs to have an IT infrastructure, usually a very complex IT infrastructure, in order to conduct its business efficiently. That infrastructure will consist of hardware, networks, mission-critical applications, security, back up, recovery and much, much more. It requires a special set of expertise, both from a technical and a business standpoint, in order to maintain and continually improve it. Such staff is hard to come by and even harder to retain. Meanwhile, regulations and rapidly shifting market conditions mean that infrastructure is getting more and more complex and more and more critical. How is this problem to be tackled and at what cost?

Delta Energy is one company that has solved this problem and gained enormous benefits from its approach in doing so. When Michel Koornstra became head of Energy Trading at Delta, he inherited a very familiar problem to many in the industry. The company was using an ETRM solution that was already 6-years old. “We had workarounds on our workarounds,” he says, and that was only a part of the issue. The support requirements on Internal IT were so high and cumbersome that they didn’t have the luxury of following the ETRM software market. Day-to-day firefighting activities prevented them from utilizing their time around its ETRM software to properly support the best in class trading operation that he wanted to build.

Read the document online or download it from the CTRM Center A Managed Services approach to Trading IT Excellence