Energy Trading & Risk Management

INTEGRATED FUNCTIONS ARE GREAT FOR BUSINESS

If you are in the business of selling power, you are also in the business of selling surplus power. That means being able to quickly respond to changes in demand, effectively manage risk and consistently fulfill orders on time.

Sounds simple enough – as long as everyone is on the same wavelength. But that’s not always the case.

One of our clients, a large utility, has a power-trading floor that generates over $500 million in annual secondary net revenue from surplus power sales.

That’s great.

However, the utility’s Trading Operation (front office) function, and the related Credit/Transactional Risk (mid-office) and Confirmation/Settlement (back office) functions, were all operating on different systems.

This lack of integration presented a number of challenges.

Process and decision-making capabilities could be streamlined, financial controls and visibility to position could be improved and credit risk exposure could be mitigated.

We were called in to lead the selection, contract negotiation and implementation of a new energy trading and risk management (ETRM) system (OpenLink’s Endur product). The project involved creating and integrating discrete front, middle and back offices. It also included significant book structure changes, modifications to credit policy and increased financial controls.

A combined ACME/client team worked fast to gather input from every department, define the system requirements, and interview and evaluate software vendors. We helped bring the separate front, middle and back office operations together to work more cohesively – on one wavelength.

There’s great power in synergy.

Once a vendor was selected, we helped negotiate a software license agreement and a contract for a third-party implementation service.

The $4.5 million ETRM project was delivered on time, on budget – with no interruption in trading operations – in only nine months.

The utility’s systems are now integrated at every level. Trading activities, positions and transactions are easily visible from front to back. And better financial controls are in place, including segregation of trading, risk, scheduling, settlement and accounting functions.

Great project.