ENERGY RISK – STOCKING UP ON CARBON CREDITS
Business has slowed. And so too has the demand for carbon emission allowances – those credits are traded among European nations and some American utilities as a way to motivate a transition to a carbon-free global economy.
If commerce were humming along, manufacturing and utility plants would be increasing production and thereby raising their emission levels. Because they are cutting back their operations, however, they are in essence keeping a lid on that pollution. In a world that is moving steadily toward pricing each ton of carbon released into the atmosphere, that dynamic has dampened the trading of carbon allowances.
The recession, however, is ending and activity will once again pick up. Carbon trading will then follow suit. While Europe has led the global effort, it is expected to be joined by the United States, Japan and Australia.
According to New Energy Finance, the value of world carbon markets fell by 27 percent from the second quarter of 2009 to the third quarter of 2009. That is the result of the reduced demand for credits, which has thus put downward pressure on carbon prices – once estimated to rise to $30 a ton but which hovered around $10 a ton earlier this year.
The firm still expects that the total value of global carbon markets will reach $122 billion by year-end. That is 3 percent greater than that of 2008 and about double that of 2007. It estimates that the value of world carbon markets will reach $1.9 trillion by 2020.
The European Union Emissions Trading Scheme remains the cornerstone of carbon markets but other nations are also making inroads. As for the EU, it accounts for about 71 percent of emissions credits that have been traded as well as 83 percent of the value that has been exchanged, the group says. Volume in other countries as the US is picking up, although not enough to compensate for that decline.
In this country, volume actually increased by 8 percent over the second quarter of 2009. However, New Energy Finance says that this may not last, noting that the while the U.S. Regional Greenhouse Gas Initiative has conducted five auctions that have raised a total of $360 million, the price of credits fell to a record low of $2.56 a ton in September. That’s compared $3.39 a ton in June. The firm says that it expects prices to drop further, perhaps to as low as $1.86 a ton.
“These figures show that the carbon markets have not been immune from the recession,” says Guy Turner, head of carbon market research at New Energy Finance. “However, pending the passage of legislation in the U.S., Japan and Australia — all of which are within reach — the global carbon market should see continued growth post 2012 driven by increasing volumes and prices.”
The Possibilities
Europe is now leading a charge to cut emissions by 25-40 percent by 2020 when the international community meets in Copenhagen in December. The United States, meanwhile, has not made any firm commitments. But the U.S. House has passed legislation requiring 17 percent cuts in carbon emissions by 2020 while the U.S. Senate is considering a bill to cut them by 20 percent.
Clearly, the establishment of an emissions trading plan is critical to achieving greater cuts. As governments around the globe continue to restrict overall pollution levels, cap-and-trade systems involving carbon will expand. The thinking is that by trading credits, a “price” for emission levels is established that will send the proper investment signals to those who have to decide how they will reduce harmful pollutants.
Installing environmental controls may or may not be cheaper than purchasing emissions credits. Obviously, in today’s economic climate in which the price of credits has fallen precipitously, buying allowances would be a better bargain for companies.
As things turn around, carbon markets will become more liquid and transparent, setting forth a possible expansion of $150 billion per year of traded certified emission reductions, says the World Bank. “As one response to the climate crisis, a deep and global carbon market continues to hold the promise to deliver significant benefits to both developed and developing countries alike,” says Kathy Sierra, vice president for sustainable development.
U.S. lawmakers are debating the merits of a cap-and-trade system, with conservatives saying it would raise the cost of energy during recessionary periods while progressives are maintaining that it is a free-market approach to solving a complex problem. Even more perplexing, though, is whether to give away most of the allowances until a trading mechanism is established or to sell most of them from the start.
Neither the House nor the Senate bills tackles that subject, although the general belief is that most credits would initially be allocated for free. The premise behind giving them away is to give companies time to adjust to carbon limitations — something that critics say will delay progress at a time when the world can’t wait. The good news, according to EcoSecurities that trades carbon credits, is that three-fourths of the more than 300 industrial facilities that it surveyed have already started a carbon reduction strategy.
“Although there’s still plenty of room for improvement, these survey results show that companies are keeping green issues high on their agendas,” says Lisa Ashford, global head of voluntary and new markets for EcoSecurities. “It is great to see from these survey results that the voluntary carbon market is continuing to gain more credibility.”
Recession has hurt carbon markets. But the exchanges are emphasizing that the financial value of those markets has doubled in a few short years and that it can continue to grow exponentially once the private sector joins the cause en masse.
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Middle East Crude-Sentiment weak; al Shaheen sold
SINGAPORE, Nov 17 (Reuters) – Sentiment for the Middle East
crude market remained weak on Tuesday with falling refining
margins, but heavy crude inched up after Danish company Maersk
sold all of its Qatari al Shaheen cargoes for January.
Asked about the outlook for January heavy sour crude market, a trader said: “It’s hard to tell, it swings very fast with DME market. Not much has moved so far but margins are not looking great… tough call.”
*AL SHAHEEN
- Danish shipping and oil company Maersk has sold at least three to four cargoes of Qatari al Shaheen crude for January loading at a discount between 10 and 20 cents to Dubai quotes, traders said.
The differentials were stronger than a discount of between 15 and 30 cents fetched for December-loading al Shaheen cargoes Maersk sold last month.
- Traders are waiting for the result of Qatar’s al Shaheen tender which closes on Tuesday.
Qatar has offered nine 600,000-barrel cargoes of al Shaheen crude for January loading, the highest tendered amount in over six years. [ID:nSP80226]
*REFINING MARGINS
- Complex refineries with Dubai crude in the Singapore area posted an average profit of $1.71 a barrel over the past 15 days, down from an average over the last year of $3.65. <REF/MARGIN1> Simple refiners in the same area showed a negative yield of 58 cents a barrel over the last 15 days, down from 73-cent profit over the past year.
*OSPs
- Iran has cut the official selling prices (OSPs) of all its crude for December loading to Northwest Europe, a source with National Iranian Oil Co (NIOC) said. [ID:nSP346030]
*ASSESSMENTS
- Abu Dhabi flagship Murban crude was assessed around a 10-cent premium by one trader, unchanged from assessments on Monday, after December-loading volumes of the light sour grade finished trading around a 20-cent discount to ADNOC last month.
- Buying interest for January-loading Qatar Marine was around a 10-cent premium to QM, one trader said.
*OMAN ASSESSMENTS
-January Oman traded on the Dubai Mercantile Exchange (DME) remained at around flat to Dubai swap quotes, traders said.
*EFS
- Front-month Brent/Dubai Exchange of Futures for Swaps (EFS) for January narrowed to only 2 cents a barrel, down from 6 cents on Monday.
*MARKET NEWS
- Mitsui Energy Risk Management (MERM), a unit of Japan’s Mitsui and Co, is set to return to the oil derivatives market by the first quarter of next year after putting trades on hold since March. [ID:nSP542655]
- Oil demand in wealthy countries has not improved much and the patchy state of global recovery could prompt OPEC to keep output steady at its next meeting, the International Energy Agency (IEA) said on Tuesday. [ID:nSP6313]
- Kuwait’s oil minister said on Tuesday he expected OPEC to keep production levels unchanged when it meets in December, but the cartel would push for better compliance. [ID:nLH546367]
*CRACK SPREADS
- Fuel oil’s prompt December crack stayed below a discount of $5.00 a barrel for a second session, valued at minus $5.01 to Dubai crude, up 19 cents. <OILSWAP/SG>
- Gas oil’s prompt December crack fell to a fresh four-month low at $5.63 a barrel on Tuesday, down from its three-month high of $8.81 just two weeks ago.
*OUTRIGHT PRICES
- January ICE Brent LCOc1 rose to $78.37 a barrel at 0830 GMT, up 92 cents from the close of Asian trading a day ago, after the U.S. dollar slid to a 15-month low against a basket of currencies. [O/R]
- January Oman OQc1 rose 99 cents to settle at $78.42. (Reporting by Judy Hua and James Topham in TOKYO; Editing by Keiron Henderson)
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A RETHINK ON RISK MANAGEMENT
Energy Trading
The fluctuating energy prices over the past year have caused problems for financial and non-financial energy trading firms alike, leading to a greater focus on their risk management practices.
HIGH VOLATILITY IS OFTEN an attractive characteristic of commodities markets, in particular energy commodities such as oil, gas and power. Even so, the extreme volatility seen in several energy commodities prices during the past year has rattled even the most seasoned industry experts, who fear that risk management practices among energy market players may not be able to cope.
The figures are heart-stopping: annual volatility in US national gas reached 49% in 2008, while the year saw record increased in spot prices of well over 100% for several types of coal. Oil price fluctuations, meanwhile, are now a matter of popular controversy: sharp volatility throughout much fo 2008 saw the commodity hit record highs on a consistent basis, leaping to $147.29 per barrel in July 2008 before plummeting to less than $60 per barrel in July this year. Policy-makers globally have become so disconcerted by what the G-8 referred to in its July 2009 communique as “excessive” price instability that the Commodity Trust Futures Commission (CTFC) is now exploring the possibility of limiting energy trading activity.
LONG-TERM UNCERTAINTIES
There may be little regulators and policy-makers can do in the long-term,however, to curb price spikes. Energy commodity prices are increasingly subject to discontinuities in supply and demand, gyrations in global policy decisions, changing regulatory rules, and the expanding energy commodities investor base. These market uncertainties are being compounded by the rise of energy insecurity, driven by increasing fossil fuel scarcity, the ongoing deferral of critical energy infrastructure investment decisions, and rising geopolitical risk: in short, it is a fine balanced, febrile marketplace – and one that is likely to become more volatile, not less. While the shorter-term dislocations in the financial markets and the resulting global economic slump have undoubtedly driven volatility over the past year, the long-term outlook is nothing short of “punishing”, says Aily Armour Biggs, advisory CEO at Global Energy Advisory (GEA), an independent energy sector think tank and risk practice.
In any market, of course, traders can and do make failed bets on the direction of instrument prices. But where the underlying commodity is highly volatile, fatal losses can accumulate at breakneck speed: when ill-fated $9bn hedge fund Amaranth Advisors entered into its terminal downward spiral after its natural gas position went disastrously awry, for example, it racked up an eye-watering $560m in losses in just one day. In certain asset classes, energy commodities are also prone to extreme il-liquidity, which means exiting a hedge position that has moved into reverse may not be possible before losses become irrevocable. As such, it is the speed fo market changes that can, and likely will in future, prove “horrendous”, says Ms Biggs, a former physical energy trader. Yet many players in the energy markets are simply not properly equipped to manage the systemic credit risk associated with fierce volatility: contagious credit defaults could become an “endemic” feature of the energy trading landscape, Ms Biggs warns.
BEYOND THE BANKS
The erratic energy markets have already claimed a catalogue of casualties since Amaranth Advisors shut up shop, among them other hedge funds and bank commodities desks. For many market-watchers, however, the financial players are not the focus of concern: rather, there is growing band of non-financial energy players – including producers, large dedicated commodities trading houses and utilities – who are becoming increasingly influential in the energy trading markets. Many of these institutions have built-out large internal corporate hedging, asset-backed and proprietary trading operations, as well as client-facing businesses in the form of financial products and hedge vehicles for clients, much like a bank.
Dedicated commodities trading houses, in particular, are growing influence. the capital-intensity associated with volatile energy markets is prompting some financial institutions to retreat from the business: Bank of America, UBS, and BNP Paribas and have pulled back from certain energy sectors. This development is allowing some dedicated trading houses to become more important to the energy commodity marketplace, says Paul Newman, managing director at ICAP Energy. “Many of these are privately owned companies, and while their financial profiles are often not as transparent as a public company’s, they frequently dominate sectors of the oil trading markets, derivative as well as physical, with the same authority that a bank can command.”
Indeed, banks increasingly find themselves competing for clients with these trading operations. Such players, it is often argued, boast an information advantage due to their integration in the physical energy markets which allows them to develop sophisticated hedging strategies. Many market-watchers are not convinced however. Gavin Lavelle, CEO of Brady, a commodities trading software provider, says that the risk management discipline among non-financial energy trading firms is sorely lacking when compared to the banks. “Risk management is nowhere near as sophisticated and yet positions they take are very large”, says Mr Lavelle. “I think the question we should be asking in the commodity space is this: how strong is the risk management practice, and do we have similar frameworks and disciplines associated with the business?”
BANKRUPTCY BLOWS
The rising incidence of losses and bankruptcies emerging from the non-financial sector of the energy markets over the past year indicates that there is room for improvement. Take oil-trading giant SemGroup, for example. Founded less than 10 years ago, SemGroup rapidly expanded to become, at one time, the 12th largest privately owned company in the US. In July 2008, however, the firm was forced to file for Chapter 11 bankruptcy after $3.2bn in losses in oil futures and derivatives trades proved too great to bear. The collapse, which came as a major shock to market-watchers, could leave the firm’s creditors some $3.5bn out of pocket, Moody’s warned last July.
The final report on the bankruptcy filed in April 2009 by Louis Freeh, the bankruptcy court examiner in this case, reveals a company engaged in an active and complex options trading strategy, run by the group’s co-founder and chief executive, Tom Kivisto. Aspects of Mr Kivisto’s strategy, which assumed oil prices would always return to a “normalised” price range, were increasingly speculative. This strategy, “when coupled with the unprecedented rise in and volatility of the price of oil in 2007 and 2008, led to the filing of the debtors’ bankruptcy petitions”, Mr Freeh writes. Given the nature of its trading strategy, the group’s risk management framework was insufficient, notes Mr Freeh, who identifies the group’s overall failure to develop or implement a suitable risk management policy as central to the firm’s downfall.
UNCLEAR CREDIT
Much of this energy trading activity deploys the “Enron loophole” (so-called because the energy giant lobbied for its introduction under the Commodities Futures Modernization Act of 2000) which exempts a large proportion of over-the-counter (OTC) energy trades and trading on electronic energy commodity markets, such as the Inter Continental Exchange, from regulatory scrutiny. Nor are these trading desks subject to mandatory capital adequacy requirements or loss-absorbing buffers. As a result, says one financial energy trader, there is a lot of “unclear credit” in the marketplace – as Fortis Bank discovered to its cost: SemGroup went bust owing the Belgian bank more than $300m, mostly in the form of interest rate and commodity swaps, and a further $80m under SemGroup’s working capital and revolving credit facilities.
It is this type of credit contagion that has market-watchers rattled. Many of the big trading businesses rely heavily on financing and counterparty credit lines. This is particularly true of physical trading, where settlement occurs some 30 days after delivery. In order to underwrite future settlement, many counterparties in the physical markets will deploy a letter of credit, frequently provided by what GEA regards as an over-concentrated bracket of banks. Historically, however, counterparty credit exposure calculations have not taken into consideration data on the entity underwriting the credit line, says Ian Slogget, director at the energy division of Temenos, which provides credit risk management software products. For players relying extensively on letters or credit, the collapse of Lehman Brothers provided a salutary lesson, he continues. “They must really ramp up their credit processes regarding exposure to all counterparties. Even some of the more sophisticated players are now learning that they have got to apply proper credit risk management to all counterparties regardless of reputation or size.”
To some extent, failings in this regard have been a function of poor technology: automated, integrated credit risk management systems of the type deployed by banks are not yet widely used among energy trading desks, says Mr Slogget. This might sound a little self-serving, were it not a commonplace complaint. Reports recently issued by Celent and PA Consulting Group highlight the operational and technological insufficiencies that characterise credit risk management in the energy trading space. “These data and tools, when they exist, have been mostly deployed in isolation at various business units or related to only a sub-set of trading activities,”says the report by PA Consulting. As a result, it continues, “energy market participants are exposing themselves to unforseen risks of large unexpected losses and inefficient use of scarce risk capital.”
This shortcoming in technology capability has also left some players unable to properly calculate and anticipate margin calls. The problem was underlined in August last year when Constellation Energy, the US’s largest independent power generator and marketer, revealed that it had dramatically underestimated its collateral liabilities by $1.6bn in the event of a downgrade. This “lapse in the company’s risk management and control processes”, as S&P described it, prompted the feared downgrade and with it a liquidity crisis in the company’s energy trading business which ultimately forced the company to make divestment of its nuclear energy assets. In the meantime, Constellation Energy cut its credit line to US gas marketer Catalyst Energy, which subsequently collapsed.
INTEGRATED PERSPECTIVES
In this rebuttal of mr Freeh’s damning analysis, Mr Kivisto blamed a lack of credit facilities which prevented SemGroup from riding out its losses until the oil price “normalised” making good its hedges. From a risk management perspective, however, this is the wrong defence: if SemGroup did not have enough cash to ride out its position,k says one banker, then the position was simply too big. As Jonas Abrahamsson, CFO of E.ON Energy Trading, the trading subsidiary of European energy generation and marketing giant E.ON, points out, it is precisely this related cashflow risk that firms have to get right. “It is fine to lay off the commodity risk, but then you sit with a credit risk or a cashflow risk: if you don’t have an integrated perspective on this you could end up in trouble,”he says. It is particularly worrying that some energy trading desks may not be able to accurately calculate their collateral liabilities, since extreme underlying volatility can quickly put a strain on liquidity. “Liquidity problems can come about very quickly and aggressively in our markets,” says Martin Frankel, global head of commodities at Caylon.
In markets that are not system critical, bail-outs are not an option. For this reason, Global Energy Advisory is calling for energy firms to hold reserves against unexpected losses and ensure they have capital adequacy to withstand any disastrous risk that could result in insolvency inducing losses. Industry association the European Federation of Energy Traders did not respond when approached for comment on this issue.
IMPORTANT STEPS
Advances are being made, however. According to Sid Jacobson, managing consultant in the global energy practice, energy trading and risk management at PA Consulting Group, a recent flurry of consulting requests suggest credit risk management is now a priority. E.ON Energy Trading is a leader in this regard. The organisation has made extensive efforts to consolidate the management of all its commodity risk across all geographies. “Now we have a single, integrated view of what’s happening. I think it is crucial in volatile markets where things shift very quickly, to have one view and one point of decision-making to manage those risks”, says Mr Abrahamsson.
“Given the group’s wide geographical footprint, which covers a large area of Europe, this has been a really important step for us and we have already seen the benefits in light of what has happened during the past year,”he adds.
Elsewhere in the market, bilateral margining agreements are also growing in prevalence, says Mr Fraenkel. Although the practice imposes discipline on counterparties, it is not a panacea, he warns. For production of oil and gas, it typically does not make sense to ask for margin if they are selling forward their production. “They have production assets that will deliver against those forward hedges and if we ask them for margin then it means that they do not have the cashflow to produce the oil and gas that they will deliver against their hedges.” most banks which have experience in the oil and gas sector do not typically ask their clients for margining, but the practice is not uncommon.
Following Lehman Brothers’ collapse, the energy markets, like other derivative markets, saw a shift to clear trades centrally on facilities such as the new York Mercantile Exchange Clearport platform. E.ON is now publicly pushing for better regulation fo the OTC energy markets and the increased movement to these types of centralised market infrastructures. “Bilateral margining will play a role and in some cases it is healthy for the market, but is it the silver bullet? No. Exchanges and clearing houses, particularly when it comes to standard products, are among the most efficient solutions”, says Mr Abrahamsson.
In the face of tremendous future price shifts, however these types of measures may not be enough, says Ms Biggs. “Everyone is going to have to raise their risk management game tenfold.”
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Are you ready for the Expansion of the EU Emission Trading Scheme?
Global Energy Advisory Launches New Carbon Advisory Service to Support Industry in the Expansion of the EU Emission Trading Scheme.
On 6th April 2009 the European Council adopted a climate-energy legislative package containing widespread measures to fight climate change and promote renewable energy. This ambitious package is designed to achieve the EU’s overall environmental target of a 20% reduction in greenhouse gases and a 20% share of renewable energy in the EU’s total energy consumption by 2020. It also included a proposal to improve and expand the EU Emissions Trading Scheme (EU ETS). The EU ETS is currently the world’s largest carbon market and preferred mechanism for fighting climate change. However, as the renewable targets come under more strain, so will the compliance under the EU ETS. Is your firm ready for the expansion of the EU ETS?
Very soon, the EU ETS is set to expand across new economic sectors and greenhouse gases. With regards to sectors, aviation, petrochemicals, ammonia, and aluminium are to be included. Regarding gases, nitrous oxides from acid production and PFCs from aluminium smelting will join. The last major sector classed as a big emitter, transport (land and shipping), is not included in these proposals because the EC hasn’t yet decided if its inclusion is the best way of achieving emissions reductions, but at best, this is likely only to be a stay of execution rather than a exclusion.
What does that mean? From 2013 onwards, and in some cases much earlier, a number of companies will find themselves confronted by a new set of legislation to bring about emissions reductions that will have a direct impact on their businesses. The legislation regarding energy efficiency, etc., so for the first time, many companies will see an explicit price of carbon showing up in their input and/or output costs and prices.
Companies in these new sectors, or those doing business with them, should start preparing an impact analysis on their business resulting from this new legislation and, if necessary, commence preparations. If a company does get drawn in to the EU ETS, there are a number of important issues for it to consider:
Carbon Prices - what level are they likely to be? We have seen a wide range of estimates, from €zero/t to €50/t, but we do know that the EU ETS will reduce supply over time to flush out abatement. Historically, prices have been volatilve and have sent out contradictory signals. Companies need to put their own price tag on carbon for budgeting and financial planning purposes, especially in preparation for the inital auction of allowances. Through the unique GEM (Globa Energy @ Market) service, Global Energy Advisory has access to real time carbon market price data and can therefore comprehensively support clients in their carbon purchasing and offset investment decisions.
Compliance – entry in to the EU ETS entails some very onerous reporting and audit requirements and penalties for non compliance are severe. This means that the underlying business processes and IT systems may need to be enhanced to meet the needs of the EU ETS as well as support the business needs of the organisation. With the comprehensive experience and latest understanding of market and legislative developments Global Energy Advisory can best advise and support processes and systems.
Trading and Risk Management Strategies - the EU ETS is a trade market, which aims to find the marginal cost of emission abatement in the most cost-effective way. This process is very different from the procurement one that companies may be more accustomed to , and could be a real culture shock. While traditional procurement strategy could be followed for managing the emissions position, it is unlikely to give optimal results: Global Energy Advisory provides comprehensive decision making support for the EU ETS.
Auction – Unlike previous phases, emissions allowances are not going to be given away – there will be an initial auction process, in which companies have to bid for their allocation of allowances. Would your firm know how to bid for these allowances? Does your firm have a view of the cost/price of carbon in the company’s value chain?
Integrated emissions reduction strategy - a company may already be following an emissions reduction strategy, domestically and/or internationally, by virtue of previous legislation or voluntary participation. This could include involvement in Kyoto projects in other parts of the world, generating carbon “credits”. Participation in the EU ETS will mean being in a market which sets an explicit price for carbon, so it will become important, possibly essential, to benchmark current reductions strategy against the market. Through GEM and the realtime price feeds, Global Energy Advisory can keep clients fully aware of carbon price developments and future volatility levels.
Impact on input and output costs – even if a company is not a direct participant in the EU ETS, it may be trading with companies who are, so could see adverse financial ramifications. What are these likely to be and what can be done about them? Full cost pass-through to end customers may not be the panacea to these questions.
The expansion of the EU ETS is a near certainity - only the debate over the inclusion of land transport remains, and that too will no doubt be included in the EC’s plans at some point in the future. There is no doubt that a widespread, explicit price for carbon will have an impact on economic activity by virtue of it being an additional cost.
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Would you like to clear your energy trading lines?
Credit where Credit is due
The global energy sector is now a volatile and punishing marketplace. Future energy prices are highly uncertain with commodity shortages likely. Going forward, energy firms are exposed to a series of high impact events whose magnitude and frequency are likely to increase in the future.
Although energy risks may be uncertain, we firmly believe that they are not unimaginable or unmanageable: Center provides a proprietary financing and settlement solution to manage energy trading credit risk on a range of commodities.
How does it work?
It is simple: if trader A has an out of the money position; his counterpart trader B is more than likely to ask for a letter of credit or cash to cover his position. Trader A enters a confirmed payable into the Center system. If trader B has full credit lines and wishes to trade, he can discount trader A’s payment instruction through Center’s capital market programs to obtain cash at a highly competitive discount, while clearing valuable trading credit lines.
As the marked to market changes, Center independently monitors the credit limits while reconciliations can occur effortlessly through Center’s payment system. Even if a counterparty is cash rich and happy to post cash margin, by using the system they can improve their working capital and bottom line.
How does the independent MTM work? Center Energy Finance independently reports and monitors the credit position of the portfolios, while the proprietary financing structure allows for credit management of energy traded positions as well as financial market investment in the positions and/or the trading counterparts themselves.
This concept originally evolved from a financing solution initially developed by Citibank and SAP and is now owned by a USA company called Orbian. This solution has a technology platform that unites the buyer and suppliers, and the financing source electronically and provides financing triggers based on one or several supply chain events. In short this is a payment platform that can allow financial markets to invest in the credit/payment risk of companies every day trading. Most importantly it can be a gateway to dissipate the credit risk in commodity trading in to the global financial markets.
This structure also has a specific investor market and it does not affect existing banking lines, over $22bn has been services to date with settlement 100% error free.
This is a classic risk management investment opportunity trade.
Also it’s suited for the longer term, more valuable transactions as well as used by the finance department as a way to improving working capital.
This is the energy credit risk management solution that we have been waiting for and in our discussions with the main players Center has been very well received.
Global Energy Advisory is proud of the involvement in this initiative with Orbian. To be able to offer such a a solution for credit risk management in the energy industry is to me possible one of the most important contributions an advisory can make.
The financial structure also allows for monetization of contracts.
Aily Armour Biggs, Advisory CEO
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