the revolution in energy and the etrm software requirements to support profitable growth

The Revolution in Energy and the Software Requirements to Support Profitable Growth

Michael Schwartz,EVP & Chief Marketing Officer,

Eka

Bjorn Hagelmann,Chief Operating Officer,

MRE Consulting

Andrew Bout,Vice President, Energy,

Eka

www.ekaplus.comwww.ekaplus.com

Agenda

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The Evolving Commodity Market – BjornHagelmann, MRE Consulting• Economic Shifts Changing the Market• Managing Supply/Demand Balance• C&I/Retail Changing the Landscape• Pricing Effects• Changing System Requirements

Eka Background – Michael Schwartz, Eka• About Eka, Customers, Global Presence• Next-Generation Smart CM

Eka Energy Platform – Andrew Bout, Eka• Eka Energy Platform• Software to Support Changing Requirements

Join the conversation:@EkaSoftware

#ekawebinar


Featured Speaker

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Bjorn Hagelmann

Chief Operating Officer, MRE Consulting

• 16 years of CM experience from diverse positions at MRE Consulting, Strategic Energy, Enron, Koch and Dean Witter Reynolds

• Bachelor of Arts, Hastings College, emphasis in marketing, finance and human resource management

• Master of Business Administration, Wichita State University, emphasis in finance

©MRE Consulting – All Rights Reserved mre-consulting.com | 4

The Evolving Commodity Market

Presenter: Bjorn Hagelmann

Economic Shifts Are Changing the Market


Impact on Supply?

Constrained Capital

Environment Leads to Static

Demand

Increased Regulation

Increased Production of Wet Gas in New Areas

Managing Supply/Demand Balance


•Difficult to Execute in a Credit Constrained Market

• Long Lead Time (Permitting – Production)

•NIMBY (Not In My Back Yard)

Export to a More Profitable Area (e.g. LNGs)

• Scalable Solutions are Not Always Readily Available

• Smaller Regional Substitutes Could Help Regional Supply / Demand

Find a Local Market to Consume the Product (e.g. NG Fueled Fleets)

• Substitution for Specific Price Conditions

•Displaces Other Products / Raw Materials

•Realigns the Supply Stack with Marginal Elasticity for Demand

Artificially Substitute the Gas as Finished Product (e.g. Fertilizer)

Managing Economic Surplus


The Most Common Choice?

Find a Substitute!Stable-Priced, Readily Available Energy for

Commercial and Industrial (C&I) and

Retail Customers

C&I Customers in Particular Have Seen Substantial Growth

Shifted Needs of CM Systems

C&I/Retail Changing the Landscape


Retail Invoicing Varies Drastically from Wholesale/Marketing

Pricing is Less Standardized

• Must Account for more Custom Modeling/Unique Price Calculations

Vendors are Dealing with New Transportation and Commodity Needs

Package Sizes Have Changed

• Taxes are Much More Complex for Retail

• Unique Fee Structures

Reporting Needs Have Shifted

• Software is Expected to Meld Both Raw Materials with Consumer Goods and Provide Decision-Making Metrics

• Often Need to Homogenize Units of Measure Between Products to Track P&L Effects

C&I/Retail Changing the Landscape


• Spending Scarce Resources on R&D to Expand Capabilities to Match the Market Needs

• Implementing Modules and Modifications Specifically for Retail (e.g. Tax, Settlement)

• Vendors with Scalable Systems Have Thrived While More Rigid Providers Have Lost Market Share

Software Vendors Have Been Forced to Respond

Pricing Effects


Green Energy and Other “Must-Dispatch” Energy (Wind, Solar, etc.) Create Negative Price Settlements

Hypothetical: Could Increased Production of Wet Gas Create a Situation where NGLs are Stranded Once Dry Gas is Extracted?

• Assume Gas Prices Spike Due to Winter Heating and Power Production Demand.

• Could Regional Stranded NGLs Transact at Negative Prices?

Pricing Effects


Risk: MTM and VaRCalculation

Accounting: Reduction of Assets vs. Increase

of Liability

Requires Software Vendors to be More

Forward-Looking

What is the Effect of Negative Prices on CM Systems?

• “Status Quo” Operations Can No Longer be the Sole Focus

Customer Needs Have Become Much

More Complex

• Customers Deserve to be Educated on Potential Market Conditions

• SIs Should Prepare Clients for Future Scalability and New Areas of Growth

Vendors and Software

Implementers (SIs) Must be Aware of the Ever-Changing

Environment

Changing System Requirements


Eka Smart Commodity Management

Eka Energy

www.ekaplus.comwww.ekaplus.com14

Timeline – ETRM to Smart Commodity Management

1990 2003

2003

2014

2008

2008 2014

ETRM

Energy Commodities• Oil• Power• Natural Gas

Additional Commodities• Ags• Metals• Biofuels

Broader Footprint• Supply Chain• Compliance• Manufacturing

Data to Foresight• Predictive Analytics• Visualization• Optimization

CTRM

CM

Smart CM


Eka Software Solutions: Company Profile

Position: Global leader in on premise & cloud served Smart Commodity Management solutions

Founded: 2004

Employees: 315

Global Offices: 7 offices. 3 development & support centers

• Americas: Stamford CT HQ, Calgary AB

• Asia Pacific: Bangalore India, Singapore, Adelaide & Perth AU

• Europe: London UK

Investors: Silver Lake Partners - GP Group - Nexus Venture Partners

Customer Base: >50 leading global enterprises on 4 continents• Cargill, Rio Tinto, Mitsui, Bunge, BMA, EDF Trading, Graincorp, Viterra, Louis Dreyfus, Noble,

CBH, Mitsubishi, Pinnacle Foods, Twin Eagle, Boliden, Tata Steel

Solution: InSight Commodity Management (CM) Platform• End to end financial and physical transaction management• Cross asset trading and position management – Ags, Energy, Metals, and Bulk• State of the art enterprise risk management

Commodity Analytics Cloud• Analytics specific to commodities• Multiple data sources internal and external to Eka• Prebuilt and custom apps

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Customers

M E TA L S & M I N I N G

Customers

E N E R G Y

A G R I C U LT U R E


Perth

Global Market – Global Customers – Global Engineering & Support

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Singapore

London

New York (CT)

Adelaide

Development & Support Centers

Bangalore

Eka Offices

Calgary


Intelligent. Integrated. Innovative.


Featured Speaker: Energy Industry Leader

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Andrew Bout

Vice President, Energy, Eka

• Founder of EnCompass Technologies with over 25 years of experience in the commodities market

• Led the design, development and implementation of the Energy Suite, an industry leading platform

• Experience working with large financial institutions, large and midsized trading firms, utilities, and producers in all functional areas

• Bachelor of Business Degree (with Honors) from Wilfrid Laurier University and CMA certification


Eka Energy Platform

• Fully integrated Smart CM for physical and financial transactions supporting complex structured deals

• Multi currency, capital market hedging transactions

• Complex pricing formulas, event basedpricing

• Tariff cost/loss subsystem

• Near real time valuation, position

• Advanced risk metrics

• Integrated credit risk

www.ekaplus.comwww.ekaplus.com22

Compliance / Risk PolicyEka Energy Platform

FacilitiesLocations

Indices

ContractCounterparty

Credit

Delivery ProfilesGrade

Tariff StructuresRisk

ManagementParameters

LiquidsInterest

RatesFXPower

Natural Gas

Transportation

Storage

Financial Swaps

Futures

Financial Options

Crude Oil

IndexPrices

TariffRates

FX & Interest

Rates

ForwardCurves

Confirmations

Deal Validation

Credit Work FlowContract Status

Broker FeesReconciliation

Scheduling

ActualizingVolumes

Settlement

Posting

Mark to MarketForward Cash Flow

Exposure ReportingOption Delta

Market andCredit Risk

Full Audit Trackingand Dodd Frank

Physical Buy/Sell

Futures Options

Source

Commodities

Transactions


Changing Environment and CMs

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• Regulatory• Increasing regulatory requirements• Some of these require significant process and

data changes• i.e. Dodd Frank

• Additional “simpler requirements” that is quarterly/annual reporting

• Pricing• More transactions requiring “non standard”

pricing especially for C&I customers• Net back pricing

• Transportation/delivery changes• Rail, truck and shipping are becoming more

prevalent• Rail, truck due to lack of pipeline capacity,

choices• Shipping for above reason as well as new

markets

• New points, pipelines, pricing points


New Regulatory Requirements

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• New regulations require significant process and data changes

• Example: Dodd Frank• Ideal to have it built into the CM since the reporting requirements are very

tied to the life cycle of the transaction, updates

• Beneficial to have single system of record for all commodities

• Vendor must be willing to commit the resources to build and integrate new requirements into their platform

• The customer needs to be able to upgrade easily to the version that has the functionality both from a licensing and upgrade path perspective

• Eka Energy has Dodd Frank (including submission and reporting) built directly into the platform• Requires a substantial investment in terms of resources, as well as

partnerships, with clients to truly understand and implement the requirements


Regulatory Reporting

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• New or changing regulatory reporting and internal requirements• Many of these reports are annual/quarterly with differing requirements

• Customer needs to be able to create the data report – not be dependant on the vendor

• Smart CM needs:• Extensibility – need to be able to add data attributes to any part of the

data model

• Categorization – need multiple means of categorizing deals in addition to the book structure

• Same data will be used for multiple reporting requirements

• Accessibility – need to have access to the data to retrieve/report

• Data needs to be understandable; not useful if only the vendor can provide this capability


Transportation

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• Ideally would be able to manage the entire lifecycle,including scheduling • Integrate into scheduling if the CM provides scheduling capability

• Shadow settlements

• CM should be able to handle these at the very least to measure risk of these delivery methods

• New points, pipelines, pricing points• Example is shale gas; need to be able to seamlessly configure new

pipelines, points, and pricing points without IT/vendor involvement

• Able to handle inventory in storage as well as in transit• Valuation of inventory including WACOGs, losses


Summary

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To facilitate changing requirements, the Smart CM vendor must:• Work in a partnership relationship with its customers

• Provide the capability to capture the majority of the data required within the system

• Make the data accessible and the system extensible

• Deliver advanced business intelligence for better decision making

• Allow for a simple cost effective upgrade path to the system

USATwo Harbor Point Square100 Washington Boulevard,Stamford, Connecticut 06902United States of AmericaT: +1.203.810.4250

EUROPE2 Sheen RoadRichmond , TW9 1AEUnited KingdomT: +44.208.973.2683

AUSTRALIALevel 5 185 Victoria SquareAdelaide 5000 SA AustraliaT: +61.0.4479.77831

SINGAPORE17 Phillip StreetGrand Building 05-01Singapore 048695Tel No: +65.8363.2635

INDIAEmbassy Tech Village, Phase IIAster Building 2A, East TowerDevarabeesanahalli, Outer Ring RoadBangalore 560 103 IndiaT: +91.80.40819200

CANADASuite 730, 734 - 7th Avenue SWCalgary, AB , T2P 3P8T: +1.403.237.7740

Download Webinar Recording:

http://info.ekaplus.com/energy-revolution-etrm-webinar

http://info.ekaplus.com/energy-revolution-etrm-webinar

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