Portland Fuel Price Protection

Transcription

1 Portland Fuel Price Protection

2 The Environment Why Protect? The Past In the last 10 years, daily fuel price fluctuations have increased by over 100% - usually in an upwards direction. In 2000, the average daily price movement for diesel was 0.20 pence per litre (1.23cpg). By 2005, this figure had risen to 0.40ppl (2.45cpg) and today, prices can move by up to 1.50ppl per day (9.20cpg). The Future With economic recovery, comes an inextricable growth in demand for oil products and the voracious appetite of the Eastern economies (China, South-East Asia, India) is putting pressure on oil prices, never experienced before. Many market observers predict inevitable rises in energy costs, punctuated by periodic crashes in the market as alternative energies and government policy temper demand. In short, the perfect ingredients for fuel price volatility. Such volatility causes operational nightmares for commercial users of diesel, petrol, gas oil, fuel oil, LPG and Jet A1. Budgets become impossible to plan, the best prepared sales contracts are destroyed and companies spend more time debating fuel costs than they do promoting their own business products and services. 3 good reasons to manage your Fuel Price Risk Control Keeping control of your fuel costs can help protect your business from unexpected changes in the fuel price, enabling you to have confidence in your budget and safeguarding profit margins. Stabilise Stable fuel prices help to manage cash flow within your business. Focus Stabilised fuel prices provide you with the confidence to spend more time focusing on your core business, instead of worrying about rising fuel costs. 2 3

3 Which Risk Management Strategy? Fixed price / Swaps Simplicity is the key PORTLAND FUEL PAY YOU Portland will always keep things simple and will help you step by step. YOU PAY PORTLAND FUEL SWAP Formulating your Fuel Price Protection strategy need not be a complex or onerous exercise. Portland will help you understand all the different factors and should you wish, can work with you to create a relevant and simple Fuel Price Protection plan. Over the next few pages, Portland outlines the straight-forward and easy to understand Fuel Price Protection mechanisms that can be used simply and effectively to fix your fuel costs. PLAN PROS CONS Fixed price / Swaps Capped price / Options Fixed Price Agreements (UK only) Capped Price Supply Agreement (UK Only) Fuel price stability with zero fee Freedom to purchase your physical fuel from the supplier of your choice Protection from price rises, whilst also benefiting should they fall Freedom to purchase your physical fuel from the supplier of your choice Free to set up Guaranteed invoice price for up to 18 months Set your maximum price for fuel for up to 18 months Exposure to falling prices Potential collateral requirements Upfront premium required Fixed volume needs to be taken evenly throughout the month Upfront premium required Guarantee your fuel price for up to 18 months Monthly volume you would like to hedge typically this is between 20% - 80% of anticipated usage Period you would like to hedge 1 week to 18 months Your target price How it works Month 1 Market prices remain above your fixed price throughout the period, as a result the average price for the month is greater than your fixed price. In this scenario Portland pays you the difference which offsets the price increases in the market. Month 2 Prices start to drop off in month 2, as a result the average price for the period is below your fixed price. In this scenario you would pay Portland the difference which takes you back to your fixed price. Result Zero fee, there are no set up costs associated with this product. Stable fuel prices. You continue to purchase your fuel from whoever you like. Fuel price certainty for up to 18 months. Any movements in the daily spot rate are offset by the payments from your price protection plan. The settlement takes place at the end of each calendar month for the life of the agreement. The settlement is based on the difference between your fixed price and the monthly average of your chosen index price. 4 5

4 Capped price / Options Fixed Price Agreements (UK only) PORTLAND FUEL PAY YOU CAPPED FIXED NO PAYMENT DUE Pay no more than your capped price Monthly volume you would like to hedge typically this is between 20% - 80% of anticipated usage Period you would like to hedge The level you would like to cap your price at this determines your premium Fixed price physical supply Contract period Fuel grade Volume per month The fixed price Delivery location(s) Load size How it works: Premium is paid up front Month 1 Market prices remain above your Capped price throughout the period, as a result the average price for the month is greater than your capped Once the agreement is in place Portland will deliver the agreed volume to your delivery location(s) for the life of the contract, all product will be invoiced at the fixed price. price. In this scenario Portland pays you the difference which offsets the price increases in the market. Month 2 Prices drop off in month 2, as a result the average price for the period is below your capped price. In this scenario no settlement is due, you reap the benefit of falling prices. Result Protection from price increases. Benefit from falling fuel prices. You continue to purchase your fuel from whoever you like. It s simple. Protection from price increases. Guaranteed fuel supply. Enables you to set your maximum fuel price. Protects you from fuel price rises but also allows you to benefit from drops in the market. You pay your premium to Portland upfront and then never pay more for the remainder of the contract. 6 7

5 Capped Price Supply Agreement (UK only) Getting started.. YOU PAY WILL NOT GO ABOVE CAPPED CAPPED Setting up a Fuel Price Protection strategy needn t be a stressful and time consuming experience Our 3 step process will help guide you through the procedure and ensure that you end up with a price protection plan which is right for your business. Set the maximum price you will pay for your fuel Contract period Fuel grade Volume per month Maximum price Delivery location(s) Insurance premium Load size Once the agreement is in place Portland will deliver the agreed volume to your delivery location(s) for the life of the contract. If the spot price is below your maximum price then you pay the spot price. If the spot price is higher than your maximum price then you only pay the pre-agreed maximum price. It s simple. Fuel supply at or below the current market rate. Guaranteed fuel supply. Step 1: Getting to know your business To enable us to help you we need to understand your business. Therefore the first step in the process involves gathering data to better understand your goals and objectives. Areas we may cover include: Your current fuel procurement strategy How fuel price fluctuations impact your business Your attitude to risk Step 2: Putting the strategy together Once we know what makes your business tick we can start to work with you to devise an effective and relevant fuel price protection strategy. Discussions will include: Which hedging tool is most suitable for you? What is the most effective time period for you to hedge? How much of your fuel volume would you like to hedge? Step 3: Execution / On-going review We work together to put your strategy into action. The Portland team is on hand throughout the period of protection to offer help and guidance where necessary. In addition, we will keep you up to date with all the latest developments in the oil market throughout the duration of your contract. 8 9

6 Our Ethos Why Choose Portland? Genius is about making complicated things simple... Over 80% of our customers are repeat customers 1. Keep It Simple 3. Communication Is Key The best reason we can give is that over 80% of our customers are repeat customers. That, Relaxed sales approach at Portland it s completely up to you when you take out The oil industry is sometimes tarnished by its smoke and mirrors reputation, with industry experts often speaking in what seems like a foreign tongue. We strive to fight this reputation and believe that the oil market is no more complex than any other commercial sector. We also believe that customers will only ever continue to buy our products when they fully understand what we offer and for this reason, we will always aim to hold a face-to-face meeting, however big or small the customer. We make certain our customers understand that coupled with our unparalleled knowledge of the fuel market, makes us an unbeatable partner. We value each and every customer and are always prepared to go that extra mile to ensure complete satisfaction. your price protection plan. We will provide you with the tools you need to make your decision and then its over to you to decide when the time is right. Lastly and perhaps most importantly we keep it simple. 2. Trust fuel prices go down as well as up and we always ensure that customers only take-on fixed prices for volumes that reflect their own fuel consumption. We believe that in order for us to provide you with the most suitable strategy we need to get to know you, which is why we endeavour With combined experience of over 100 years in the oil industry, the Portland team are well equipped to help your business Trust is the backbone of everything that we do. We only ever make promises we can keep, if we say we ll do something, we will. 4. Respect We respect all who we come into contact with; to meet each of our customers face to face. achieve fuel price stability in a volatile oil market. clients, suppliers and colleagues alike

7 Portland Fuel Price Protection The Fuel Trading Company Ltd 109 Micklegate York YO1 6LB United Kingdom Tel: Fax: