Hot topics Treasury seminar

Transcription

1 Hot topics Treasury seminar Commodity risk management technology Discover and unlock your potential PwC

2 Program Drivers of trading results Positions and controllable variances Making the supply chain fully financial Implementation of the trade margin improvement proposition 2

3 Drivers of trading results Hot topics treasury seminar Commodity risk management technology

4 Limited (Actionable) Insights into Drivers of Trading Results Observable to Decision-Makers Not fully observable to Decision-Makers Hot topics Treasury seminar Trading P&L Fundamenta l drivers Actionable information Create more actionable insights Trading P&L and related KPI Assessment of ex-post profitability of trading operations Underlying drivers of performance not transparent Fundamental drivers of trading P&L Trading results can be attributed to supply chain trading, asset-backed trading and proprietary trading Performance attribution enables decision-makers to better evaluate the risk-return trade-off generated by various trading activities. Only available on an ad-hoc basis Actionable information into performance drivers Optimization of trading and logistical decisions requires up-to-date information on key performance drivers Not available across the full value chain. 4

5 Positions and controllable variances Hot topics treasury seminar Commodity risk management technology

6 Capturing more marketing & trading value requires insights into positions and controllable variances along the value chain Geographical Arbitrage & Freight Optimization Product Arbitrage & Cross Commodity Optimization Temporal Arbitrage & Storage Optimization Crude Oil Trader Naptha Jet Fuel Fuel Oil Objective Triangulation of freight movements exploiting regional imbalances between supply and demand Key Insights Required Overview of global commodity book including expected sales and supply volumes as well as transport positions for short and medium term periods Identification of flexibilities in contracts allowing for cargo diversion and location swaps Regional supply/demand dynamics and price patterns Hot topics Treasury seminar Objective Capturing cross-commodity price differentials by blending, refining and/or processing commodities Key Insights Required Overview of cross-commodity positions Insights into customer demands in downstream markets for refined/processed products Availability and prices for capacities (storage, handling and processing) Dynamics of cross-commodity price differentials Objective Utilize access to cheap storage to capitalize on inefficiencies in the term structure of commodity prices Key Insights Required Understanding of storage costs for both own assets and third parties Term structure of commodity prices taking liquidity into account Overview of available funding opportunities and relevant costs 6

7 Insights into positions and controllable variances required for four major steering areas Exploiting Contractual Flexibility Real-time identification of opportunities for exploiting contractual flexibilities. Support of decision-making processes (e.g. deal approval process) for non-standardized contracts used for selling/buying of flexibility. Valuation of flexibility to ensure that it is fully priced upon origination and that its value can be recovered by trading operations. Logistics & Shortterm Trading Increasing throughput by superior production and sales forecasting accuracy and alignment of planning processes between sales and assets/production. Transparency of commodity and transportation books enabling decision makers to identify short-term trading opportunities. Planning (Mid Term) & Risk Management Alignment between medium-term planning of supply and sales volumes, capacity positions (storage, transport, processing) and risk capital allocations. Identification of portfolio needs in the medium term, i.e. required structure of supply contracts, needed positions in physical assets and the optimal design of the hedging path. Usage of Working Capital Hot topics Treasury seminar Alignment of financing and logistical processes in order to minimize usage of working capital. Identification of opportunities for off-balance sheet financing of trades using trading positions as collateral. 7

8 Required Insights in positions and controllable variances can be generated by modelling of trading activities and business intelligence analytics Production (Upstream) Identification of controllable drivers of trading margins along the whole value chain Production Flexibility Processing Lique-faction Storage Transportation Flexibility Loading Births Shipping Unloading Births Storage & In- Store Trading Storage & Dispatch Flexibility Regasification Entry Trans. System Customers Liquids FOB DES Reloads Spot Market Cost-Based / Net-Back Pricing Financial Hedging Market-Based Pricing Pre-Deal Analytics Structuring & Valuation of Contracts Pricing (commodity price, risk premia, fixed cost revovery for assets etc.) Risk Assessment (Controllable vs. non-controllable risks) Portfolio Optimization Analytics (Mid Term) Portfolio Planning for Realizing Intrinsic & Extrinsic Value Exercise of Flexibilities (Destination flex, storage, cross-product) Mid-term planning (Controllable vs. non-contrallable volumes, storage & transport capacities, supply etc.) Short Term Trading & Logistics Analytics Short-Term Trading & Logistics Optimization Short-Term Forecasting (Controllable vs. noncontrallable sales and production volumes) Merit Order of Supply Sources Capacity Checks (Storage, transport, supply etc.) Contract Approval (Standard vs. structured contracts) Risk Exposures (Market risk, credit risk, capacity risk controllable vs. Non-controllable risks) Hedging Path Scheduling & Dispatch Hot topics Treasury seminar 8

9 Making the supply chain fully financial Hot topics treasury seminar Commodity risk management technology

10 Operative Processes Valuation Approach Drivers of Trading PnL Making the supply chain fully financial enabling traders and other decision makers to optimize their portfolio Expected supply/sales volumes Forward Book Supply price vs. market price delivery location) Number of Days ballast vs. sailing days Dispatch Book Demurrage / Port Congestion Delivery Expected Transportation Costs Sales price vs. market price (@ delivery location) Extrinsic values in commodity/ transport contracts Markups based on expected quality Valuation against forward curve; assumption of average budget rates for non-tradable cost/revenue items (e.g. quality markups, transport differentials etc.) Notification of counterparty Vessel Quality PFA Customer issues (LC) Repositioning of vessels (premium/discount) Logistical congestions Valuation effects driven by (1) additional fee items (e.g. demurrage) and (2) marketing/covering of excess/deficit positions in spot markets (e.g. chartering additional ship in spot market) Planning processes Scheduling / Operations Pricing processes Note: In addition to the key operative processes listed above, further issues also require a different treatment depending on whether the forward book or the dispatch book is in focus. For instance, this applies to the required design of internal controls. Hot topics Treasury seminar 10

11 Implementation of the trade margin improvement proposition Hot topics treasury seminar Commodity risk management technology

12 1 Implementation of the Trade Margin Identify Value Drivers & Controllable Variances Embed Valuation Define Valuation Approach in Approach Trading Process Align Trading Organization Analysis of Business Model & Trading Strategy Trading strategy & approach Portfolio of physical assets Structure of key supply, sales and transport contracts Identification of Key Drivers of Trade Margins Assessment of different factors on trading results regarding impact on P&L Controllable and Uncontrollable Drivers Deep Dive into key drivers in order to identify controllable drivers and appropriate actions Key Controllable Drivers identified Design Valuation Approach Modelling of Margin Generation in Trading Alignment of Valuation Approach with Trading Approach Extrinsic vs. Intrinsic Valuation of Flexibilities Modelling of Drivers of Trade Margins Market prices including spot- and forward markets Tradable vs. non-tradable value drivers (market prices, non-traded value drivers) Differentiation between controllable and noncontrollable drivers Valuation Approach based on quantitative Model of Trading Margins Align Pricing of Contracts Adjust pricing model for all contracts to overall valuation model Coverage includes pricing of sales, supply and capacity contracts Align Steering Model for Portfolio Adjust steering model for mid-term trading and shortterm trading/logistics Align Processes for Pricing of Contracts and Portfolio Steering Ensure adequate data feeds from market Establish interfaces to relevant units with own organization Pricing models for all contracts aligned with overall valuation model Identify organizational gaps Analyze relevant interfaces between organizational units (e.g. supply vs. logistics) Adequacy of data collection processes (quality, speed, granularity) and related ITsystems Define to-be implementation within the trading organization Define to-be implementation including roles & responsibilities for models and data, alignment of IT systems landscape etc. Organization is fully aligned with trade margin improvement proposition Hot topics Treasury seminar 12

13 Questions 13

14 More information Trainer: Jeffrey Bollebakker Phone number: Hot topics Treasury seminar 14