Management of a sales portfolio in gas wholesale market...Reporting across applications / planning...

© 2015 Allegro Development Corporation. All rights reserved.

A story from initial ideas to operational excellence

Barcelona – August, 2015

Management of a sales portfolio in gas wholesale market

Sales Portfolio Management I Allegro Summit AUG 2015 I Page 2

Aim of today’s session is to give a high level overview on1 …

Business rational for integrated portfolio management (wholesale sales activities and portfoliomanagement)1

2

3

System independent approach on methods, processes and IT-architecture

Practical solution with Allegro

1 Client specific informations were eliminated


Agenda

1. Business rational for integrated portfolio management

2. System independent approach

3. Practical solution with Allegro


As margins in German energy wholesale market were/ are shrinking, a

more accurate risk-return steering of our sales portfolio was required

Transformation program to install integrated portfolio management

Situation and objectives for …

Methods

▪ One integrated view on all energy relevant

positions1, flexibilities, constraints

▪ Transparence on risk-return as basis for

steering

Process and organization

▪ Streamlined Front-to-End processes from

trade capture to valuation, logistic and

invoicing

▪ Reduction of operational effort

Infrastructure

▪ Integrated application landscape

▪ Use of scalable standard software

Methods

▪ No consistent view on energy positions

▪ Weak basis for integrated risk and financial

reporting

▪ Difficulties to fulfill new regulatory

requirements (EMIR, REMIT)

Processes and organization

▪ Lots of manual, time consuming workarounds

and reconciliation work

▪ Know-How focused on few resources

▪ No integrated logistic and portfoliomgt.

processes

Infrastructure

▪ Heterogeneous, decoupled landscape

▪ Mainly self-developed applications

Initial situation for … Overall objective of …

1 Long term contracts, storage, standard trading product and wholesale contracts; capacity trades


Agenda



- Overview

- Margin per sales product

- Integration of wholesale logistic

- Application architecture and consequences for reporting



Logistics partner

Sales

Todays presentation focuses on integrated portfolio management of

procurement and sales trades as one wholesale sale key function

Sales control and risk management

Whole-

sale

customer

Data exchange

Customer / product mgmt.

Product

development

Acquisition /

contract signing

Contract

termination

Customer care

Energy management

Modeling

Energy logistics

Contract and portfolio management

Procurement Sales

Overview on wholesale functions

Trading

Energy

market


Before design application architecture a full understanding of wholes sale functions is required

High level functions map

Reporting across applications / planning (Positions, profit, risk, debtors/creditors, cash flow, …)

Finance

1 KW, Speicher, marktrationale Verträge, etc.

3 incl. holding of load forecasts, positions and MtM-evaluations

Modeling

Market data provisioning2

Asset optimization1

Risk evaluation (Market and credit)

Contract and portfolio management

Trade capture3

Invoicing and invoice verification

Confirmation, clearing,

margining

Order management and pricing

Sales

Energy logistics4

Balancing group / Energy data

management

Scheduling

Forecast5

4 Complexity relative to share key accounts5 Creation load and production forecast (long term,

medium term, day ahead)

Systemic to support core functions

Procurement

2 Collection external market data, generating

internal market data (PFCs, volatilities, credit

ratings, …) and market data provision

1 power plants, storage, market rational contracts, ...


Contract and portfolio managementModeling

Asset optimization1

ETRM application is the energy management backbone. As wholesale invoicing is historically well established an integration is challenging

Integrated application architecture


Finance

3 incl. holding of load forecasts, positions and MtM-

evaluations



margining


Energy logistics4




Forecast5

Core ETRM functionality


management

SalesProcurement

2 Extraction market data, generating market data

(PFCs, volatilities, credit ratings, …) and market

data holding




Typical none ETRM functionalities

Scheduling

Trade capture3


Agenda



- Overview






Procur

ement1

Portfolio Sales1

Procurement

portfolio

Sales

portfolio

Optimization

Full supply

Fixed schedules

Sigmoid products

Flexible schedules

Virtual storage

LTCs

Storage

Market

Access

standard

products

Hed-

ging

Booking logicSteering structure

Portfolio Sales1

Procur. portfol. Sales portfolio

Full supplyMarktet A.

Optimization

LTCs

Storage

Flexibe schedules

Virtual storage

HedgingSFPDelta 1

ResidualDiscount FlexibilityCustomer 1

Fixed schedules

…

Customer 1 Customer 1

To manage margin and hedging strategy per wholesale

product a respective book structure is required

Wholesale steering and booking logic

…

1 No energy positions but just cash postings


Agenda



- Overview






Purchasing & sales management Energy logistics

For a consistent wholesale portfolio management a full integration with energy logistics is necessary

Wholesale logistic

Forecast5


management

Forecast, Actuals

Actuals, Inbound

nominations

Actuals

Outbound nominations

Outbound

nominations

ActualsForecast

Trade capture


margining



Procurement Sales


Core ETRM functionality

Typical none ETRM functionalities

Inbound

nominations

Inbound nominations

Scheduling


Agenda



- Overview


- Integration to wholesale logistic




Core application design decisions “wholesale billing

integrated vs. separated” has major impact on reporting

Delimitation of PnL types

Trade lifecycle

Time

Beg time – end time

Delivered

Invoiced

Paid

ETRM

Invoicing

solution

OPTION 1:

Settlement

and ETRM

on separate

platforms

ETRM

ETRM

OPTION 2:

Settlement

and ETRM

on one

platform

Realized PnL1 (post invoiced)

Actual PnL

Realized PnL (post invoiced)

Actual PnL

≈

=

Realized PnL1 (pre invoiced)

Realized PnL1 (pre invoiced)

Unrealized PnL

Unrealized PnL

1 Only meaningful in case actuals meter data loaded into ETRM


As … decided to disintegrate ETRM and invoicing,

the full PnL reporting need to take place in an energy DWH

Full reporting on PnL

Invoicing Tool

Representation

Sales contract in

ETRM

Actual granularity

in ETRM

11

1

2

ETRM Separate invoicing solution

Trade No actuals

2A

Evalu

ation

Easiness to mig.

to integr. solution

…

aPnL in ETRM

rPnL in ETRM

uPnL in ETRM

Trade

2B 3A 3B

Sales

trades

Clustered actuals No actuals

Cases

Sales

trades

Clustered sales

trades

✓

✓

✓

✓

✓

✓

(✓)

aPnL only in

invoicing solution1 assumed as strategic solution 3 MA = Market Area

(✓)

(✓)

Is already

integrated solution


Agenda





Contract and portfolio managementModeling

Asset optimization1

… will establish their strategic landscape until end of this year

… strategic application landscape


Finance

3 incl. holding of load forecasts, positions and MtM-evaluations

Energy logistics4




Forecast5

Typical systems coverage

DWH

KYOS Analytical

SAP-FI

Powel

Robotron


management

2 Extraction market data, generating market data

(PFCs, volatilities, credit ratings, …) and market

data holding




MD-Provider Allegro

Trade capture3


Confirmation,

clearing,

margining


Scheduling

Purchasing Sales

SAP-FI

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