© 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
Sales Portfolio Management I Allegro Summit AUG 2015 I Page 3
Agenda
1. Business rational for integrated portfolio management
2. System independent approach
3. Practical solution with Allegro
Sales Portfolio Management I Allegro Summit AUG 2015 I Page 4
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
Sales Portfolio Management I Allegro Summit AUG 2015 I Page 5
Agenda
1. Business rational for integrated portfolio management
2. System independent approach
- Overview
- Margin per sales product
- Integration of wholesale logistic
- Application architecture and consequences for reporting
3. Practical solution with Allegro
Sales Portfolio Management I Allegro Summit AUG 2015 I Page 6
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
Sales Portfolio Management I Allegro Summit AUG 2015 I Page 7
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, ...
Sales Portfolio Management I Allegro Summit AUG 2015 I Page 8
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
Reporting across applications / planning (Positions, profit, risk, debtors/creditors, cash flow, …)
Finance
3 incl. holding of load forecasts, positions and MtM-
evaluations
Invoicing and invoice verification
Confirmation, clearing,
margining
Order management and pricing
Energy logistics4
4 Complexity relative to share key accounts5 Creation load and production forecast (long term,
medium term, day ahead)
Systemic to support core functions
Forecast5
Core ETRM functionality
Balancing group / Energy data
management
SalesProcurement
2 Extraction market data, generating market data
(PFCs, volatilities, credit ratings, …) and market
data holding
1 power plants, storage, market rational contracts, ...
Risk evaluation (Market and credit)
Market data provisioning2
Typical none ETRM functionalities
Scheduling
Trade capture3
Sales Portfolio Management I Allegro Summit AUG 2015 I Page 9
Agenda
1. Business rational for integrated portfolio management
2. System independent approach
- Overview
- Margin per sales product
- Integration of wholesale logistic
- Application architecture and consequences for reporting
3. Practical solution with Allegro
Sales Portfolio Management I Allegro Summit AUG 2015 I Page 10
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
Sales Portfolio Management I Allegro Summit AUG 2015 I Page 11
Agenda
1. Business rational for integrated portfolio management
2. System independent approach
- Overview
- Margin per sales product
- Integration of wholesale logistic
- Application architecture and consequences for reporting
3. Practical solution with Allegro
Sales Portfolio Management I Allegro Summit AUG 2015 I Page 12
Purchasing & sales management Energy logistics
For a consistent wholesale portfolio management a full integration with energy logistics is necessary
Wholesale logistic
Forecast5
Balancing group / Energy data
management
Forecast, Actuals
Actuals, Inbound
nominations
Actuals
Outbound nominations
Outbound
nominations
ActualsForecast
Trade capture
Confirmation, clearing,
margining
Order management and pricing
Invoicing and invoice verification
Procurement Sales
Systemic to support core functions
Core ETRM functionality
Typical none ETRM functionalities
Inbound
nominations
Inbound nominations
Scheduling
Sales Portfolio Management I Allegro Summit AUG 2015 I Page 13
Agenda
1. Business rational for integrated portfolio management
2. System independent approach
- Overview
- Margin per sales product
- Integration to wholesale logistic
- Application architecture and consequences for reporting
3. Practical solution with Allegro
Sales Portfolio Management I Allegro Summit AUG 2015 I Page 14
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
Sales Portfolio Management I Allegro Summit AUG 2015 I Page 15
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
Sales Portfolio Management I Allegro Summit AUG 2015 I Page 16
Agenda
1. Business rational for integrated portfolio management
2. System independent approach
3. Practical solution with Allegro
Sales Portfolio Management I Allegro Summit AUG 2015 I Page 17
Contract and portfolio managementModeling
Asset optimization1
… will establish their strategic landscape until end of this year
… strategic application landscape
Reporting across applications / planning (Positions, profit, risk, debtors/creditors, cash flow, …)
Finance
3 incl. holding of load forecasts, positions and MtM-evaluations
Energy logistics4
4 Complexity relative to share key accounts5 Creation load and production forecast (long term,
medium term, day ahead)
Systemic to support core functions
Forecast5
Typical systems coverage
DWH
KYOS Analytical
SAP-FI
Powel
Robotron
Balancing group / Energy data
management
2 Extraction market data, generating market data
(PFCs, volatilities, credit ratings, …) and market
data holding
1 power plants, storage, market rational contracts, ...
Market data provisioning2
Risk evaluation (Market and credit)
MD-Provider Allegro
Trade capture3
Invoicing and invoice verification
Confirmation,
clearing,
margining
Order management and pricing
Scheduling
Purchasing Sales
SAP-FI