Upload
ngothien
View
215
Download
0
Embed Size (px)
Citation preview
PwC
Hot topics Treasury seminarCommodity risk
management technology
18 June 2015Discover and unlockyour potential…
Program
2
Drivers of trading results Positions and “controllable” variances Making the supply chain fully “financial” Implementation of the trade margin
improvement proposition
Limited (Actionable) Insights into Drivers of Trading Results
Hot topics Treasury seminar
418 June 2015
Trading P&L
Actionable information
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 basisActionable 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.
Observable to Decision-Makers
Not fully observable to Decision-Makers
Fundamental drivers
Create more actionable
insights
Positions and “controllable” variances
Hot topics treasury seminar
Commodity risk management technology
Capturing more marketing & trading value requires insights into positions and “controllable” variances along the value chain
Hot topics Treasury seminar6
18 June 2015
Geographical Arbitrage & Freight Optimization
Product Arbitrage & Cross Commodity Optimization
Temporal Arbitrage & Storage Optimization
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
Trader
Crude Oil
Naptha Jet Fuel
Fuel Oil
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
Insights into positions and controllable variances required for four major steering areas
Hot topics Treasury seminar
718 June 2015
Logistics & Short-term Trading
Planning (Mid Term) & Risk Management
Usage of Working Capital
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.
Exploiting Contractual Flexibility
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.
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.
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.
Required Insights in positions and controllable variances can be generated by modelling of trading activities and business intelligence analytics
Hot topics Treasury seminar
818 June 2015
Short-Term Trading & Logistics Optimization
Structuring & Valuation of Contracts
Portfolio Planning for Realizing Intrinsic & Extrinsic Value
Pre-Deal AnalyticsShort Term Trading & Logistics
Analytics
Portfolio Optimization Analytics (Mid Term)
Production (Upstream)
Lique-faction StorageLoading Births
ShippingUnloading
BirthsStorage & In-Store Trading
Regasi-fication
Customers
Spot Market
Entry Trans. System
FOB DES
Transportation Flexibility Storage & Dispatch FlexibilityProduction Flexibility
ReloadsLiquids
Processing
Financial Hedging
Market-Based PricingCost-Based / Net-Back Pricing
Pricing (commodity price, risk
premia, fixed cost revovery for assets etc.)
Risk Assessment (Controllable vs. non-controllable
risks)
Capacity Checks (Storage, transport,
supply etc.)
Contract Approval (Standard vs.
structured contracts)
Exercise of Flexibilities (Destination flex, storage,
cross-product)
Risk Exposures(Market risk, credit risk,
capacity risk – controllable vs. Non-controllable risks)
Mid-term planning (Controllable vs. non-contrallable
volumes, storage & transport capacities, supply etc.)
Hedging Path
Scheduling & Dispatch
Merit Order of Supply Sources
Identification of controllable drivers of trading margins along the whole value chain
Short-Term Forecasting(Controllable vs. non-contrallable sales and production volumes)
Making the supply chain fully “financial”
Hot topics treasury seminar
Commodity risk management technology
Making the supply chain fully “financial” enabling traders and other decision makers to optimize their portfolio
Hot topics Treasury seminar
1018 June 2015
Forward Book Dispatch BookDelivery
Expected supply/sales
volumes
Sales price vs. market price (@ delivery location)
Expected Transportation
Costs
Extrinsic values in commodity/
transport contracts
Supply price vs. market price (@ delivery location)
Markups based on expected
quality
Number of Days ballast vs.
sailing daysDemurrage /
Port Congestion
Vessel QualityRepositioning of
vessels (premium/discount)
PFA Logistical congestions
Customer issues (LC)
Dr
ive
rs
of
Tr
ad
ing
Pn
LO
pe
ra
tiv
e
Pr
oc
es
se
s
Planning processes
Pricing processes
Scheduling / Operations
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.
Valuation against forward curve; assumption of average “budget” rates for non-tradable cost/revenue items (e.g. quality markups, transport differentials etc.)
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)V
alu
ati
on
A
pp
ro
ac
h
Notification of counterparty
Implementation of the trade margin improvement proposition
Hot topics treasury seminar
Commodity risk management technology
Implementation of the Trade Margin
Hot topics Treasury seminar
1218 June 2015
Identify Value Drivers & Controllable Variances
Embed Valuation Approach in
Trading Process
Define Valuation Approach
Align Trading Organization
2 3 41
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
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 non-controllable drivers
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 short-term 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
Key Controllable Drivers identified
Valuation Approach based on quantitative Model of Trading Margins
Identify organizational gaps
• Analyze relevant interfaces between organizational units (e.g. supply vs. logistics)
• Adequacy of data collection processes (quality, speed, granularity) and related IT-systems
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.
Pricing models for all contracts aligned with overall valuation model
Organization is fully aligned with trade margin improvement proposition
More information
Trainer:Jeffrey BollebakkerPhone number: +31 88 7925004E-mail: [email protected]
18 June 2015Hot topics Treasury seminar
14