Tech approach opens the books to trading floor

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By Murthy Divakaruni, Syntegra USA’s energy sector

The events related to California deregulation and Enron’s collapse will likely cause changes in energy company accounting practices. Many utility executives are addressing the issue proactively and looking for technological ways to provide transparency in trading floor accounting and energy supply.

Improving system interoperability and functionality to provide accounting transparency is a large investment that also requires deliberate cultural changes. The goal for energy companies: to be able to own and control assets, link them to markets and generate profits from service. To accomplish this, trading floors must work closely with operations and finance. There are three challenges:

  • Keeping financial ledgers linked and assets managed to optimize value,
  • Providing network security while providing access to partners, and
  • Retaining competitive advantage while providing flexibility and open-book accountability.

This must be accomplished in near real time and transparently, using interoperable software and hardware. System interoperability is key, and includes technology in operations (heat rate, plant maintenance, dispatch and load aggregation) and trading floors working together and synchronizing in time.

Technology now is available for companies to manage software interoperability. We will see more hardware-based functions shifting to software systems, as companies can’t afford to upgrade trading floors every three to four years.

Other system interoperability improvements and Internet-based communications strategies that energy companies should explore are:

  • Computer-Telecommunications Integration (CTI)-integrating telephone and turret hardware with software functions and providing full functionality at minimum cost per trader.
  • e-Provisioning-a single sign-on to use wireless, Web and computer devices that dramatically reduces cost per user.
  • Straight-Through Processing (STP)-back, middle and front office applications migrate to provide transaction completion seamlessly; also schedule and provide settlements.
  • eCRM for trade and deal closures-partners view Excel deal sheets, negotiate using chat sessions and conclude a transaction with potential bilateral and counter parties.
  • Asset management/trading around assets-assets are priced, controlled and dispatched to optimize physical and financial returns from transactions; optimize intrinsic and extrinsic values around assets.
  • Business development/asset management alignment-a greenfield project is maintained on the books to capture the projected value from an asset acquisition or construction.
  • Retail and C&I market load aggregation-consolidate and develop strategies to maintain native load, project unregulated market loads and prepare for supply; provide customized solutions to valued customers, and calculate ROI for customer segments.
  • Daily reconciliation of cash-flow and balance sheet statements-project and balance financial performance of assets and revenues from customers; manage value at risk.
  • Knowledge management and business analytics-turn data into knowledge, preserve intellectual capital and improve corporate performance using metrics; use proven software to slice and dice data for end users, according to need.
  • Infrastructure, global messaging and directories-provide network security and use directories to enhance corporate communications while M&As occur (without a glitch).

The most important strategy is to make IT an integral part of business management. Align with a technology partner or develop the internal skills to reduce operational costs.

Murthy Divakaruni is a general manager for Syntegra USA’s energy sector. Contact him at Murthy.Divakaruni@syntegra.com.

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