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Power & Gas: Complex Financial Reporting/Process & Technology: Earnings & Risk Assessment

Natural Gas Trading and Asset Management Co. (“NG TradeCo”) is a natural gas wholesaler who captures arbitrage opportunities primarily by managing physical assets. NG TradeCo is involved with natural gas marketing, trading, pipeline transport and capacity management, storage and asset management agreements. NG TradeCo’s clients include: natural gas utilities, gas-fired power generators, large commercial and industrial customers, retail customers, natural gas producers and wholesale traders/marketers.

Opportune was retained by the parent company that acquired NG TradeCo to assess its earnings drivers, business risks and internal controls and systems. Opportune professionals were successful in driving the implementation of the following:

  • Historical earnings for a three-year period were assessed, identified and disaggregated into the key drivers to quantify historical volatility
  • An evaluation of significant historical market events and the company’s performance and risk controls was undertaken to assess the NG TradeCo’s risk management capabilities
  • Based on these analyses, future earnings volatility were estimated
  • The performance of asset management agreements with regulated natural gas LDCs and third-parties was conducted to assess performance and identify any potential risks
  • An extensive assessment of NG TradeCo’s risk models & controls, policies, ETRM and related systems and overall business processes supporting trading and risk management was completed
  • Options for qualifying for hedge accounting (vs. MTM) were evaluated to potentially reduce earnings volatility
  • A review of NG TradeCo’s internal controls was completed
  • Extensive interviews with NG TradeCo’s executives and managers were undertaken to assess overall business capabilities and risk control environment
  • Recommendations were made to the parent company on the overall assessment of NG TradeCo and potential integration approaches

This engagement required a diverse set of skills to meet the client’s needs – a deep understanding of natural gas trading and supply, risk management and controls, complex IT ETRM systems, financial reporting and analysis, as well as derivative analysis and hedge accounting. Opportune added tremendous value by bringing together a diverse team with skills in all these areas. Our senior team was able to interface with all levels of NG TradeCo personnel, from the CEO to the analyst, to develop a comprehensive assessment of the company’s strategy, operational capability and organizational effectiveness. We then developed an executive review for the acquiring company tailored to their needs and perspectives.

Opportune understands the intricacies of the U.S. power and gas markets and the complex commercial strategies, systems, controls and oversight needed for success. Thus, power generators, retail power and gas companies, and wholesale supply and trading companies all benefit from the depth of our industry expertise and the breadth of our consulting experience in addressing commodity risk management, organizational and policy design and operational execution. For more information, CLICK HERE.

Charlie Palmer

Managing DirectorOpportune LLP