Case Study

Sembcorp

Client Success Risk Analytics Trading Analytics

Sembcorp is undertaking a multi-phase implementation of Lacima Analytics VaR, EaR, Credit Risk and Limit and Breach reporting for a global portfolio of financial contracts and physical assets including power, gas, oil, interest rates and FX. In addition, Lacima Trader>Storage is also being onboarded for the optimisation of gas assets.

The Project

Sembcorp commenced trading operations and needed accurate and robust risk measurement within a short time horizon. To support this new business, a rapidly deployed solution was needed that could address both valuation and cashflow exposures across a global portfolio of physical assets and financial contracts which would include power, gas, oil, interest rates and FX. Management support tools such as credit risk and limit and breach reporting were also essential as was gas optimisation.

The Client

Sembcorp Industries (SGX: U96) is a leading energy and urban development player. Leveraging its sector expertise and global track record, Sembcorp delivers innovative energy solutions that support the energy transition and sustainable development. Sembcorp has a balanced thermal and renewable energy portfolio of over 12,600MW including more than 2,800MW of wind, solar, battery storage and energy-from-waste capacity.

The Solution

To meet the tight deadlines, a phased deployment approach was adopted. In phase one, within three months of project commencement, Lacima Analytics modules for parametric, historical and covariance Monte Carlo VaR were specified, configured to Sembcorp’s requirements, integrated with data systems and put into live production use. A second phase was then undertaken to implement limit and breach reporting, credit risk (PFE) and automation of day-to-day business processes including running daily VaR and risk reporting to management.

In subsequent phases the VaR reporting is being extended to Sembcorp’s global portfolio (including interfacing with additional deal capture systems) and the metrics extended to cover the measurement of risk associated with their physical asset portfolio by modelling the underlying assets and implementing EaR calculations. Concurrently with the asset modelling, Lacima Trader> Storage will be implemented to enable optimisation of gas storage facilities.

The Outcome

With this implementation, Sembcorp is able to calculate both Delta VaR and co-variance Monte Carlo VaR on their full trading portfolio (including power, gas, oil, interest rates and FX) in less than one minute. This has enabled Sembcorp to commence their new trading activities on schedule with the confidence that both valuations and risk metrics are being reported accurately and on a timely basis. When the further phases are completed Sembcorp will be able to calculate market and credit risk across their whole portfolio of traded contracts and physical assets, as well as perform detailed analysis on their gas storage contracts portfolio.

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