Case Study

US trading and risk outsourced provider

Client Success Risk Analytics

A US based outsourced risk and trading provider has successfully implemented Lacima Analytics to undertake trading and risk management on behalf of their clients in power and gas markets throughout the United States.

The Project

The client provides outsourced risk and trading functions ‘as a service’ to a diverse client base across numerous energy markets in the United States. They identified a need for a single comprehensive system that would enable them to provide their services on a consistent basis to their entire client base. The chosen solution would be required to simulate multiple price and demand nodes as well as be able to capture and store each individual client portfolio within a single system. The system would also be required to be transparent so that clients could have confidence in the valuations, hedging recommendations and expertise that the client was providing to them.

The Client

The client is an experienced power marketer that offers utilities, municipalities, large industrial clients and independent power producers a variety of optimization, risk management, power trading and settlement services. They manage approximately 44,500 megawatts (MW) of generation and over 3,800 MW of load across the United States.

The Solution

Lacima Analytics has been implemented for both Value-at-Risk (VaR) and Earnings-at-Risk (EaR) metrics for market risk, and Potential Future Exposure (PFE) for credit risk for large complex portfolios. As part of the implementation, Lacima developed new functionality for duct firing capabilities within the multi-unit generator model and enhanced its reporting tools to output enhanced results for generator operations. The valuation and pre-deal analysis capabilities of Lacima Analytics are being used for structuring, product origination, and ad-hoc analysis.

The Outcome

Lacima was selected primarily because of its ability to co-model assets and contracts to provide portfolio risk metrics for a large number of price nodes. Lacima stood out in the selection process as the only vendor who could accommodate and risk manage a large number of different markets and price nodes, across multiple different client portfolios.
Since implementing Lacima, their clients have gained more confidence in their expert advice.

Using Lacima Analytics means they can provide valuation, hedging and risk management services using a single consistent approach for all clients which is leading to more focused and faster analysis.

Lacima’s ability to handle a large range of different contract types has enabled modelling of both more markets and more complex financial contracts than had been previously undertaken, and they are now able to offer their client’s a more sophisticated service and a larger variety of potential hedging options for their portfolio of assets.  Lacima Analytics is also utilised to rapidly evaluate potential deals on behalf of client’s trade desks. The valuation and pre-deal analysis capabilities of Lacima allow structuring, product origination, and ad-hoc analysis to be performed more rapidly and consistently than was possible with their previous solution provider.

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