Lacima
Effective Risk Management and Valuation Tools for Higher Profitability

The production, distribution, trading and hedging of energy and commodities is a complex business with many players operating across multiple physical markets, geographies and currencies; owning and dispatching multiple physical assets, and trading in both standard and complex hedge con- tracts. Economic pressures and ever in- creasing regulatory scrutiny mean that the spotlight is now shining on the accurate measurement of the values and risk of these diverse portfolios. Management are more reliant than ever on the systems that record their trading activities–commonly referred to as Energy Trading and Risk Management (ETRM) systems–but these generic systems were never properly de- signed to cope with the specialized nature of valuation and risk.

Lacima, a provider of software and advisory services, has developed Lacima Analytics, its flagship product, to meet this specialized need and is able to holistically address all of the valuation, optimization and risk management needs of global energy markets players, whilst helping to deliver a boost their profit- ability. Lacima Analytics is able to jointly handle long term structured financial contracts together with a diverse range of physical assets such as thermal, hydro and wind power plants, gas storage facilities and pipelines.

“No two customers in the energy industry are the same. This means that the generic ‘one size fits all’ solutions offered by the wider ETRM solutions has very little applicability, and they are drawn to specialized solutions such as ours” says Dr. Chris Strickland, Co-Founder of Lacima. With this focused approach, Lacima has developed a first rate reputation over the past 15 years, garnering an impressive customer list across North America, Europe, and Australasia.

“Our solution is increasingly replacing the only reasonable alternative to the very limited risk capability of the ETRM systems” says Strickland, “which are the ad-hoc, often spreadsheet based, solutions developed by small in-house teams.

As these ad-hoc solutions come under in- creased scrutiny from shareholders, regulators, and credit rating agencies, management teams are waking up to the need to find a more robust alternative that doesn’t carry the myriad of risk associated with in-house development.”

With management more reliant than ever on its systems to value and manage risks, Lacima will continue to focus on developing robust solutions to meet this need

Lacima Analytics is an open frame- work architecture, a key feature of which is its ability to interface simultaneously with multiple ETRM systems meaning that existing deal and data capture systems do not have to be replaced and customers can benefit from quick, cost effective implementations. An example of one of Lacima’s current projects is for a client who is a leading provider of wholesale and retail energy services in the U.S. The client manages more than 20 financial portfolios, each of which includes physical asset and financial hedges. Lacima’s solution is designed to determine the appropriate risk metrics across the entire portfolio, including across multiple regions, using a consistent modeling framework. In addition the solution is being used to quantify the success or failure of hedging strategies on the portfolio at large, and to quickly evaluate potential hedges or new strategies. Finally, the solution gives the client a consistent, detailed framework for valuing assets (existing or potential).

Looking to the future, Lacima will continue to grow its application to include emerging asset types across the full commodity spectrum and so is well geared to ongoing success as the leading provider of specialized energy and commodity risk analytics.