2. AMEREX HISTORY
1978
Amerex
Brokers, LLC
Founded in NYC:
Commodities
Brokered:
•Heating oil
•Gasoline
•Fuel oil
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2004
2006
Amerex Energy
Services
Established:
Formed to
provide energy
advisory
services to enduse client retail
Amerex
purchased by
GFI Group
(NYSE: GFIG):
•2000
employees
•Serves 24,000
institutional
clients:
financial
institutions, FE
RC, retail
suppliers, and
utilities in 12
countries
2009
AES acquired
CETX Energy
Agency:
Increased
Texas client
base and
added key
team members
2011
AES acquired
Philadelphia based
Energy Choice
Solutions:
Increased Northeast and
Midwest client base and
expanded team
footprint
3. AMEREX: INDUSTRY LEADERS
Amerex Brokers (Wholesale)
– Pre-eminent wholesale energy brokerage platform in North America
– Facilitate large trading volumes across most U.S. regions:
• Electricity- 7.5 million MWh per day
• Natural gas- 170 Bcf per day
Amerex Energy Services (Retail)
– Leverage wholesale presence to advise end-use retail clients on energy
procurement & management
•
•
•
•
Commercial
Industrial
Institutional
Governmental
– Assist clients in all deregulated markets for both electricity and natural gas
– Seasoned team with experience on both the supplier and consulting sides
Industry Awards
• Ranked No. 1 Energy Commodity Broker for Energy Risk and Risk Magazine’s for 2010
, 2011, and 2012
• Only energy brokerage firm invited to join Committee of Chief Risk Officers
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4. OUR PROCESS
Phase I
Phase II
Phase III
Phase IV
Phase V
Phase VI
Phase VII
Phase VIII
Orientation & Education
Data Collection & Analysis
Strategic Planning
Client Risk/Reward Assessment
Supplier Evaluation & Selection
Execution
Monitor & Manage
Track Data
Diligence and Devotion to each step
prevents mistakes and eliminates errors
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5. PRODUCT OPTIONS
Most
Risk &
Opportunity
LMP
Index
Block &
Index
Real Time Market Prices
• Available to most clients
• Prices set real time &
only known afterwards
• Volatile
• Relatively easy to
manage
• Price spikes likely
coincide with peak usage
• Can capture lower/avoid
higher prices with load
shifting
• Potentially low pricing
over extended periods of
time
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Heat
Rate
Fixed Price
Fixed Price
with
with
Bandwidth
Full Swing
Portfolio Managed Strategy
• Available to mid to large
clients
• Requires management
• Disaggregate components
to allow wholesale
purchasing dictated by
market conditions
• May yield lower pricing
than fixed prices if
forward natural gas prices
continue to drop
• Can provide budget
forecasting via hedges and
caps
Fixed Price
• Not available for all
clients
• Price certainty
• Set it and forget it
• Relatively easy
• Market near 10 year
lows
• Probable savings
against current rate
(hero status)
Least
Risk &
Opportunity
6. ELECTRICITY PRICING
Generator &
Fuel Costs
Retail Costs
Market
Conditions
Supplier
Specific
Wholesale Supply
• Heat Rate
• Energy
• LMP
• NG - NYMEX
Retail Supply
• Ancillaries/Losses
• ISO fees
• Load shaping
• Supplier Margin
• Capacity &
Transmission
6
Utility Costs
and Taxes
Regulated
Tariffs
Utility Supply & Tax
• Transmission
• Distribution
• GRT/PUC
• State/City
Total Cost
($/kWh)
8. CASE STUDY : CHILDREN’S NATIONAL MEDICAL
Hospital, Power – 75,000,000 KWh/yr
- Challenge:
• Currently paying well above market rates in a supplier
contract with 1.5 years of term remaining
•Establish long term energy procurement strategy to include
all primary / secondary accounts and 20% green REC’s
- Solution:
•Provide various strategy options for management review
& consideration
•CNMC staff educated for greater understanding & input.
-Results:
•Provide multi level / term fixed rate to include all accounts to
secure budget certainty and alignment through 2017
•Achieved annual savings of ~ $3M/yr inclusive of green REC’s
with options for longer term extensions
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9. CASE STUDY: BAYLOR UNIVERSITY
Power: 100,000 MWh/yr, Gas: 30,000 Dth/yr
– Challenge
• Control escalating energy prices for as long as possible
allowing university to focus on capital program
– Solution
• Leveraged university's investment grade credit to support
financing of west Texas wind farm
• Sleeved university credit through major investment
bank, thus decreasing developer’s financing costs
• In exchange, university obtained 10 year fixed price contract
at below-market rate
– Results
• 35% savings, resulting in $2M+/yr in savings
• Received 2007 Innovation Award by the National
Association of College and University Business Officers
• Energy Risk Magazine recognized the contracts as a 2007
Deal of the Year
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10. CASE STUDY: LARGE PJM INDUSTRIAL
Large Multi-National, power: 425,000,000 kWh/yr
PJM
– Challenge
• Need to Secure Savings vs. Lowered Target while Mitigating Risk
• Leverage Buyer Sophistication and Secure Contract Flexibility
– Process
•
•
•
•
Evaluated Fixed, Block & Index, Managed Heat Rate Options
Developed Qualified Supplier List of Those Willing to Provide
Evaluated Pricing , Contracts, Optionality Gained
Priced Subs Together, but Contracted Separately
– Results
• 24 month Load Following Heat Rate Contract, Cap & Trans P.T.
– Block & Index Value vs. Risk Deemed Insufficient
– Fixed Rejected Due to Bearish Gas Bias
• Savings vs. Contract Executed 3 Years Ago = $10/MWh & Improving
• Total Energy Cost Under $0.04/kWh
– 2013 Strategy
• Lock Additional Heat Rate at Opportune Time
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11. VALUE ADD EXAMPLES
Products:
Facilitated and manage numerous heat rate structure
contracts in PJM (PA & IL) allowing clients to
capitalize on falling gas prices
10 year power contract using I-bank for commodity
and REP sleeve for QSE and billing resulting in $2 MM
annual savings
Designed commodity product structure to capitalize
on demand response load resulting in 30% increase
in demand response revenues
In discussions with several clients on financial
products in both deregulated and regulated markets
Contracts:
Negotiated with multiple suppliers to provide 100%
bandwidth at no premium with no recourse for a
large institutional client that had previously been
subject to usage limitations
Negotiated with multiple suppliers to provide
customized language limiting change in law
utilization regarding ERCOT LMP price cap increases
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Pricing:
Captured below-market heat rate (~$13/MWh)
supported by Letter of Credit in a specific market
yielding 22.5% savings for client
Analyzed and recommend contract restructure to avoid
LMP exposure after cap increase and secure budget
certainty, lowering overall fixed price and potentially
avoiding ~$300,000 increased spend
Currently represent ~30 clients who have secured
energy prices <$45 per MWh in 2012
Additional Services:
Negotiating development of a natural gas pipeline in a
rural market to allow client to convert from propane
to gas, which is expected to save ~$300,000 annually
after CAPEX
Provide 4CP notifications to ERCOT clients, providing
potential savings of ~$20,000 per MW
12. THE ROAD AHEAD
Depressed economy does not incentivize building new
generation fleets in states like Ohio, New Jersey,
Pennsylvania, Illinois, and Texas
As long as EPA allows hydraulic fracking, natural gas
resources will be plentiful, presumably keeping prices low.
Additional fields likely to be developed
Additional infrastructure to supply markets
New EPA emissions regulations could create an
uneconomic environment for older coal generation
Purchasing managers will continue to be overwhelmed by
a market that is increasingly competitive
Utilities want expanded capacity payments because they
do not want to take the market risk others deem normal
Be aware of PJM capacity price increase for 2013-2014
–
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PECO: $139.73 vs. $245.00/MWday
13. GETTING THE MOST
Develop a Long Term
View and Strategic
Purchasing Plan
– When to buy
– What components to
buy
– How long to buy for
– What terms/conditions
most appropriate
– What’s negotiable
– Explore opportunities
for “value adds”
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The optimum
strategy strikes
the best
combination of
balancing: cost
minimization
capturing
opportunities, a
nd mitigating
risks and
uncertainties.
