Engie Global Markets (EGM) has worked with both consumers and producers in the oil & products sector in order to provide long-dated hedges and structured deals that draw on its experience of managing risk for its parent company.
“We have been working on more structured deals in order to adapt to client needs,” says Benjamin Faure, originator at EGM, which is the trading arm of global energy company Engie. EGM worked with several banks last year to assume the commodity price risk associated with hedging programmes linked to E&P financing projects, indirectly securing their future revenues.
EGM also differentiates itself from its banking competitors through its appetite for long-tenor transactions, says Mark Konijnenberg, the company’s head of oil trading and origination. For example, in 2016, EGM worked with a ferry company that was applying for a 10-year tender on sea routes organised by a local authority. It needed to provide a long-term guaranteed price plan in order to win the tender and EGM advised on the best instruments, timing and processes for a fuel supply price hedge.
“This is a good example of the renewed interest in longer-term hedges among some market participants,” says Konijnenberg. “Because there was a government element to this particular tender, our client needed to have certain requirements in place in order to compete. As a consequence, this company needed a 10-year hedge.”
The ferry company needed a provider with a significant risk appetite from both a product and a credit perspective. “EGM had to be willing to take 10 years of credit risk on this name on our book,” Konijnenberg says, adding that the solution also had to be competitively priced to help its client win the tender, which it did.