New CEO Mausbeck oversees shake-up at Danske Commodities

Dirk Mausbeck, the new chief executive of Danske Commodities, is striving to bring the Denmark-based trading house back into top form after a turbulent year

Dirk Mausbeck, Danske Commodities

When Dirk Mausbeck became the new chief executive of Danske Commodities on January 5, the Danish trading firm was struggling to emerge from a difficult year. It reported pre-tax profits of €8.9 million ($10.1 million) in 2014, a drop of almost 80% from the year before. Danske also cut more than 100 staff last year, leaving it with 360 employees at the end of 2014.

Despite such turbulence, Mausbeck says the job was "a perfect match" for him. Prior to Danske he served as chief commercial officer for Energie Baden-Württemberg (EnBW), having risen through the ranks at the German electric utility after joining as a director of trading in 1999. Like other German utilities, Karlsruhe-based EnBW has undergone a painful transition due to government plans to phase out nuclear power by 2022 and encourage renewables.

"Coming from a German company with a much higher need for restructuring in the past, I don't see [Danske's] restructuring as dramatic," he says. Moreover, Mausbeck notes that Danske is a relatively new trading firm – it was founded in 2004 – making it tricky to manage its growth: "When you build up such a business, it is always difficult to predict how many people we need and how far the business can be grown."

As part of its consolidation in 2014, Danske merged 12 business teams into two: one for trading and another for origination. It also created, for the first time, a senior management group to assist the chief executive. Mausbeck voices optimism about 2015, but refuses to go into detail about his expectations. "It is the one million dollar question," he says. "Without saying too much, I am confident we will improve results in comparison with 2014."

With more than 700 counterparties and a presence in 33 countries, Danske trades physical as well as financial products linked to power, natural gas and emissions, both in bilateral over-the-counter and exchange-traded markets. Mausbeck says the company is considering a move into oil, which has historically been used to price long-term gas contracts in Europe.

Not to kill liberalisation through too much regulation – this is something which, from our point of view, is very important

Although European gas trading has veered toward hub-based pricing over the past few years, Mausbeck believes it is worth exploring oil as an add-on to Danske's offering. "We are investigating whether it really makes sense to do something there," he says. "It very much depends on the requests from our customers, whether they still have those types of [oil-linked] contracts and want to deal with them or not."

A German national, Mausbeck started out in 1991 as a scheduling manager for a refinery in Cologne owned by UK- and Netherlands-based oil major Shell. Over the next two decades, he watched an influx of solar and wind power reshape Europe's energy markets. Traders must now be available 24 hours a day and scrutinise weather forecasts to deal with the intermittency of renewables, he notes: "In comparison with five years ago, that has changed dramatically."

New regulations pushing renewable generators to bring their own power to market – which in Germany are called Direktvermarktung or ‘direct to market' rules – are an opportunity for Danske, Mausbeck says. Renewable generators often lack the expertise to trade or market power themselves and depend on trading firms to deal with the fluctuating volumes they produce. "Many of them are small producers, and can't do it on their own, so we are taking responsibility," he says.

Danske is currently the largest independent provider of Direktvermarktung solutions in Germany, managing more than 4,600 megawatts of power under such agreements. As the idea gains traction across Europe, Mausbeck plans to roll out similar offerings in other countries this year. "We are expanding our business from Germany into other countries as markets mature," he says.

Despite the sweeping changes associated with renewables, Mausbeck's top concern is regulation, especially Europe's Mifid II legislation. "For the whole industry, Mifid II is by far the biggest challenge out of all of these regulations," he says. "It is important that we remain with high liquidity. Although I understand the aim of Mifid II and higher capital allocations [for] these types of risks, we all have to be aware that there is a major impact on the market."

Like other commodity trading companies, Danske is assessing the impact of Mifid II on its business. One possible way to cushion the blow would be to spin Danske's trading arm out into a separate company. "It is something we are looking at," he reveals.

Mausbeck frets that Mifid II will have a grievous impact on risk management for end-users, reversing years of market liberalisation. Many European politicians "like to place blame on trading", he says. "We have to have good faith in liberalised markets. Not to kill liberalisation through too much regulation – this is something which, from our point of view, is very important."