KWI head dismisses Caminus/SunGard threat

David Bucknall, chief executive of KWI, the London-based energy risk management technology firm, today told RiskNews that SunGard’s purchase of Caminus, KWI’s New York-based competitor, amounts to “a marriage of two dinosaurs”. Earlier today Pennsylvania-based integrated IT service provider SunGard said it would buy Caminus for about $160 million in an all-cash deal.

“Since the collapse of Enron, the market has shifted away from the trading-centric model to an asset-heavy model. This has caused a downturn in demand for pure trading systems,” Bucknall said. “We see this merger as a defensive move of two trading-oriented software companies, both of whom were market leaders in North America, but with little or no position in Europe.”

KWI is one of a handful of energy companies dedicated to providing risk management systems for energy companies, and is known to be particularly strong in the European market. Surprisingly, however, given the downturn in global energy markets, both KWI and Caminus, as well as SunGard, have all noted an increase in business during the past year. This growth could be attributed to a desire by energy traders to implement robust systems to make their businesses more efficient, following high-profile exits from the trading markets, as well as to please regulators and shareholders, market participants said. As a result of the growth, however, energy technology firms have sometimes engaged in hostile competition.

Although Bucknall said he is unconcerned at the prospect of the Caminus/SunGard tie up, he admitted the merger could spell problems for KWI’s North American expansion plans. “In North America this merger will represent a formidable opponent in the near term. However, experience has taught us that neither of these companies has a history of investing in the future. We expect they will concentrate on consolidating their product lines and cutting costs out of the business,” Bucknall said.

But, Bucknall added, the merger demonstrates that there is significant interest and potential growth in the energy trading sector. “It signals a long-term belief in the growth of the sector and a resurgence of activity which in turn is great news for KWI...We have had an incredibly successful year in a depressed market, having won over 50% of the new deals in Europe. To our knowledge neither of these two companies have won one.”

SunGard was not immediately available comment.