Hedging advisory of the year: Aegis Hedging Solutions

Energy Risk Awards 2022: Client numbers grow as advisory firm enters new markets, makes key acquisitions and advances digitally

Bryan Sansbury, Aegis

Aegis Hedging Solutions made further advances in the commodity advisory space in 2021, entering new markets, developing its unique technology offering and making a key acquisition, all of which earnt it Energy Risk’s Hedging advisory of the year award for the sixth time.

The firm executed more than 90,000 hedges in 2021. Throughout the recent volatility and uncertainty in commodity markets, the combination of Aegis’s market expertise and cloud technology gave customers visibility into their positions and exposures, allowing them to make timely decisions.

“The ability to quickly understand commodity exposures and take immediate action has never been more critical than in today’s global economy,” comments Bryan Sansbury, Aegis’s chief executive. “We develop tailored hedging strategies by fully understanding commodity markets against customer production and consumption profiles, investor objectives, lender requirements and risk tolerances,” he says.

Applying new technology to commodities risk management is a huge part of Aegis’s strategy.

“Our goal is to modernise every element required to run a world-class hedging programme,” says Chris Payne, chief product officer. “The Aegis platform enables customers to make confident hedging decisions and take action in real time.”

Aegis has developed a bilateral marketplace for hedge execution directly between customers and financial counterparties and is on track to become the industry’s first swap execution facility (SEF) upon approval by the Commodity Futures Trading Commission.

In early 2021, Aegis acquired Instanext, a leading commodity trading and risk management (CTRM) platform, giving Aegis full ownership of and integration across its analytics, trading and workflow automation platform. The platform provides full-cycle hedge management across energy, agricultural, metals and interest rate markets.

“The Aegis platform is unique in the market and would require a multitude of different systems, custom development and systems integration investment to attempt to replicate at scale,” says Payne.

Later in 2021, Aegis entered the carbon offset market through its acquisition of Emissions Advisors. With the acquisition, Aegis now offers integrated commodity hedging and environmental offset services through its platform.

Our customers have trusted us to help them navigate the opaque commodity hedging markets and are becoming increasingly good stewards of the environment

Bryan Sansbury, Aegis

“Our customers have trusted us to help them navigate the opaque commodity hedging markets and are becoming increasingly good stewards of the environment,” says Sansbury. “As a result, they are asking us to help navigate the opaque carbon markets to meet their compliance obligations and enable their voluntary offset efforts.”

In the California cap-and-trade markets, Aegis developed an innovative product that resulted in distressed oil and gas firms saving tens of millions of dollars at a time when many of them were in survival mode post Covid-19. Credit was challenging and most could not make forward purchases. Undeterred, Aegis proposed a forward prepay structure that allowed favourable pricing without collateral or margining. Instead, there would be a simple prepay the day before delivery.

“Aegis was able to bring trading firms to the table that were comfortable offering a forward structure, thanks to our long-term relationship and deep customer list,” says Mike Taylor, director of emissions trading. “As a result, Aegis locked in 12 to 18 months forward structures for customers at 20–28% below the 2021 auction floor price of $17.71 for delivery and payment in 2021.”

As carbon prices rallied from a low of $11.00 in 2020 to $31.66 by November 2021, Aegis customers collectively saved over $20 million in compliance costs for the Phase III – 2018–20 – compliance period, which was due in November 2021.

Looking ahead, the roadmap is full for Aegis. In addition to launching its SEF, Aegis will introduce AI-driven hedge recommendations, online trade approvals, APIs to enable downstream system integrations, additional workflow automations and the first phase of its carbon offset marketplace in 2022.

“We have big plans to expand our lead in 2022,” says Payne.