Natural Gas Europe House of the Year - Essent Trading

Essent Trading stood out from the competition in the past year thanks to its commitment to pushing the boundaries of Europe’s natural gas markets in both proprietary trading and client risk management.

Our judging panel weren’t alone in appreciating the value that Essent Trading adds to its parent company, which RWE offered to purchase for €9.3 billion ($13 billion) in January 2009.

Essent Trading’s Geneva trading hub took on more than 100 new employees in 2008, and its 25-strong gas trading team has a mix of financial and physical market expertise that has allowed it to register year-on-year growth in profits – which it would not disclose precisely – when other companies were withdrawing from the market.

“Though we may be classed as a relatively small, niche player compared to the giants of the energy world, we punch way above our weight,” says Stephen Cornish, lead vice-president of capital trading at Essent Trading. “We have built up a portfolio from small beginnings to actively trade all the major European gas markets; we believe liquidity benefits the sector and invite competitors into our own backyard, as we surely make our presence felt in theirs.”

The natural gas trading team is split into five complementary desks: capital, asset, structured trading, origination and structuring and global gas and LNG origination. “Essent has always been in a strong fundamental cross-commodity position based on its roots in the Dutch market, and the best way to expand our portfolio was to leverage off that core inbuilt skill set, but to do things slightly differently,” says Cornish. “The desk structure has given us that extra edge when entering new markets, so we’re very proud of it.”

Cornish says that another reason for the unique quintet of desks is to ensure that the right talent oversees the right portfolio. A gas trader who can optimise a power station is not necessarily the right person to structure a long-term power deal with a customer.

Across the desks, key functions include monetising the value of Essent’s power stations, gas storage facilities and transportation infrastructure, while the structured trading desk has been the engine for the growth of Essent Trading’s merchant activities, progressing to be tier-one traders on the PEG hubs in France, the PSV hub in Italy and Baumgarten on the Austrian/Hungarian border. “The desks are optimising our positions around illiquid hubs, with originators building out the portfolio and structurers understanding and pricing the risks involved,” says Cornish.

Standout achievements in the past year include securing long-term transport capacity through a number of transactions across Austria, Germany, Switzerland and Italy, and gaining long-term flexible storage in Austria. Essent has now become one of the most active traders at the rapidly expanding Baumgarten hub.

Such deals and liquidity provision in illiquid and developing markets is now Essent Trading’s forte. “We’ve built the models, we’ve got the expertise, the risk capital is allocated, so it’s just a case of obtaining the appropriate sign-off, which is a speedy process,” says Cornish.

In the past year Essent Trading has also received a Spanish gas trading licence and acquired bi-directional capacity between Spain and France. The company also diversified its supply portfolio by signing a deal with GDF-Lundin for 2.5 billion cubic metres of supply from the E17-A North Sea gas field, which accounts for more than 50% of Dutch gas production.

As Europe’s energy markets continue to integrate, Essent Trading hopes to blaze a trail when it comes to cross-border deals. RWE may take ownership, but Essent plans to continue to do what it does best, says Cornish. “Regardless of what the immediate future holds, we always want to be pushing for the next level of liquidity and market integration. Our team goes to extraordinary lengths to create exceptional value.”