Currency Trading at resundskraft

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Currency Trading at Öresundskraft

• 2004 11 11
• Pernilla Ademar
• Head of Financial Trading
• Öresundskraft Energy Trading AB

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Definition of risk at Öresundskraft

• A risk is a measurable change in value,
  effecting incomes or expenses, assets or debts,
  in a short and long term perspective.
• This defined risk could be eliminated by
  measurable correlated counteractivities.

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Öresundskrafts view on risk

• The word risk is subjective
• It is impossible to have a riskneutral company
• Risk is everybodys responsibility, not single
  persons
• Competence pays off
• The risk policy is to be treated like a sacred
  document, but should continuously evolve as we
  increase our knowledge of business risk

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The general purpose and objective of
Öresundskrafts risk policy

• The overall purpose of the Öresundskraft risk
  policy is to support the underlying business with
  rational and cost efficient financing and to
  limit the negative impact of operational and
  financial exposures through hedging.
• A complementing objective is to use the
  knowledge of the financial markets to optimize
  the effect on group earnings.
• Financial activities must be based on the
  industrial activity.

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Risk policy at Öresundskraft

• The risk policy is set by the company board on a
  yearly basis
• The CEO may delegate risk to each company in the
  group within the limits of the set risk policy
• Risk exposure is being reported continuously to
  the board of each company
• Deviation from the risk policy requires a board
  decision

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Öresundskrafts policy for currency risk exposure

• The exposure must be hedged as soon as it is
  known
• 90-100 of rolling the 12-month exposures should
  be hedged
• Contracted sales volumes should be hedged to
  90-100
• Equity, debts and assets in the balance sheet
  must be hedged to 100

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The currency exposure at Öresundskraft
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Responsibilities
Our riskpolicy is built after an ambition of a
distinct definition of responsibility between
risk owner group companies- and executer
Öresundskraft Energy Trading
Group companies
Öresundskraft Energy Trading
Risk owner
Executer
Responsible for hedging
Responsible for the bottomline result
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Öresundskraft Energy Trading AB
Managing Director Magnus Sjövik
Controller-Accounting Pia Jönsson Controller-Ri
sk Management Sanja Mik Back Office Christina
Dencker
Structured products Christer Lithell (50)
Portfolio management Head Magnus
Sjövik -------------------------------------- Por
tfolio manager Joakim Nilsson Portfolio
manager Pär Gustavsson Portfolio manager Erik
Svensson
Financial trading/Treasury Head Pernilla
Ademar -------------------------------------- Tra
der Anneli Melin Trader Gustav Tilgus
Physical trading Head Christer Lithell
(50) --------------------------------------- Spo
t trader Paul Carlsson Spot trader Ola
Bruno Spot trader Nils Rönnbäck
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Financial trading

• Internal bank in the Öresundskraft group
• Support function for the group companies
  regarding currency hedging
• All risk taking takes place within Financial
  trading
• We have a risk mandate in the currencies that we
  have commercial flows in (SEK, NOK, USD, EUR,
  CAD)

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Instruments on the currency market

• Spot
• Terminer
• Swaps
• (Options)

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Currency flows for financial trading
Internal or external customer
The customer gets a price in SEK or have its
currency contract
Group companies
Portfolio management
Need to buy currency for customers with floating
price, VAT or fuel
When the electricity contract is purchased the
currency is also hedged
Financial Trading
Financial trading may choose to keep the trade in
our own book or to cover the exposure by a bank
Banks
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Internal currency flows

• The internal company gets Energy Trading as its
  counterpart
• Reuters is used as our price source
• A deal slip is always made between Energy Trading
  and the counterpart
• At settlement physical transactions are made on
  the bank accounts of Energy Trading and of the
  internal counterpart