WRMA 2005

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(No Transcript)
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STRATEGIC OBJECTIVES IN FRONT-END SYSTEMS

• Simplify weather market information for
  cross-industry application
• Monetize the weather markets to highlight its
  financial relevance
• Improve integration with other weather sensitive
  financial markets

FRONT END SYSTEMS OBJECTIVES
Simplify
Monetize
Integrate

• Transparency
• Availability
• Reporting
• Display

• value
• impact
• - risk
• correlation

• Energy futures
• Spot markets
• Equities
• Leading indicators

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SIMPLIFY

• Front-end systems play a key role in closing
  informational asymmetries
• Facilitate in reporting to help create a more
  transparent market
• Make weather markets understandable to
  non-insiders
• Front-end systems can help create clear processes
  for new entrants
• Easy GUIs to help translate weather market data
  into actionable information
• Front-end systems will move to fewer
  numbersmore value model targeted to specific
  end user segments
• Front-end systems play a key role in visualizing
  weather for non-insiders

EXAMPLE
Weather Market Insiders GUI
Weather Markets for Non-Insider
OR
End User
End User
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MONETIZE

• Most industrial end-users, natural gas traders,
  utilities, etc. do not understand what one HDD is
  worth to their operation
• Front-end systems must convert weather market
  prices into dollar () values
• Front-end systems can also incorporate client
  specific data to determine the -impact of
  weather on their real-time business operations
• Front-end systems must monetize the relative
  financial impact
• I.e. comparison to 10yr 30yr averages or client
  historical mean

EXAMPLE
Block Trades for non-Insider
Block Trades for Insiders
CONTRACT PRICE QUANTITY HS2H 5010
50
CONTRACT PRICE CHANGE CHICAGO 5010 2500
OR
End User
End User
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INTEGRATE

• Front-end systems serve as the key
  cross-commodity interface to the market
• Integration will help the weather markets grow
• Linked to systems for power trading, natural gas
  purchasing, and research
• Linked to financial accounting and billing
  systems
• Linked to pipeline, storage, metering, and other
  operational systems
• Integration through the creation of new weather
  market instruments and indices
• Hurricanes - risk and evacuation indices
• Equities - Weather Strength Indices
• Commodities - buy/sell signals based on weather
  markets for technical analyst

EXAMPLE
Natural Gas vs. CME Weather Market Price
Deviation From Normal
EXAMPLE
NG Summer High
CME Cool August Down N Responds
WX Market Reversal
NG Summer Low
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CONCLUSIONS

• Simplified front-end systems will allow for
  weather markets to continue to grow into a truly
  cross-industry financial instrument
• Monetization of weather market information will
  give CFOs in all industries a tool to directly
  manage the link of weather to their balance sheet
• Front-end systems will lead the way in the
  integration of weather derivatives with other
  financial markets such as fuels, electricity, and
  equities
• Front-end systems are at the forefront of the
  weather derivatives market penetration into new
  cross-industry segments

Contact Agbeli Ameko First Enercast
Financial 1775 Sherman St., Suite 2825 Denver, CO
80302 [phone] (phone) agbeli_at_firstenercastf
inancial.com