Clients

Over an 18 month period, we supported Alpiq on a group-wide transformation and cost reduction programme tasked with delivering a streamlined organisation and achieving significant enduring cost savings. The scope of this programme spanned Generation, Trading and Sales as well as all Group Centre functions. Working as an integral part of Alpiq’s internal design and delivery team, we particularly supported the client in:

• Modelling: Developing models of the current and future organisation at the business unit level to provide consistent consolidation of costs and savings across Alpiq (both in FTE and value terms). This required enforcing consistent assumptions and analytical rigour to ensure that estimated savings were achievable, credible and well understood by stakeholders. We also supported the client in developing tools capable of tracking the implementation progress of FTE and personnel cost targets;
• Communication and documentation: Providing clear, logical and concise documentation of all activities together with the “Blueprint” of the new organisation for stakeholders from line managers to the Executive Board; and
• Project management: Supporting Alpiq in setting up and running the programme, planning resources across multiple interrelated projects, and managing a wide variety of stakeholders across the business.

In addition, we supported and provided subject matter expertise to the trading workstream in the development of the Blueprint for the future commercial and trading function. This work included:

• Process Design: Developing a “Greenfield” design of all key front, middle and back office trading and commercial processes in light of corporate objectives and strategy; and
• Organisational Design: Structuring and sizing of the “to-be” trading and commercial organisation (both business and support functions) in light of cost cutting interventions.

The programme designs and plans were approved and implemented.

Over a 6 month period, ESP Consulting supported Alpiq on the implementation and detailed design of a new business model. We supported the client in the design and implementation of methodologies, business rules, and processes, as well as in the drafting of accompanying documentation and the revision of group risk policies. Working closely with the client team, our work particularly focussed on:

• Design of new book structures and accompanying inter-book transfer rules to support operations, risk control and reporting under the new business model;
• Implementation of an integrated budget and performance reporting framework including new methodologies for budgeting the energy gross margin across the business as well as accompanying performance KPIs;
• Revision of the existing group risk policy as well as supporting policies for market and credit risk management to reflect the new business model;
• Development of new risk policy for management of liquidity risks arising under margining terms; and
• Documentation of the new business model detailing key business model principles, organisational roles and responsibilities, key business processes, book structure, budgeting principles, and performance reporting.

The business model and revised risk policies were subsequently approved by the Executive Board.

Over a 12 month period, we provided subject matter expertise and implementation support on a comprehensive review and development of risk governance and policies. The new Group Risk Policy and supporting policy manuals (market, credit and business risk) were subsequently approved by the Executive Board and the Alpiq Board of Directors.

We assisted Alpiq to enhance their approach and methodology in several key areas, as well as to draft new policy documents. The scope of services delivered during this assignment included the review and development of:

• The enterprise-wide framework for risk management including corporate risk governance, and roles and responsibilities;
• The setting, allocating, and charging for Group-level risk capital;
• Market risk management, including book structure and position transfers, transfer pricing, hedging policy, limits and controls, and market risk measurement;
• Credit risk management, including the rating and approval of new counterparties, credit limits, security/collateral requirements, and credit risk measurement;
• Liquidity risk management in terms of measuring, managing and controlling the cash-flow uncertainty stemming from cash margining;
• A new products process covering appraisal, prioritisation, and approval of wholesale and supply products, ranging from standard instruments to complex (structured) transactions; and
• Investment and transaction risk including methodology for appraising the risk of large investments and transactions and integrating such (longer term) risks within the operational framework for risk management.

As part of this work, new approaches were developed in several areas including:

• The basis for linking risk capital and appetite directly to P&L and balance sheet metrics, and the allocation of such capital across the group;
• Internal pricing of risk and liquidity to ensure effective utilisation of capital resources which, by definition, are neither unlimited nor free;
• Management of margining/collateral and establishment of an integrated framework for controlling market, credit, and liquidity risks; and
• Assessment of investment and project risk, and integration of such longer-term risks within the operational risk management framework.