CE & T provides customers with the tools needed to manage energy commodity buys and hedges to attain the lowest prices, with acceptable price risk. We use NYMEX, CME and ICE traded contracts which are cash settled to accomplish this.
A typical customer can either become self implementing, or use our staff and accounts to accomplish this. Some of the commodities our clients trade include, electricity, natural gas, gasoline, diesel fuel, and coal among others. We guide all our clients to trade only the contracts that are CFTC and SEC regulated to be sure of transparency and be sure there is no risk.
Since the government deregulated energy markets in the 1990s. markets have developed for all these products by standardizing the contracts, allowing for clearing, and organizing electronic and pit traded markets for them. Today, markets are deep, with literally billions of dollars in face value of these commodities trading every day. What does this mean to you? You can buy and sell contracts many months out into the future, looking at the electronic publishing sources to see current pricing and trends. You have absolute control of what you buy, when you buy, and can move very quickly.
Why do it this way:
Less market specific understanding required. Once the strategy is defined, one person on staff can oversee its execution and monitor its success.
Multiple locations are aggregated virtually. Do you have 5 locations using 1000 units each? Physically this can mean 5 contracts, and all that goes with that management. Financially it is all one transaction.
Did a location go down, or did it add shifts or loads? Physically you have to store or sell the deliveries ordered in excess, or make supplemental buys to balance your energy needs. With financial instruments cash settlements occur based on contract, eliminating the need to match it up to specific locations or meters. There is no need to manage inventory.
Less credit support is required from sellers and buyers. The buyer and seller are only exposed to mark to market instead of face value of the physical buy. Since the underlying contract can also be sold at market, there is less at risk, and the amount of credit support is greatly reduced.
More options of hedging exist with options, cross commodity hedging and other strategies in play, not available in a physical transaction.
Here are some of the companies already taking part in this type of hedging program
Arcelor Steel Foundations Health Care
Optima Manufacturing Midwest Ecoat
Lockheed Martin Anchor Flange
Eaton Manufacturing Superior Machining