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Managing Risk |
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| Inventory Financing |
| Inventory financing is an effective tool which limits credit exposure and risk to the Seller and provides the Buyer with the possibility of keeping a competitive edge in their market. We are living in a constantly changing financial environment where creative credit alternatives are welcome. Natural Energy’s staff can assist in tailor making a product which meets the client’s needs and is lucrative for the interested parties. Storage facilities and refineries are good stepping stones to launch such business alternatives. With the secondary markets provided by insurance companies and/or banks who are willing to underwrite the country risk, one can hedge the location risk. |
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| Risk Management |
| Speculation in the commodity futures markets has introduced violent volatility. It is common to see the fundamentals of supply and demand at odds with the prices in the futures markets. The volumes traded on the futures exchange have exponentially surpassed the world’s daily capacity for production and refining. Market structure plays a vital roll in oil trading today. Contango and Backwardation are part of the everyday considerations used in analyzing business opportunities. Futures contracts, swaps, options, arbitrage, etc., are some of the tools available to the industry. Their use and their limitations must be clearly understood to participate effectively in this business. Natural Energy can assist in assessing risk and designing a hedging strategy to go with it. |
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| Country Risk |
| Working with Latin America provides its challenges. Some countries have always been more stable than others. Government is an active player in the energy markets in Latin America and as such is the only counterparty in many countries. To keep transparency, the most common mechanism used to buy and sell is via a tender. General terms and conditions can be draconian, requiring extended payment terms, biased liability provisions, performance and bid bonds, etc.. Not complying with these terms in an offer or a bid leads to immediate disqualification. Latin America’s political profile is in constant flux and varies from country to country. Credit ratings fluctuate greatly depending on the existing government and its political policies. The higher the perceived risk, the bigger the opportunities. Natural Energy’s staff and contacts in the region are in tune with the ecopolitical climate and the potential risk of transacting business in any of the countries in the region and at any given time. We have also structured hedging strategies to offset the country risk with insurance companies (such as Lloyds of London), banks or other financial institutions willing to underwrite the transaction for a fee. These mechanisms give the principal an insurance policy against potential risk. |
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