7 min read
Key takeaways
- Neptune Energy needed to improve operational efficiency, simplify its accounts payable account landscape, and reduce the risk and fees associated with maintaining over one hundred payment accounts across multiple regional banks.
- J.P. Morgan created a single-entity, multi-currency notional pool that enabled automated funding across currencies. With this solution, Neptune Energy consolidated their 100+ physical bank accounts across 5 currencies to one per currency; they also leveraged virtual accounts for improved operational reporting.
- As a result, Neptune Energy reduced bank account fees, reduced treasury transfers by 75%, optimized the account closing process, and improved cash visibility.
About
Neptune Energy is an independent global E&P company with operations across Europe, North Africa and Asia Pacific. With investments and operations across eight countries, Neptune Energy employs more than 1,300 people and aims to store more carbon than is emitted from its operations and the use of its sold products by 2030.
The business focuses on achieving sustainable growth by optimizing operational efficiency, increasing productive capacity and growing its international presence.
Neptune Energy routinely benchmarks its treasury function, with the mission to be in the top quartile across all dimensions of best practice treasury operations. To achieve this goal, Neptune Energy seeks continuous improvement in areas such as cash visibility, cash forecasting, funding efficiency, hedging effectiveness, liquidity management, investment performance and payment processing, among others.
Banking solutions implemented by J.P. Morgan for Neptune Energy
The challenge
To increase benchmark rankings Neptune focused on improving operational efficiencies, but faced two key hurdles:
- Simplifying accounts payable: Neptune Energy’s payment execution for accounts payable and intercompany settlements was spread across nearly one hundred bank accounts, which lead to variations in payment and reporting formats across different banks.
- Reducing risk and cost: With over 100 payment accounts across 5 regional banks, Neptune Energy incurred significant administrative and bank fees. But minimizing costs and reducing the number of accounts required centralized execution via significant investment in payment factory software infrastructure.
The solution
The solution implemented by J.P. Morgan for Neptune Energy leveraged both traditional and innovative bank products to enhance the treasury operations of its in-house bank. It represents a best-in-class treasury solution that combined real-time cash pooling through on-behalf-of cash operations, an automated multi-bank cash concentration structure for entities and markets outside the in-house bank, and a single-entity multi-currency notional pool that optimized short-term cross-currency working capital.
- Virtual Accounts: Multi-entity virtual account structure for cashless intercompany settlements across funding and commercial trade activity. This allowed Neptune Energy to avoid the transaction costs and cut-off times associated with clearing settlements.
- Notional Pooling: Single entity, multi-currency notional pool for 5 currencies on a single booking location. This enabled automated funding, reduced FX swapping and improved cash visibility.
- Cash Consolidation: Cash concentration through cross-border zero-balancing sweeps to the notional pooling center from booking locations that offered local clearing access.
- Payment Centralization: Fewer physical bank accounts through virtual account structures, supporting on-behalf-of payment execution without impacting reconciliation and bookkeeping.
Blueprinting an infrastructure to support settlement of virtual card payment
Operations
- FX trading unit to manage FX exposures to enable bookings to be transacted in the home currency of booker and hotel
- Excel API real-time notification to confirm that credit (Agoda’s funding) and debit (settlement) entries are posted to accounts
Streamlined document requirements in restricted markets - Virtual Card Payment
- Hotel Partners
Flow of funds
- FX funding of accounts for the global card network provider settlement through desk dealing and passive FX
- Supported by intra-day facilities
J.P. Morgan Americas
Agoda Company
USD, New York
USD, Canada
J.P. Morgan EMEA
Agoda Company
GBP, London
EUR, London
HRK, London
DKK, London
NOK, London
USD, Canada
ZAR, London
SEK, London
CHF, London
MXN, London
CZK, London
HUF, London
ILS, London
PLN, London
RON, London
TRY, London
J.P. Morgan APAC
Agoda Company
AUD, Australia
HKD, Hong Kong
CNH, Hong Kong
IDR, Indonesia
JPY, Japan
MYR, Malaysia
NZD, New Zealand
PHP, Philippines
SGD, Singapore
THB, Thailand
1. Initiates MT101 drawdown to automatically debit Agoda’s accounts based on daily settlement advisement reports
2. Settlement of funds via book transfer; discharging Agoda’s obligations and minimizing late penalties
Global card network provider
3. Settlement proceeds > Merchant Acquirers > 4. Merchant pay-outs > Hotel Partners
“Our Treasury team has been able to achieve important cost reductions and operational efficiencies. These include a reduction of administrative, legal and operational fees, while achieving better visibility into bank charges and streamlining the reporting process.”
Mr. Ricardo Leandro
Group Treasurer Neptune Energy Group Limited
The results
Neptune Energy’s project achievements have been recognized with a 2022 Adam Smith Award for the Best-in-Class Regional/Global Treasury Solution by Treasury Today. The solution, delivered by J.P. Morgan, led to impressive results across several areas of the business:
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Strategic: By centralizing group payments, Neptune Energy reduced bank account fees and rationalized its bank account landscape by over 90%. The business reduced operational risk of fraud by centralizing payment activity through significantly fewer bank accounts.
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Financial: Neptune Energy achieved centralized cash management operations without capital expenditure on vendor software solutions. As a result, the number of treasury funding movements executed through traditional bank clearing channels was reduced by over 80%, leading to reduced transaction fees and cashless intercompany settlements instead of cross-border wires.
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Operational: By leveraging automation, Neptune Energy relieved several hours of manual effort per week, allowing resources to be reallocated to more strategic functions. The solution also increased internal efficiency through simplified transaction monitoring and standardization of the account payables process.
To learn more about how we can support your business, please contact your J.P. Morgan representative.
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