Transforming treasury with a state-of-the-art design
Combining bank and non-bank solutions, ACWA Power simplified its USD bank structures and automated funding across a large corporate structure. Fully realizing return on investment (ROI) after only one year, its award-winning best-in-class treasury has delivered on its mandate to prepare the firm for growth with a scalable operating framework.
ACWA Power is a developer and operator of power generation and desalination plants sustaining organizations and populations across 13 countries in the Middle East and North Africa. The firm leveraged partner solutions to transition to in-house banking for its complex asset-based business model to reduce complexity and accommodate growth.
Like many firms with asset-based business models, ACWA Power relies on a complex corporate structure – comprising holding companies and special purpose vehicles (SPV) to manage capital allocation and financing, segregate operations and control risk. With a large corporate structure of 200+ entities, treasury was burdened with very high bank account administration and KYC overhead.
With an account landscape exceeding 600 across more than 65 banking relations, liquidity management required significant effort. Creating the foundation for a fully-automated and resilient treasury operating model built on centralization, ACWA Power, J.P. Morgan and other non-bank providers were mobilized to produce an integrated best-in-class solution, comprising in-house bank infrastructure, bank-agnostic connectivity and virtual accounts.
The solution ACWA Power implemented in its treasury transformation project was three-fold:
- Established automation through a new best-in-class treasury management system (TMS), providing in-house bank infrastructure for payments, intercompany tracking, accounting, forecasting, screening and reconciliation
- Simplified multibank connectivity through Swift for Corporates (SCORE) for payment delivery and reporting
- Centralized offshore USD bank account structures through a multi-entity virtual account structure with J.P. Morgan underpinning a single USD bank account with virtual accounts at group company level. Segregated cash management activities while achieving real-time cash pooling without sweeping
The key objectives ACWA Power achieved through the solution applied were:
- Simplified complex capital structures, bank structure and improved ROI
- Introduced a treasury operating framework
- Achieved 100% visibility over global balances across multibank, multi-currency and multi-country landscape
- Streamlined funding management and reduced costs
- Improved yield on group liquidity cash placements
- Reduced cost of banking account services
- Automated corporate actions and intercompany settlements
- Implemented controls to ensure compliance with Anti Money Laundering (AML) laws
ACWA Power Communications Department
ACWA Power’s pioneering project in Saudi Arabia – one of the most innovative bank solutions in recent years – produced impressive results for the firm:
Recovered ROI for the program in one year
The operational efficiencies realized by migrating to automated processes and introducing real-time cash pooling with virtual accounts slashed account maintenance fees by 50% and need for cross-border transaction fees for intercompany settlements by 30%
Increased utilization of existing working capital by 75%
Achieved 100% visibility over all accounts across the group and increased utilization of existing working capital by approximately 75% within the structure through the real-time cash pooling delivered by in-house bank centralization
Strengthened risk management controls
Strengthened transaction processing and AML controls through TMS screening module and eliminated operational risks from human error by transforming to entirely automated payment, reconciliation and intercompany management processes
Zero business interruption during COVID pandemic
Through integration of vendor (TMS), infrastructure (SCORE) and bank (VAM) solutions ACWA Power transitioned from a heavily manual to a completely automated cash management operation that saw no business interruption during COVID pandemic and the transition to work-from-home
The solution and demonstrable achievements realized by ACWA Power’s project can be replicated by other industries and businesses. The vendor, market infrastructure and bank solutions applied here to create a best-in-class treasury are affordably available to firms of all sizes – most notably, when SaaS models and strong global bank partners are used to provide the product and professional services to achieve the much desired result to transform treasury.
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