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Case Studies

New Funding Mechanism Fuels Growth for JERA Global Markets

Hybrid liquidity solution smoothens cash flows across time zones


About

Headquartered in Singapore, JERA Global Markets (JERAGM) was established to consolidate the global trading activities of seaborne fuels between two leading global utilities, JERA and Electricité de France (EDF). This makes JERAGM one of the largest utility-backed energy traders specialising in LNG, coal and freight across all key markets in Asia Pacific, North America, Middle East, Africa and Europe. JERAGM’s mission is to increase the security of seaborne fuel supply and create significant value for its shareholders and third-party customers. 

The Challenge

Following the integration of its global trading activities and the inception of JERAGM, the company had accumulated accounts with multiple banks across the world that had incompatible platforms and formats. This created significant challenges for JERAGM’s treasury, finance accounting and IT departments, particularly around liquidity management, cash visibility and ability to deploy treasury funding in support of its growing business. Key concerns included:

  • Inefficient payment processing across time zones and expensive overdraft fees: JERAGM had to deal with the limitations of early payment cut-offs which resulted in the need to back-value payments that have missed the cut-off deadlines. Late payments also resulted in expensive overdrafts.    
  • Absence of a global liquidity management solution and platform: Without a global structure, JERAGM faced challenges to efficiently optimize surplus cash as cash movements across entities and regions were subject to different time zones, expensive wire and corresponding banking fees. 
  • Highly manual process with limited system integration: There was limited system integration between JERAGM’s treasury systems with its existing banks which resulted in a highly manual process for payments and reconciliation between JERAGM’s systems and its incumbent banks.

To support the growing needs of its business, JERAGM embarked on an ambitious treasury transformation initiative which included identifying a robust liquidity management banking partner with solutions that help optimize cash across multiple entities and currencies across Asia Pacific, the U.S. and the European continent. The solution also had to be integrated with JERAGM’s SUN accounting system to drive operational efficiencies, reduce IT costs and more importantly provide scalability as its business continues to expand.

The J.P. Morgan Solution

JERAGM mandated new banking partner J.P. Morgan to help embark on its treasury overhaul. The solution involved a three-phase approach to establish a fully automated global liquidity solution within 12 months from inception: 

Phase 1: Asia & U.S. Multi-Entity, Single-Currency Notional Pool

In the first phase, JERAGM implemented a Multi-Entity, Single-Currency Notional Pool (MESCNP) across its Singapore global headquarters and its U.S. entities. This entailed opening accounts and setting up the USD notional pool within one month. The solution was tailored to address JERAGM’s immediate need to establish a strong foundation for its existing businesses with the flexibility to include additional countries and Asian currencies.

Phase 2 : Europe Multi-Entity, Multi-Currency Notional Pool

For the second phase, JERAGM went on to establish a Multi-Entity, Multi-Currency Notional Pool (MEMCNP) for all of its key European participating entities, hubbed in Luxembourg. The advisory and joint consultation between JERAGM, its tax partners and J.P. Morgan was evident having assessed the potential impact of pre-post Brexit scenarios, along with JERAGM’s legal and tax considerations for each market, was designed to ensure the pan-European liquidity solution fulfils JERAGM’s global business requirements.

Phase 3: Cross-border “Follow-The-Sun” sweep 

In the final phase, both Asia and Europe notional pools were further integrated via a cross-border “follow-the-sun” sweeping arrangement to enable a global automated liquidity structure. 

The final liquidity management construct effectively provides JERAGM’s treasury a one-stop cash visibility of all participating entities’ accounts and balances. The Asia pool fully optimizes its group available cash for payments during Asia operating hours before sweeping over the Europe pool in Luxembourg in support of European time zones, before sweeping the funds back into Asia. This bespoke liquidity solution is global and fully automated, enabling JERAGM’s participating entities to fully optimize its group available funds, ensures payment funding efficiencies and drives improved cash utilization within JERAGM’s group of companies.

The Result

The adoption of J.P. Morgan’s global liquidity solution translated to US$1 million total estimated benefits per annum for JERAGM’s group treasury, accounting finance and IT teams. The implementation was, by far, the most straight-forward for all three departments and deployed in a time- and resource- efficient manner, leading to strong outcomes: 

  •  Scalability – A truly global and scalable liquidity solution across multiple jurisdictions
  • Improved productivity and efficiency – Increased straight-through-processing rates from manual to almost 100% for all payments generated from its current accounting system
  • Increased security when initiating and transacting payments via J.P Morgan Access® – The e-banking solution enabled JERAGM to run various payment types, in various currencies through one global platform, improving controls and security for JERAGM Treasury
  • Enhanced operational efficiency – With almost 100% of payment flows now automated and secure, the need for manual intervention is eliminated. 
  • Strategic banking partner – As JERAGM may subsequently embark to migrate from SUN to SAP, J.P. Morgan has a ready ERP (SAP) adapter that can help generate industry standard payment format (ISO20022 XML) in support of JERAGM’s drive for automation efficiencies and scalability

“J.P. Morgan has clearly demonstrated through our partnership its exceptional advisory expertise, innovation and global scale as our strategic global liquidity and cash management bank for JERAGM.

During the course of establishing our new global liquidity structure, J.P. Morgan successfully executed against the very high and exacting standards expected of a leader in the financial services space."

Siang Chee, Chew
Group Treasurer
JERA Global Markets

JERA Global Markets is an overall winner of the Treasury Today 2019 Adam Smith Awards Asia in the category of Best Liquidity Management Solution.

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