SOUTHEASTERN PENNSYLVANIA TRANSPORTATION AUTHORITY. Fuel and Electricity Price Risk Management

Transcription

1 SOUTHEASTERN PENNSYLVANIA TRANSPORTATION AUTHORITY Fuel and Electricity Price Risk Management Frank Gormley, Director Operating Budget Philadelphia, PA 2013 APTA Rail Conference Philadelphia, PA June 5,

2 Title of Individual Slide or more Diesel Fuel Hedging 2

3 Title of Why Individual Hedge? Slide Dramatic fuel price increases 2008 and Budget certainty 2 Separate 3 timing of energy pricing from energy consumption 4 Improves 5 or organizational more efficiency 3

4 Price/Gallon Title Diesel of Fuel Individual Price Trend Slide $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $ $2.86 $ $4.03 $3.91 $ or more $3.59 $3.33 $2.33 $2.41 $2.55 $2.48 $2.21 $2.90 Hedged $3.04 $2.94 $2.90 $1.00 $0.50 $0.00 Period 4

5 Title of Physical Individual Fuel Slide Platts NY Harbor ultra low sulfur diesel (barge daily 1 midpoint) 2 One year contracts based the above index 3 Spot daily 4 prices 5 or more 5

6 SEPTA Title Fuel of Individual Hedging Summary Slide or more Physical PPG Hedge PPG Difference Savings Realized FY 2011 $ $ $ $ 4.0 M FY 2012 $ $ $ $ 7.6 M FY 2013 $ $ $ $ 2.4 M Based on annual hedge of 15.5 million gallons 6

7 Hedging Strategy Title of Individual Slide Gauge prices historic vs future 1 Ensure solid base 2 Focus 3 on earlier periods Opportunistically 4 add to positions 5 or more Separate financial hedge contract from physical contract 7

8 Title General of Individual Guidelines Slide Hedge terms 18 months to 2 years 1 Individual hedge contracts: no single hedge greater than 10 2 percent of annual requirement 3 Average 3 percent 5 percent of annual requirement 4 Goal: two-thirds 5 or more annual requirement hedged Rule: hedge less than fuel requirement which diversifies and lessens risk 8

9 Lessons Title of Individual Learned To Slide Date Assure hedge aligns with physical delivery (e.g., NY Harbor 1 vs. Gulf Coast) Monitor 2 market daily 3 Small-quantity hedges are preferable from risk standpoint 4 5 or more Doing nothing increases overall risks 9

10 Title Results of Individual To Date Slide High level of budget certainty 1 Cash flow positive in 28 of 33 months since inception 2 Generated 3 positive cash-flow in excess of $14 million 4 5 or more 10

11 Title of Individual Slide 1 2 Electricity Procurement or more 11

12 Title of Background Individual Slide Local energy rate caps expired December 31, 2010 In 2008, 1 SEPTA considered: Continue 2 with local as default provider Select 3 a third party supplier Amtrak 4 proposed partnership to solicit for third party supplier 5 or more 12

13 Title of Background Individual Slide SEPTA and Amtrak signed partnership agreement in Advantages 2 included: Economies 3 of scale Amtrak s 4 expertise, capitalization and experience Amtrak 5 or master more agreements 13

14 1 3 4 Title Master of Individual Agreements Slide Expedite procurement process Executed master agreements required from all participating 2 suppliers Lock-in contracts day of final pricing Multiple contracts negotiated 5 or more 14

15 Electricity Title of Solicitation Individual Slide Process Two step solicitation process 1 RSQ: Request for Supplier Qualifications 2 RFQ: Request for Quotations or more 15

16 Electricity Title of Solicitation Individual Slide Process Solicitation Process - Step 1 RSQ: Request 1 for Specifications and Qualifications Released 2 December 2009 Responses 3 by January 2010 Notified 4 eligible suppliers February 2010 Evaluated 5 or more by Amtrak and consultant 16

17 Electricity Title of Solicitation Individual Slide Process Solicitation Process - Step 2 RFQ: Request 1 for Quotations June 2010 Indicative 2 quotations Final 3 quotations SEPTA 4 and Amtrak negotiated separately SEPTA 5 or more and energy consultant reviewed final quotations 17

18 Electricity Solicitation Process: Final Award Title of Individual Slide Criteria and weighted values: Ranked based on RSQ process -10% Financial Assurance 20% Price Quotation 70% 5 or more 18

19 Electricity Solicitation Process: Final Award 1 2 Title of Individual Slide Contract Awarded June 2010 Contract started January 2011 Award split between two suppliers 3 Split amongst two or more suppliers can lower cost and 4 will reduce default risk 5 or more Initial contract 2-3 years Contracts under Amtrak s master agreement 19

20 Title Current of Individual Solicitation Slide Current three year contracts expire January 2014 RSQ / RFQ 1 Process underway Recently 2 completed the RSQ (Request for Supplier Qualifications) stage 3 Negotiating master agreements with qualified suppliers 4 RFQ (Request for Final Quotations) is targeted for Summer / Fall for or a more contract start date of January

21 Title Results of Individual to Date Slide Propulsion power annual savings $800,000 GS and HT 1 electricity accounts annual savings $300,000 Combined 2 annual savings $1.1 million Savings to 3 date $2.7 million 4 5 or more 21