The National Office for Electricity and Drinking Water (ONEE) has decided to embark on a major operation to modernize its purchasing processes and set up a new management policy to cover itself against risks in the commodity markets (coal, natural gas, electricity), freight and foreign exchange market transactions.
“This is a major project for the restructuring of the risk management activity, which consists of providing the Office with a complete management, analysis and decision-making system for management and risk coverage, “said the agency in a statement.
The main results expected from this strategic project aim in particular to control and optimize the expenses relating to high-stake purchases; put in place effective and optimal risk management strategies; dynamically monitor the Office’s exposure and intervene in the markets to cover the risks run by the Office, specifies the same source.
Convinced of the added value of this new activity in terms of cost optimization and improvement of operational and financial performance, ONEE is mobilized to make its trading room operational in 2021.
A call for tenders has just been launched for the selection of a specialized firm which will assist the internal project team to select the most appropriate structure and sizing, to set up the necessary platform and tools and to carry out, during an anchoring period, the first risk hedging operations, said the same source.
ONEE, continues the press release, “operates in a rapidly changing environment inducing many risks, some of which are exogenous”, noting that the issues associated with these risks are “multi-criteria” and can have financial consequences, particularly on the financial position of the Office.
He added that due to the diversification of its activities and the peculiarity of the electricity market, ONEE, as a planner and manager of the supply and demand for this form of energy, is exposed the risks of fluctuating fuel prices, freight, and exchange rates, which can have a “significant” impact on translation differences, balance sheet items, financial charges, equity and cash position.
At the end of December 2019, energy and fuel purchases by ONEE represented more than 68% of the expenses of the Electricity branch, the press release said, noting that the expenses relating to these operations reached MAD 11 billion, of which MAD 8 billion for purchases of coal and MAD 2.5 billion for purchases of natural gas and MAD 174 million for imports of electricity.
In addition, “almost all of these purchases are denominated in foreign currencies (EUR and USD) and ONEE is therefore led to carry out large volumes of purchases and sales of foreign currency on the foreign exchange market for the payment of its commitments denominated in foreign currency, “says the same source, adding that the volume of foreign exchange transactions carried out in 2019 reached 12.81 billion dirhams, mainly in EUR (7.29 billion dirhams) and in USD (5.08 billion dirhams).
ONEE being also involved in long-term financing contracts, an unfavorable change in currencies could also have consequences on the profitability of its investment projects, the press release continued, noting that in the absence of hedging, fluctuations in the purchase price of electricity, fuel and foreign exchange between the Dirham and the currencies of the various international markets on which ONEE operates can therefore significantly modify the results of the Office and make comparisons of performance d ” year to year.
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