Advising the Senior Management of a Major Energy Merchant Company Under Chapter 11 Protection

The Situation

NERA was recently engaged by a US firm, which had filed for Chapter 11 bankruptcy protection, to undertake certain due diligence efforts on behalf of company management. The firm had been in negotiations for several months with its key creditors related to financial restructuring. As proceedings continued, management wanted an independent assessment of the risk management structure and controls as the company undergoes changes to its energy trading operations. Management called on NERA to perform a thorough review of the company’s merchant energy risks, and advise on best practices.

NERA's Role

NERA executed a rigorous risk assessment by working closely with the Chief Risk Officer (CRO) to create a work plan to assess both immediate and long-term risks to the company. To achieve this assessment, NERA brought to the project a team of energy trading and risk experts as well as analytical staff to work in conjunction with key company personnel including: Head Traders, Financial Analysts, Risk Modelers, Quantitative Analysts, Middle Office Specialists, and Credit Analysts, as well as IT and Systems, Legal Department, and other back office staff.

NERA prepared analyses and reported back to management with an assessment of the company's risk governance structure, risk tools, risk models, trading systems, valuation systems and risk personnel. NERA also advised the client by suggesting improvements in these risk functions to ensure that they were appropriate and the proper controls were in place as the company moved forward.

The Result

Management was provided with practical and cost-effective suggestions for improvements.