Vision
At Inargy, we are passionate about understanding the energy market and integrating new technologies as tools for continuous development in the sector.
With extensive experience across the entire value chain of the energy sector, we strongly believe in the significant improvements that the energy mix has brought through new and renewable technologies. However, we also recognize the challenges arising from liquidity shortages and high volatility in a sector that lacks a traditional trading culture.
The push for private capital through long-term fixed-price subsidies has driven greater integration of renewable energy into the energy mix, reducing costs through economies of scale. This has resulted in production costs from renewables becoming independently viable without subsidies. However, this shift has created uncertainty for private capital regarding price forecasting, while simultaneously demonstrating the sector's potential to generate capital.
To mitigate this uncertainty, banks began demanding long-term hedges to ensure their returns, known in the sector as Power Purchase Agreements (PPAs). These complex financial instruments are essential for a smooth transition from subsidies to private sector risk management, attracting private capital by ensuring bankability and investor profitability.
As this transition progresses, banks have become more familiar with the energy sector, particularly renewable energies in a merchant capacity. Although many banks still require long-term hedges to guarantee loan returns, there is a growing number of renewable plants operating under a merchant model, transferring full risk management to the investor.
Investors, depending on their sector profile, must choose between a simple business model with long-term hedges to avoid risk management and maintain a lean team, or managing their own risk to seek higher returns on their assets. Both choices are valid and complex. Regardless of individual investor decisions, the sector as a whole benefits from increased volatility and interest from the perspective of electricity trading.
It is crucial to distinguish between the broader energy sector, which includes crude oil, WTI oil, liquid gas, LNG, coal, and all commodities capable of generating energy through combustion, and the purely electric sector, where financial trading is conducted with the final energy product, also part of the energy sector as a sub-sector.
Unlike other sub-sectors of the energy industry, such as oil, gas, coal, and LNG, which are well-developed and familiar with commodity trading, the electricity sector lacks a traditional trading culture for the final product. Most agents in the energy market are either producers or consumers, whose core business is ensuring investment returns for producers and guaranteeing energy delivery for consumers. Producers naturally tend to be long, while consumers tend to be short. Both have exposure to cover and use the market primarily to mitigate long- and short-term risks.
Recent history has shown that retailers that have survived are those most risk-averse, focusing their business model on fees between energy purchase and sale to the final consumer, avoiding exposure risk. Meanwhile, producers have found that maintaining their assets in merchant mode allows them to react to market movements and generate significantly higher profits.
In recent years, due to the technological transition from fossil fuels to renewable energies, the electricity sector has become highly volatile and relatively low in liquidity, creating a narrow margin for risk management. This has generated high uncertainty but also a highly interesting and complex market niche to manage.
This is where Inargy comes in, aiming for correct data management and interpretation to integrate risk management in the merchant market and generate capital by providing market liquidity.
With the need for liquidity and the foresight of battery development and integration into the market, Inargy seeks to anticipate the need for analysis and proper position management to maximize returns. The development of batteries, coupled with new European and regional regulations regarding battery integration with storage capacity and profile shifting for increased billing, emphasizes the importance of risk management and the potential added value of trading.
Do you share our market vision and want to join us? We would be delighted to discuss possible ways of collaboration.
Do you have a different vision and want to share yours with us? We are equally eager to discuss potential adaptations and interpretations of our business model.
Whatever your opinion, you are welcome at Inargy!