Igloo Sees Significant Market Opportunities
On the verge of completing a very important implementation, Tim Harrison and Dale Emmerson of Igloo are sounding quite excited these days. Last year, Igloo announced a strategic capital investment by CommodityNet Holding, a European fund backed by commodity traders and investors and is now plotting a path to growth. A part of that plan is to bolster the solutions’ physical energy capabilities and that it seems is well in hand. “We’ve been working with an asset optimizer who is launching in a few weeks,” Tim told me as he explained how Igloo has added a lot of physical functionality.
This new functionality includes integration with EPEX and EPEX auctions which complements Igloo’s ability to connect to other trading platforms like Trayport, ICE, and others, meaning that Igloo automatically captures the trades the user makes on those and other venues. In addition, Tim mentioned capturing balancing activities on the reserve market, aggregate trades, capturing gas hedges, calculation of gas imbalances and carbon exposure and much more. “The client has hugely complex cost structures that has all been built into Igloo,” he told me. The interesting thing is that the client is a physical gas player. “It’s good to have a physical client,” Dale said. “Hopefully, the first of many to come.”
Igloo had historically found favor with hedge funds in the energy space and is an ETRM with the hedge fund extensions (AUM calculations and so on). It now has significant physical capabilities as well it seems. “We are seeing interest from merchant traders in Europe, and a lot of startups on the smaller end of the scale currently,” Dale told us. The smaller entities will often resort to spreadsheets but under current market conditions of increased scrutiny and reporting requirements etc., need to step up to professional ETRM solutions in Comtech’s view. Like another vendor in the space, Igloo find sales cycles to be still quite long despite the demand.
Dale and Tim both believe that the market suits smaller and newer entrants like Igloo with lower cost platforms. In the future, they anticipate more newer entrants into the end user market providing new competition in the energy transition and in terms of the frequency and type of trading conducted. At the same time, they see and expect more dissatisfaction from larger enduser companies with older and more well-known solutions that may not be as nimble and adaptive as they need to be. As Dale points out “All the big suppliers in Europe have customer portals these days and are trying to drive customer engagement as they know that those customers have a choice and are looking around. This means that they have to get better and more proficient at trading and managing risks to cope and offer customer what they want.”
He also sees that as these companies trade more high frequency and volume, the legacy platforms can’t cope effectively. For him, this translates into demand for more agile trading solutions. We would agree with that. On the other hand, Igloo don’t necessarily see themselves as a replacement for the larger monolithic ETRMS in use. Rather, they see themselves as adding on a set of agile and cost-effective modules or services that can help customers meet their needs without having complex and costly wholesale replacement projects. We would agree with that too. We look forward to following Igloo’s trajectory in the market over the coming months and years.
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