Global energy markets began to deregulate in the early-1990s, since when an increasing number of companies have moved from being providers of power and owners of assets to traders in energy. With this new market, companies have had to learn how to deal with very different challenges – creating an opportunity for risk-management software suppliers.
But, ever since the market-leader, Enron, became embroiled in scandal, confidence in the sector has plumbed new depths. London-based KWI is one of a number of European technology companies whose prosperity is linked intrinsically with this tarnished market.
Energy trading will need “a lot of PR” before it recovers in the public’s perception, believes David Bucknall, CEO of KWI. The company has had to scale back its growth plans of late, but nevertheless remains optimistic about the future.
KWI, formed by a gang of four Coopers &Lybrand consultants, offers risk management software for the energy trading market. While this kind of technology is by no means uncommon, Bucknall says that his company’s ‘KW3000’ software is unusual in addressing the specific needs of the energy industry. “It can handle factors such as the limits on storage, the link with fuel markets, the strong correlation between market prices and volumes and the potential for real-time transaction,” he says.
Initial funding came from the founders themselves and it was only in October 2001 that KWI sought additional funding for a North American expansion, raising $14 million (EU14.3m) from Insight Venture Partners.
Revenues for the company had been impressive up to that point, doubling every year since its founding in 1993. However, the Enron debacle has tarnished the energy trading market and KWI has laid off about a quarter of its workforce.
For now, KWI is relying on its existing user base as well as systems integration partners like Accenture. “No software company ever managed to grow without paying 30 pieces of silver to every system integrator out there,” he says.
Yet Bucknall says that the first signs of a recovery are emerging, particularly in eastern Europe where a number of countries are liberalising their economies as part of the process of joining the European Union. Enron has damaged the sector, but it is clearly not being written off.