ELVIZ Is Alive and Well and Living in Europe - By Gary M. Vasey, Ph.D.

Blogging does work. Recently a comment was posted on the UtiliPoint Europe Blog (www.utilipointeuropeblog.com) regarding our lack of coverage of VIZ Risk Management. I replied to that comment suggesting that UtiliPoint would be more than interested in learning more about the company and several days later Mr. Frank Carlsen, CEO of VIZ Risk Management, contacted me via e-mail to arrange a briefing. For me, this is good evidence that blogs are a great way to communicate and discuss topics around the industry!

VIZ Risk Management

VIZ Risk Management was established in 1992, writing front office models for interest rate traders. But it wasn't until 1998 that the company entered the energy software arena. It did so as a result of an interest rate trading client who desired forward curves for the NordPool power market and it has subsequently gone from strength-to-strength. The company now boasts a large number of clients for its ELVIZ ETRM software across Scandinavia and Europe in the Netherlands, Germany, Switzerland, France and Spain. UtiliPoint first encountered VIZ Risk Management in its 2007 European ETRM Benchmarking study1. In that study, VIZ Risk Management was in the top ten ETRM vendors first to mind for European buyers and also mentioned by several respondents as their vote for market leader in the software category.

VIZ Risk Management's early strategy was to target unhappy clients of a competing product which had a large installed base around Scandinavia in the late 1990s. This strategy was successful according to Mr. Carlsen who told us, “VIZ Risk Management now has around 90 percent of that competitors clients (the competitor is no longer operating) and VIZ Risk Management was able to win some European clients, too, as Scandinavian traders familiar with the product moved to other trading firms on the continent.” But the demise of Enron signaled a pause to trader movement and a slow down in ETRM software sales generally as the industry stalled on the back of the merchant collapse.

In 2004, VIZ Risk Management got a capital infusion from some venture capital companies which it used to acquire two smaller companies in Oslo, inheriting several more clients in the process. It also used its cash injection to open an office in the Netherlands from which to target European markets. Today it boasts seven German clients and others in France and Spain with plans to continue to win new European business.

ELVIZ ETRM—An ETRM Product

Mr. Carlsen believes that his product's strength remains in valuation and risk management—with basis in Nordic power, but points to their presence in other parts of Europe to justify the products strong functional coverage elsewhere, too. As might be expected, VIZ Risk Management has added natural gas, emissions, coal, freight and FX functional coverage to ELVIZ ETRM, as well as some scheduling functionality for German markets. Their true strength, though, remains in risk management and modeling where the product offers VaR, PaR, and stress testing utilizing full Monte Carlo simulation.

Typically, VIZ Risk Management has been actively targeting middle tier energy trading firms with a message based around speed and ease of deployment and a product that is trader friendly. But it also has a somewhat unique licensing model in that it licenses its software on a monthly basis i.e., leasing. This proposition is certainly attractive for some trading firms.

Unfortunately, UtiliPoint has yet to see the product in action and is therefore not in a position to offer first-hand comments, except that surveys in Europe around ETRM continue to show that VIZ Risk Management is a strong European vendor in some identifiable market niches with a reputation for delivering effective trading and risk management solutions with the emphasis on financial energy trading. Typically the product will compete with the offerings from other vendors such as OpenLink, Navita, Murex and Allegro in the middle tier of the European energy trading arena.

1 Benchmarking of European ETRM Software Markets, UtiliPoint report, 2007 - http://www.utilipoint.com/rci/details.asp?ProductID=1142