Responsive Maritime Partners

Risk management

LOWER AND MANAGE YOUR BUNKER COSTS WITH RISK MANAGEMENT

Oil and bunker markets are volatile and the unpredictable price movements are beyond your control. But what you can do is to lower and manage your bunker costs and bridge the gap between your income and bunker expenses. Considering that bunkers amount to 50-70 percent of daily operating costs on an average vessel, hedging can be crucial for your results.

LET’S DEFINE A RISK MANAGEMENT STRATEGY THAT SUITS YOUR NEEDS

Hedging is not speculation! It is minimising and managing your risk, taking away the price uncertainty - while doing nothing is speculating on lower bunker costs. KPI Bridge Oil can help you identify your risk management needs and define a tailor-made strategy matching your specific business model and commercial situation. Our hedging tools are simple, efficient and easy to use. Let us guide you through the hedging process, every step of the way!

Bunker price increases hurt your business

It is hard to pass on increasing

bunker costs to your customers

You need bunker costs to fit

into a budget

You want to take advantage of a good buying opportunity

forward in time

KPI BRIDGE OIL CAN SOLVE YOUR PROBLEMS WHEN

We offer a range of physical settlement tools which guarantee the physical fuel delivery in the ports of your choice. FSPs and FPAs give you 100% price certainty and follow the same procedure as spot deliveries. With MPAs you can cap your fuel costs and still benefit from falling prices.

OUR PHYSICAL SETTLEMENT TOOLS GUARANTEE YOUR BUNKER PRICE AND ENSURE YOUR FUEL SUPPLY

Price

Spot price

Time

Month 1 Month 2

Your Fixed Price

FIXED FORWARD PRICE (FSP & FPA) MAXIMUM PRICE AGREEMENT (MPA)

Time

Month 1 Month 2

Price

Your Maximum Price

Your price

FIXED SPOT PRICE (FSP)

• Fix your bunker buying price up to 3 months before delivery • Single or multiple liftings • No vessels name or precise ETA needed • No minimum deal size/maximum 10,000 MT • Multiple port delivery option

MAXIMUM PRICE AGREEMENT (MPA)

• Works like an insurance policy for a physical supply contract • Fix a maximum price you are willing to pay for your bunker • Benefit from falling prices • Pay upfront insurance premium, which gives the right to buy at a pre-agreed price • Ideal to fit bunker purchases to a budget, while still able to take advantage of downside

FIXED PRICE AGREEMENT (FPA)

• Fix your bunker buying price as far forward in time as you like • No deal size limit. You can buy years ahead of delivery • Multiple port delivery option • Simple, short Master Agreement to be signed • Credit line can be extended for risk management • You may be required to pay margin calls (only in case of extreme market drops)

Get a cash compensation if your bunker costs increase. We offer the full range of financially settled hedging tools: Swaps, Futures and Options.

FINANCIAL SETTLEMENT TOOLS

SWAPS

FUTURES (GASOIL ONLY)

Month 1 Month 2

Price

KPI pays you

You pay KPI

Your Future Price

FUTURES (GASOIL ONLY)

✘

✘

Month 1 Month 2

Price

KPI pays you

You pay KPIYour Swap Price

Monthly average

SWAPS

• Fix purchase price without physical supply (supply flexibility)

• Standardized products and terms

• Buy as much and as far forward in time as you like

• Perfect hedge for ARA, Med, USGC, NY Harbour and Singapore

• Possible to convert to physical delivery with KPI Bridge Oil

• You may need to pay margin calls (only in case of extreme market drops)

• Fix your purchase price, not your physical supply (flexibility)

• Standardized and exchange-traded products (transparency)

• Perfect hedge for Northwest Europe and US EC

• Pricing on day of expiry

• Standardized contract size (100 MT for London Gasoil and 1,000 Bbls for NY Heating Oil)

• Margin deposit is required and you may need to pay margin calls

OPTIONS: CAP

OPTIONS: ZERO COST COLLAR

Month 1 Month 2

No settlement

Your Cap Price

Monthly average

KPI pays you

Price

Time

Month 1 Month 2 Month 3

No settlement

Your Cap Price

Your Floor Price

Monthly average

KPI pays you

You pay KPI

Price

Time

• “Insurance” contract that protects against rising prices and allows to benefit from falling prices

• Pay an upfront insurance premium and get the right to buy at a pre-agreed price (Cap)

• No margin calls

• The higher the cap and the closer in time, the lower the premium

• Protects against rising prices and you benefit from some fall in prices

• Keeps your prices within a pre-agreed range (between a cap and a floor)

• No premium. No costs

• You may pay margin calls (only in case of extreme market drops)

• Good to cap your prices if you would rather limit down-side benefits than pay upfront premium

PHYSICAL SETTLEMENTS FINANCIAL SETTLEMENTS

CHOOSE THE RISK MANAGEMENT STRATEGY THAT SUITS YOUR NEEDS

FSP AND FPA

• 100% price certainty

• Guaranteed fuel supply

• Same procedure as spot deliveries

• Fix a bunker budget price

• Lock in your costs in a COA

• Take advantage of a cheap market/forward curve

STRATEGYEXAMPLES

PRODUCTBENEFITS

MAX PRICE AGREEMENT

• Benefit from decreasing prices

• Guaranteed fuel supply

• No security deposits

• Protect against dramatic price increases

• Cap your costs after a market fall

OPTION: ZERO COST COLLAR

• Price certainty and some benefit from decreasing prices

• Flexibility in physical supply

• No upfront insurance premium

• Protect against dramatic price increases

• Cap your costs after a market fall

• Exercise your bullish market view at no cost

OPTION: CAP

• Insurance against price increases

• Flexibility in physical supply

• No security deposits

• Benefit from decreasing prices

• Protect against dramatic price increases

• Cap your costs after a market fall

SWAP OR FUTURE

• Price certainty without physical supply

• Flexibility in physical supply

• Standardized products and terms

• Fix a price for large volumes of bunker over a long period of time

• Lock in your bunker price in advance when it makes sense for you

12 13

HOW TO WORK WITH RISK MANAGEMENT

KPI BRIDGE OIL WILL GUIDE YOU THROUGH THE ENTIRE HEDGING PROCESS

Get in touch with your risk manager at KPI Bridge Oil

early on

1

Define together which strategies

and tools are right for you

2

Take time to present your

hedging project to your management and

owners

3

Define a target and give your risk manager an order

to work

4

kpi bridge oil helps you

follow up on the hedge

5

If markets and/or your situation

change, it is more than okay to adapt

the strategy

6

GET STARTED!

BENEFIT FROM OUR GROUP’S HEDGING EXPERTISE, RICH MARITIME HERITAGE AND WORLDWIDE COVERAGE

The financially strong KPI Bridge Oil Group is a leading bunker supplier with 8 strategically located offices in all major time zones. We have been fuelling the international marine transportation industry for over 40 years. Our global team of more than 60 experienced and dedicated brokers and traders is sourcing approx. 7-8 million tonnes of marine fuel a year.

MANAGE AND MITIGATE YOUR BUNKER PRICE RISK

Bunker hedging is a core competence in KPI Bridge Oil and we offer our risk management expertise and tailor made hedging strategy advice to ship owners, charterers, shipping companies, liners and physical bunker suppliers all over the world. Working closely with our business partners, we help manage and mitigate bunker price risk in an unpredictable market.

BENEFIT FROM OUR EXPERIENCE AND EXPERTISE

Our rich maritime heritage and the expertise of our professionals give us the depth of knowledge, the adaptability and reliability you need. Whatever challenges you face, we can help you find the best and most innovative solutions.

Maritime DNA All major time zones Purchasing power Fuel partnership

kpibridgeoil.com

LON

DO

N

NEW YORK

MIAMI

SEATTLE

SINGAPORE

ATHENS

DE

NM

AR

K

ISTANBUL