482_required Fuel Hedging Consultant

8/2/2019 482_required Fuel Hedging Consultant

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REQUIRED FUEL HEDGING CONSULTANT

Pakistan International Airlines Corporation (PIAC), the national flag carrier of Pakistan,

operates approximately 150 flights daily to around 56 national and international

destinations. Jet Fuel cost is the primary element in the operating cost. The relevant factsand figures are as follows:

2007 2008 2009 2010

Price Rs./USG 133.14 216.77 149.7 194.57

Volume USG (in Millions) 229.16 207.29 211.27 228.92

Fuel Cost % of TOC 46 54 40 42

Against this background, PIAC seeks to hire the services of a suitably qualified Fuel

Hedging Consultant to manage the Fuel Price Risk Exposure of PIAC going forward.

The fuel hedging consultant shall be responsible for performing the following tasks:

FORMALIZATION OF RISK MANAGEMENT FRAMEWORK

Identify and enlist major contributory factors to fuel price risk in order of

importance described at a level appropriate for Board presentation and

management awareness (very specific, but not detailed in extreme). The fuel price

risk should be specified vis--vis ability of PIAC to pass on cost in ticket prices.

Review of existing risk management polices & procedures with specific referenceto,

Fuel purchasing patterns and hedging practices prevailing historically in

Fuel Control Division of PIAC

Developing/ Improving Fuel Hedging Policy and Documenting procedures covering

planning, execution and monitoring with emphasis on,

Process flow

System for controls with best practices

Documentation of PIAs propensity for risk in form of related limits. Key risks & opportunities of the hedging program

Documentation of basis risk (Hedge Efficiency) with respect to,

Product

Location

Time

Designing of Credit risk management procedures & Exposure management

strategies.

Implementing a valid and testable risk control system.


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Designing the compliance procedures to determine the appropriateness of critical

parameters and assumptions.

Preparing & designing reports for review of BOD of PIAC.

TRANSACTION SUPPORT SERVICES

Based on PIA procurement and exposure to different jet fuel markets

recommending the proper over the counter (OTC) or exchange traded instrument.

Assessing the capital requirement for hedging activity by indicating,

Direct start up cost (Technology solutions)

Capital commitment necessary to provide credit support for hedging

volumes

Estimated outlay of option premiums.

Recommendation of reference price, most suitable structure and hedginginstrument considering the documented basis risk.

Determining the optimal duration of the hedges.

Assisting in OTC master agreement negotiations.

Providing support for implementation of hedge accounting infrastructure by

establishing procedures for,

Reporting of fair value in hedge accounting.

Designation as cash or fair value hedge. Testing and reporting the hedge effectiveness.


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GENERAL TERMS AND CONDITIONS

1. The Technical proposals shall include the following information at a minimum:

a) A brief on risk management experience of firm across major asset classes

with specific reference to Commodities.

b) List of current clients in aviation industry.

c) Background profile and CVs of human resource to be assigned to project

d) Organization of trading desks across the World

e) Honors / Awards of recognition received from Industry regulators,

interested parties (for e.g. Bloomberg) during the last five years

f) Proof of registration by the regulator of applicable jurisdiction

2. The Participants shall be financial institutions of international reputation and

presence having demonstrable history of operating in risk management business

with reference to commodities.

3. Contract shall initially be awarded for a period of One Year extendable through

mutual consent of both parties.

4. A schedule of High level Tangible and Intangible Deliverables covering the points

mentioned in the TOR shall accompany the proposal in the shape of a work plan.

5. Payment terms shall be Monthly in Arrears.

6. Participant selected shall not be responsible for the execution of structures /

trades.

7. Fees/expenses shall be clearly mentioned in proposal.

8. PIAC reserves the right to accept or reject any proposal or part thereof at its sole

discretion without assigning any reason. Any costs incurred in connection with the

preparation and submission of proposals will not be borne by PIAC.

9. Tender proceedings shall be convened on a single stage two envelope basis.

10.For further queries, please contact:

GM Fuel Control (Pakistan International Airlines)

Email:khijypk @piac.aero

Off.: 0092 21 99044503


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Technical Evaluation Criteria & Weightage -Selection of Fuel Hedging Consultant

No Evaluation CriteriaMax

PointsWeightage A B C

1Risk Management experience acrossmajor asset classes with specificreference to commodities

5 10

Weightage 0.00 0.00 0.00

2Current clientele in aviationindustry

5 15

Weightage 0.00 0.00 0.00

3 Skills and qualification matrix ofrelevant personnel

5 15

Weightage 0.00 0.00 0.00

4

Monthly / Quarterly priceforecasting success rate during lastfive years for following instruments,1) ICE Brent Crude2) NYMEX WTI Crude3) NYMEX Heating Oil4) Dubai Brent

5 25

Weightage 0.00 0.00 0.00

5Presence of trading desks acrossmajor commodity exchanges

5 10

Weightage 0.00 0.00 0.00

6

Honours / Awards of recognitionreceived from Industry regulators,interested parties (for e.g.Bloomberg) in last five years

5 10

Weightage 0.00 0.00 0.00

7 Registered by the Regulator ofrelevant jurisdiction

5 5

Weightage 0.00 0.00 0.00

Total points Achieved 35 100- - -

Total WT. Score- - -

Note: Maximum Weighted Average Score is 5. Minimum qualifying score is 3.

Important:


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1.Tenders proceedings shall beconvened on Single Stage Two Envelope basis.

2.Technical Proposals will be opened on August 29, 2011 @ 1100 Hrs. (PST).

3.All bidders of Pakistan Origin must submit a Pay Order of Rs. 2000 along with the

Technical Proposal as Tender Documents Fee.

4.All bidders of Pakistan Origin must submit Earnest Money in shape of Pay Order /

Bank Guarantee, equivalent to 2% of Total Bid Value along with the FinancialProposal.

5.All proposals must reach to undersigned before date / time. Proposals received

after date / time will not be entertained.

6.Price quoted must be valid for 90 days from the date of tender opening.

General Manager Procurement

Procurement & Logistics Department

Pakistan International Airlines,

Head Office, JIAP,

Karachi, Pakistan.

Tel: 0092 21 9904 5135

Email:[email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]