Houston, We Have a Solution:
Cheniere Flips the Treasury Script
By Eleanor Hill, Editor
Over the last 18 months, Cheniere’s treasury landscape has changed beyond recognition. As Brook Ballard, Treasury Manager, Cheniere Energy, Inc., Lance Kawaguchi, Managing Director, Global Head - Corporates, Global Liquidity and Cash Management, HSBC, David Andrada, Global Sector Head and Steven Smith, Regional Sector Head for Natural Resources & Utilities (NRU), HSBC Global Liquidity and Cash Management, explain, from decentralised beginnings, Cheniere now runs centralised, global treasury operations from its headquarters in Houston. As well as providing greater cash visibility and control, this centralisation journey has delivered significant efficiency and sustainability benefits, turning Cheniere’s treasury into a value creator – and award-winner.
“How can we be better today than we were yesterday, in order to service the tomorrow?” This was the strategic question that kick-started Cheniere’s treasury centralisation project 18 months ago. At that point in time, the ‘today’ consisted of a disparate treasury landscape.
Ballard explains: “In addition to the treasury team in Houston, we had a centre in Singapore that undertook local treasury processes, and our office in London, UK, where our trading arm is based, also had a treasury performing operational activities. We therefore had cash management and banking set-ups in those locations, as well as in our Luxembourg and China sites.”
Without a common technology platform or banking partner to connect them, the local treasury teams were managing cash in-country using disparate treasury processes and procedures, “This highly manual, time-consuming process was hampering cash visibility and slowing down treasury’s responsiveness to liquidity and investment opportunities, both locally and globally,” Ballard notes.
In addition, local banks were not necessarily able to offer competitive pricing on products and services, compared with global banks. “In Singapore, for example, we had limited functionality to process payments, non-standard payroll processes and visibility into our cash operations,” says Ballard. In turn, this was making it difficult for treasury to be the best possible partner to the business.
Making change happen
“The obvious solution was to move to a centralised treasury environment, with the ability to have global cash visibility and control at the click of a button – out of our Houston headquarters,” he says. With this goal in mind, Cheniere turned to HSBC for support. “We needed a bank that could precisely match our footprint through its own global network and enable us to manage cash in multiple countries, whilst serving us on-the-ground in Houston. HSBC partnered with Cheniere to offer a global banking network and digital solutions that empowered us to pull our global treasury operations back to Houston, yet enabled us to be more co-ordinated and efficient, with real-time cash visibility,” says Ballard.
The technology Ballard is referring to is HSBCnet, the bank’s online corporate banking platform. As HSBC’s Smith describes: “Within six weeks of the project kicking off, host-to-host connectivity was rolled out, integrating Cheniere’s ERP systems to HSBC to improve straight-through processing of payments going through the bank. We also set up new information flows for Cheniere so that all of the relevant bank account information, such as MT940s, comes straight into Houston through HSBCnet.”
By leveraging HSBC’s network and technology, “We were able to collapse non-core treasury operations in remote locations, transferring local bank accounts across to HSBC,” notes Ballard. Over the following months, Cheniere added more accounts to the HSBC network. Luxembourg non-core accounts were replaced with HSBC accounts to improve functionality and visibility and a Singapore dollar account was opened in the UK and integrated with its FX solution and systems. “Accounts for yield enhancement and asset management were also added; previously, these activities had been managed locally, but are now all managed from Houston,” says Smith.
Explaining more about the Houston set-up, Lance Kawaguchi, Managing Director, Global Head - Corporates, Global Liquidity and Cash Management, HSBC, notes that, “In 2017, HSBC Global and Liquidity Cash Management moved to a sector coverage model to better align to our clients. To be truly customer-centric, the first step was ensuring our teams are closest to where our clients are. Rather than flying bankers in and out to support our customers in the NRU sector, we wanted to be on the ground in Houston and truly build a relationship banking approach.”
Through a co-ordinated effort whereby HSBC works with each Cheniere country on a bilateral basis, HSBC has now put in place a ‘hub and spoke’ model, enabling a single co-ordination point for Cheniere treasury in Houston to have as much, or as little, engagement with each local country as necessary. This freedom allows treasury to focus on its core goals and enables the local teams to do the same.
To take full advantage of this new environment, however, Ballard knew that further changes would be needed. So, with the new centralised structure up and running, Cheniere then began re-engineering legacy processes.
From evolution to revolution
“One of the obvious pain points we had was the paper-based payments process,” admits Ballard. “Previously, Cheniere had limited international electronic workflow to approve and release payments. Treasury therefore embarked on a six-month digitisation project with HSBC – to move payments electronically from accounts payable, onto accounting, and then straight through HSBCnet directly out to the beneficiaries.”