ETRM Software House of the Year: Allegro Development

Allegro Development's focus on enterprise-wide efficiency is winning it new clients and bolstering its core ETRM offering

Energy Risk Awards 2014

Record revenue growth, the addition of several major new customers and substantial geographic expansion made 2013 an impressive year for Dallas-based energy trading and risk management (ETRM) vendor Allegro Development.

Other important contributions to the company's success included new product offerings, increased delivery options and a focus on enterprise-wide efficiency, notes Raymond Hood, who became Allegro's chief executive in November 2012.

Allegro achieved revenue growth of 33% in 2013 and established a presence in South-east Asia, the UK, Latin America and Canada for the first time. It also acquired 17 new clients, including China National Offshore Oil Company, the country's largest producer of offshore crude oil and natural gas. The appointment of several key executives marked a new direction for the firm, which is now targeting revenue of $100 million by 2015 – a big increase from $64 million in 2013 and a projected $76 million for 2014.

The change at the top comes after a governance dispute between Allegro's former chief executive Eldon Klaassen and the current board, which Hood says is now firmly behind the company. In December 2013, Klaassen lost an appeal in the Delaware Court of Chancery against his removal as chief executive.

Looking ahead, a major emphasis for Allegro is expanding its product offering to cover the entire commodity supply chain, from the point of production to the point of consumption, says Hood. This allows the firm to address the changing requirements of its clients, many of which are having to alter their business models in order to stay competitive.

There are new opportunities and risks for all energy participants at the moment. The global upheaval in today's energy markets is changing what customers need to do

"There are new opportunities and risks for all energy participants at the moment. The global upheaval in today's energy markets is changing what customers need to do," says Hood, pointing to the massive demand for commodities from Asia, the closure of nuclear facilities in Japan and Germany, the US shale revolution and worldwide increases in renewable energy production.

Much of the company's growth last year came from North America, where the shale boom is driving new companies into midstream natural gas. "A lot of companies in this sector are either new or are ballooning in size and need software solutions across their entire business to ensure optimum efficiency," says Hood.

In addition to pipelines, shale oil and gas is increasingly being moved by rail, road and on barges – making supply chains and physical logistics more complicated. Allegro's software can help solve this problem by flagging up where there are better returns to be made by moving commodities in a different way. That might include, for example, finding a more efficient route for ocean-going tankers delivering fuel. This kind of simple optimisation is generating one of Allegro's customers over $40 million of additional revenue every year, says Hood. "There's a lot of money lying on the ground that can be picked up if these operations become more efficient."

Hood also believes Allegro is well placed to serve another growing client base: asset-backed commodity traders. The current trend of companies aggressively acquiring energy assets, particularly power plants in the US, has led to an increased need for sophisticated ETRM solutions. "We've got equal functionality on the power and gas, coal, oil and emissions side, as it's all built into one system," he notes.

Regulation has weighed heavily on the minds of many market participants during the past 18 months. In response, Allegro enhanced its offering to take account of regulatory changes, releasing new components designed to help clients comply with rules such as the European Regulation on Wholesale Energy Market Integrity and Transparency and the US Dodd-Frank Act. It also released an upgraded credit component, which uses forward analysis to predict future exposures based on a client's current portfolio, contract set-up and collateral.

All this comes in addition to a new managed services offering. That means the company takes responsibility not only for the implementation of its system, but also for the ongoing maintenance and running of the application. "Several companies are taking us up on this, as it can be time-consuming and difficult for companies to continually commit resources to systems upkeep," says Hood. "Executives want to spend their time doing what their company exists for, not worrying about systems."

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