Houston, We Have a Solution: Cheniere Flips the Treasury Script

Over the last 18 months, Cheniere’s treasury landscape has changed beyond recognition. As Brook Ballard, Treasury Manager, Cheniere Energy, Inc., 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.”

David Andrada Global Sector Head for Natural Resources & Utilities (NRU), HSBC Global Liquidity and Cash Management

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, an HSBC representative, 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.”

As part of this digitisation drive, Cheniere has also significantly reduced the number of cheques it uses. “Like many energy companies, we were making multiple small value payments with cheques. Not only was this highly inefficient for Cheniere in treasury, but it also impacted accounts payable and accounting productivity, as well as reconciliations processes. As such, we have now moved more of our paper cheques database towards electronic settlement methods, delivering impactful results for treasury – and for our customers.”

Steven Smith Regional Sector Head for Natural Resources & Utilities (NRU), HSBC Global Liquidity and Cash Management

Kicking it up a gear

With a significant proportion of Cheniere’s payments now digitised, it was time to aim for the next level of best practice. “We were keen to leverage the centralisation and digitisation work done with HSBC as a springboard for a complete treasury transformation. So, we took the decision to implement a global treasury management system (TMS),” says Ballard.

Although this part of the project fell into the vendor rather than bank space, HSBC played an important supporting role in the successful implementation of the chosen TMS, namely Kyriba. Smith explains: “Having our global sector head and the Americas team for NRU based in Houston, the global hub of the oil and gas industry, means that we are extremely well connected with our clients – and can connect them together as peers, when appropriate. Learning that Cheniere had selected Kyriba as its TMS, we were able to link Brook’s team up with other oil and gas treasurers in Houston who had recently deployed the same TMS. This gave them the opportunity to trade ideas and share best practice, ultimately enabling a smoother TMS implementation journey.”

The value of this local support ecosystem in Houston should not be underestimated, Ballard believes, “Cheniere’s corporate office is based in Houston, so having HSBC partner with us on-the-ground, where we are, means that they can support us in our operational sweet-spot. What’s more, banking is a commoditised business, and what sets HSBC apart is the depth of relationship and service.

“I can call David or Steve up if there is a challenge we are trying to solve and invite them over to the office. We then work jointly together to come up with ideas and solutions. It’s a strategic partnership – and one that would not work so smoothly if we were just corresponding by phone or email. The fact that HSBC can connect us with our peers in Houston to enable treasury to perform better, is also invaluable. And Cheniere is now paying this forward, sharing tips with other HSBC clients: it’s a virtuous cycle,” says Ballard.

Brook Ballard Treasury Manager, Cheniere Energy, Inc.

Delivering concrete benefits

The benefits of this deep partnership between Cheniere and HSBC speak for themselves. “Cheniere is transforming itself to use best in class tools and technology within treasury to deliver valuable productivity and efficiency within our finance teams to allow our leaders to make the most informed decisions to impact our organisation in a positive way and continue to drive growth and aid operational efficiency.”

As a result of all this hard work, Cheniere has centralised reporting and payment processing, improved cash visibility and control, achieved working capital efficiencies, and significantly enhanced investment income. Ballard could not be happier: “Treasury is now adding real dollar values to Cheniere. Historically, we may only have tracked expenses; however, now we are able to track how we are adding value thanks to this centralisation and transformation journey. That’s an extremely powerful outcome, which has only been made possible through the efforts of Cheniere’s treasury team, and our internal and external partners, particularly HSBC.”

Demonstrating the bank’s commitment to Cheniere and to helping the treasury team to constantly improve, Andrada concludes: “Cheniere has made incredible leaps forward over the last eighteen months, and now has a thoroughly modern treasury function, centralised in Houston, that is fit-for-growth. But the journey doesn’t stop here; going forward we will be looking at innovative solutions, such as next generation virtual accounts, to help Brook and his team deliver even greater value for Cheniere through financial, operational and sustainability wins.”