Orbit-e to piggyback on energy trading

By N. N. Sachitanand

BANGALORE, OCT. 24. The global energy industry is undergoing dramatic changes with nearly every country going in for deregulation. What has emerged from this is a decoupling of the energy producer and consumer and introduction of an intermediary class of enterprises which deal in energy as a commodity, much like the wholesale grain merchants. And, in accordance with the times, these energy merchants are increasingly conducting their trades through the Internet.

A recent report, authored by Mr. Jim Walker of Forrester Research, estimates that online notional energy trading reached $400 billion in the year 2000 - a whopping 750 per cent increase in volume over 1999. Despite the global turbulence in e-business, energy companies jumped on the Net bandwagon - investing in dot- com trading sites, building private e-commerce platforms and forming industry consortia. Fighting to gain online momentum, energy sites have aggressively refined their offerings - extending into new areas such as financial products (like natural gas futures and options contracts), non-energy commodities (such as bandwidth, weather derivatives and metals) and niche services (like managing information and evaluating trading risk).

The Forrester report predicts that online energy trading will exceed $3.6 trillion by 2005. The search for trading liquidity will restructure the industry along three markets: (1) A central exchange aggregating high-volume transactions for a limited number of standard products; (2) Merchant platforms for buying and selling energy to match assets to customer loads; and (3) solution sites for serving wholesale customers.

This boom in online energy trading has provided a golden opportunity for Bangalore-based Orbit-e, a consultancy start-up promoted last year by Mr. Rahul Chawla, former CEO of the Indian arm of Cambridge Technology Partners. Orbit-e was initially set up to provide consultancy and devising solutions for trading in financial securities. Mr. Chawla believed that the experience of Orbit-e in working with dealers in financial securities could be leveraged to working with energy traders.To boost its standing in the energy trading area, Orbit-e has taken on as a managing partner, Mr. J. Kevin McConville, who was Managing Director of Enron North America between 1998 and 2000. Enron, according to the Forrester report, redefined online energy trading in 2000, accounting for $336 million of the total $400 million value traded. By the end of the year, Enron's marketmakers conducted 74 per cent of their trades through EnronOnline, rather than closing deals over the phone.

Orbit-e, which has now around 90 persons on board, secured its first round of venture funding from Warburg Pincus in October last year. Pointing out that the financing came at a time when venture funds were fighting shy of the IT industry, Mr. Chawla claimed that this was an indication of the sound prospects for the company due to the niche areas it had selected.

At a time when toplines in this industry are contracting, Orbit-e expects to cross a turnover of Rs. 20 crores in the current year, up from Rs. 8 crores last year.

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Section  : Business
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