Help for $1.3bn debt headache

By ADAM GIFFORD

Electricity and gas distribution company UnitedNetworks has become the first Australasian site to run the New Zealand-developed Oracle Treasury software module.

Treasurer Richard Wood said the rapid growth of United through debt-funded acquisitions and the upgrade of its financial applications to Oracle 11i forced a review of its systems.

"United's treasury operation is significant because we manage $1.3 billion of debt, so our interest rate exposure is significant," Mr Wood said. UnitedNetworks had interest payments of more than $100 million a year. It used derivatives such as interest rate swaps and options to manage that risk.

"You need tight controls so you can see if a derivative position is exposing the company to a risk it is not prepared to take or is breaching the rules."

Oracle Treasury handles debt, investment, foreign exchange and derivative and monitors liquidity, interest rate and currency exposures across the enterprise. It allows accurate assessment of cash need. Mr Wood said that unlike most other treasury applications, Oracle Treasury could display more than one financial instrument at a time.

"For example, Oracle Treasury allows us to easily view loans and interest rate swaps on the same report, which allows us to see the mix of fixed and floating debt within a certain timeframe. Our previous application could not do this without complicated reports being designed at significant cost and effort."

UnitedNetworks was using Quantum, one of the leading treasury software packages.

"We could have developed Quantum to the next level - it's a very flexible system - but that would have required spending more to get reports developed and new interfaces built," Mr Wood said.

By opting for Oracle Treasury, UnitedNetworks got the benefit of built-in integration with Oracle 11i.

Mr Wood said the first reports were being generated by the new system within six weeks.

He would not say how much Oracle Treasury cost, but "as a general rule you would be looking at $300,000 or so for a treasury system".

The basis of Oracle Treasury is software developed by a five-person Auckland company, Financial Projects, which was bought by Oracle in 1998.

Former director Peter Marriott, now Oracle's Asia Pacific director for treasury solutions consulting, said Financial Projects was formed in 1991 and had about a dozen sites in New Zealand and a similar number in Australia sold through a relationship with Fujitsu.

The module runs only on the 11i application platform, so sales will depend on how fast Oracle's 10,000 customers upgrade.

Mr Marriott said Oracle Treasury was live in more than 16 sites in the Asia Pacific Region.