DONG Energy, having been created from a merger of six companies in 2006, each with its own procedures, systems and bank relationships, faced the problem of bringing its finance processes into alignment. Treasury Today explores how Nordea’s Global Cash Pool and eGateway solutions helped to optimise DONG Energy’s performance.

Problem…

Merging multiple companies is always going to be a challenge – and with more than 200 legal entities in total – the scale of the task involved in managing payments to the company’s subsidiaries and joint ventures was enormous. Moreover, the merger created a decentralised structure which brought problems in getting a complete view of the company’s funding and liquidity to the table. “We knew it would take some years to align payment terms and contracts, to integrate systems and to merge departments,” explains Kim Japp, Director of DONG Energy’s Financial Shared Service Centre. “We started with totally decentralised accounting and finance functions in each business unit. It was only in 2011 that we formed our shared services centre (SSC) and centralised payments, by which point we were in a position to look ahead at how we could optimise our transactions and payments,” Japp continues. Having been engaged in a close dialogue with Nordea since the merger in 2006, it was a natural choice to turn to this banking partner when the company embarked on an ambitious multi-year programme of activities with the vision of establishing an internal bank and payment factory, as well as a completely centralised treasury function.

…Solved

Having worked with DONG Energy in the cash management area for some years, Nordea had a firm understanding of the intricacies of the company’s operations. As such, Nordea proposed its new Global Cash Pool solution to provide greater visibility across countries, currencies and accounts. Nordea worked closely with the company to define the rollout phases. The first steps were taken across Denmark, Norway and Sweden in January 2012 and the solution went live in November that year, with the company’s numerous UK accounts added to the pool in October 2013. But the company’s collaboration with Nordea didn’t stop there. After DONG Energy set up an SSC with the ambition to introduce an internal bank and payment factory, the company began looking for a solution that would enable payments to and from all subsidiaries to be centrally approved directly within its SAP system. This time, Nordea proposed that the company migrate to its eGateway solution which would provide the treasury department with greater efficiency and enhanced liquidity management.

The project of simplifying payments with Nordea’s eGateway began in December 2013 with a series of ambitious milestones and deadlines that needed to be met. Inevitably – with DONG Energy’s complex business structure including many companies and joint ventures that require specific payment processes and handling – there were challenges to overcome. Nordea responded by assigning a project organisation with a dedicated manager to keep stakeholders informed and solve problems. As DONG Energy didn’t just contact a service desk, “it helped a lot,” explains Anne Heidemann, Director, Treasury Front Office, DONG Energy. “Of course, there were hiccups, but what was important was that everybody collaborated and focused on solving them quickly.” The result: the new payments platform was live by the end of September 2014 (during the same year, the company’s cash pooling solution was also extended to handle internal balance transfers with support the new internal bank model).

Both solutions (Nordea’s Global Cash Pool and eGateway) are fully integrated into the company’s SAP and treasury management system, as well as the shared services and treasury processes. “These have been two major projects and the implementation has been a complete success. Now DONG Energy has truly updated, modernised and enhanced its core finance processes, producing tangible results,” says Japp. Both Japp and Heidemann also note that no comprehensive business change is easy, but the results are often worth the complex transition phase. “The collaboration between DONG Energy and Nordea has produced real benefits in cash management,” explains Japp. “We have much more solid payment processes now, which is saving us money as well as reducing operational risk. It’s hard to overstate the value this delivers to the business.”