The CEO of Enron Gas Services (EGS), a subsidiary of the largest U.S. integrated natural gas company firmly holds the risks and rewards of the sale of a variety of natural gas derivatives, embedded in both gas supply and as a freestanding financial contracts. In the three years of its existence EGS had been successful by providing buyers and sellers of natural gas, a number of innovative pricing agreements. To mitigate the risks of mismatch between their commitments to buy and s … Read more »

The CEO of Enron Gas Services (EGS), a subsidiary of the largest U.S. integrated natural gas company firmly holds the risks and rewards of the sale of a variety of natural gas derivatives, embedded in both gas supply and as a freestanding financial contracts. In the three years of its existence EGS had been successful by providing buyers and sellers of natural gas, a number of innovative pricing agreements. To reduce the risk of having to buy mismatch between their obligations and to sell gas, an EGS system, established to decompose all of its obligations in a handful of different risks of exposure. Its central risk management group not only measures the company, but also enters into financial contracts receivable to offset the exposure brought about by the company’s business.
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from
Peter Tufano,
Sanjay Bhatnagar
Source: Harvard Business School
27 pages.
Release Date: 04 March, 1994. Prod #: 294076-PDF-ENG
Enron Gas Services HBR case solution