Centrus provides financial valuation services to Welsh Water, on their Interest rate swaps and Inflation swaps positions

Transaction overview

Welsh Water required year-end and half-year-end valuation expertise for their derivatives portfolio, along with on-demand support related to audit review. This warranted:

• Understanding how they were currently producing their valuations and identifying their roadblocks.
• Analysing their extensive existing derivatives portfolio, which primarily consisted of inflation-linked swaps
• Understanding which current valuation figures were required for their financial statements.
• Agreeing on a methodology with Welsh Water and their auditors for producing the figures.

Centrus’ solution

Centrus’ role as a valuation technology provider allowed Welsh Water to rely on a suite of valuation and risk management reports for its Inflation-Linked Swaps and Interest Rate Swaps portfolio.

• Writing a detailed methodology paper, highlighting the market data sources used for valuation purposes, the number of simulation paths used, the credit curve, funding spread, and the loss given default probability.
• Initial upload of Welsh Water’s derivatives portfolio to our valuation analytics platform.
• Agreement on reporting deliverables, fully bespoke to meet requirements.
• Centrus worked closely with the client to ensure that any auditor questions were answered.

Centrus’ value added

Year-end valuation Report: Centrus provided Welsh Water with timely and insightful reporting of their derivatives valuation for year-end, adhering to the principles outlined under IFRS 13 Fair Value Measurement.

• The valuation figures required by Welsh Water were delivered on time for their financial year-end and included CVA, DVA, FVA, XVA, and Fair Value.
• Centrus’ expertise in this area added value by assisting Welsh Water with challenging auditors’ questions.
• Ongoing management and support were provided for any changes to Welsh Water’s derivatives portfolio.

“The Centrus team has understood our requirements, helped agree the methodology with our auditors and developed an efficient process that is now embedded in our semi-annual financial reporting. Their expertise and modelling capabilities on xVA has been particularly useful.”

Alan Carr, Treasurer – Welsh Water

For more information, please contact Gilles Bonlong, Head of System Implementation – Centrus.

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