33
The Solution
Partnering with Citi and leveraging the recent
cross-border deregulation in China, SEG
implemented an automated, two-way cross-
border foreign currency cash pooling structure.
By gaining the ability to leverage cash from
across the group globally, SEG has been able to
centralize cash management processes, both
domestically and internationally, and has
achieved greater control over cash flow.
Furthermore, the solution aims to improve
investment returns by maximizing the amount
of cash available for investment, and reduce
funding costs. End-of-day sweeping (for same
day value) takes place automatically, therefore
improving treasury efficiency and control.
The Result
By implementing the cash pooling solution, SEG
achieved a range of advantages, both qualitative
and quantitative. These include:
• As end-of-day cash sweeps take place
automatically (with same day value), manual
processing is reduced, eliminating the
potential for fraud or error. Citi enables cash
sweeps globally to have same day value
thus treasury can maximize the return on
funds held in the special account, increasing
the yield on cash and enabling better
management of counterparty risk. Similarly,
by netting off credit and debit balances across
the group, treasury has been able to lower its
total cost of funding.
• Subsidiaries with negative balances benefit
from lower financing rates by borrowing
through the cash pool, while cash-rich
subsidiaries gain a better return on their cash
as cash investment can be performed at a
group level, therefore increasing the amount
of cash available for investment.
• In addition to the external financial benefits
of the solution (i.e. lower financing rates,
higher cash returns and lower external
transaction costs), there have been important
internal benefits, both tangible and intangible.
By reducing manual processing, treasury
resources can be allocated to more value-added
tasks, as well as improving process control
and auditability. Treasury has achieved better
control over group cash flows, enabling
a more efficient working capital strategy
and facilitating further centralization.
Furthermore, there have been FX risk
management and quota advantages, further
enhancing treasury’s ability to manage group
cash strategically.
While SEG had already achieved an impressive
track record in FX risk management, its treasury
was seeking to increase the mobility of its global
cash, reduce financing costs, increase returns
and optimize cash management at a group level.
By implementing a cross-border, foreign
currency two-way cash pool enabled by
deregulation in China, SEG achieved its cash
management objectives, allowing its treasury
to support the cash management needs of
domestic and international group companies
more effectively, as well as managing financial
risk across the group. In addition, its treasury
now has a scalable framework in place to deliver
additional value in the future, achieve its
financial and operational objectives as they
evolve and support strategic growth both in
China and overseas.
Asia Pacific Sector Insights
| Shanghai Electric Group
Partnering with Citi and leveraging the recent cross-border deregulation in China, SEG
implemented an automated, two-way cross-border foreign currency cash pooling structure.
By gaining the ability to leverage cash from across the group globally, SEG has been able to
centralize cash management processes, both domestically and internationally, and has achieved
greater control over cash flow.
