Introduction to Hedging and Risk Management for Utilities (VIRTUAL) - PRM1V
Course Schedule
| Date |
Time |
Location |
Price* |
Registration Deadline** |
3-4 Sep 2024
Register
|
9:00am-3:00pm (Los Angeles)
|
Zoom: Americas
|
USD 2,445 (PRM1V-VILTNA24-09)
|
9 Aug 2024
|
*Prices do not include VAT, GST, or any other local taxes. All applicable taxes will be added to the invoice.
**Please register by the deadline to help us ensure sufficient attendance and avoid postponing the course.
Course Summary
Introduction to Hedging and Risk Management for Utilities is a two-day VIRTUAL instructor-led course presented by the energy training experts at Mennta Energy Solutions.
This is an introductory course on gas and power hedging and risk management for utilities in an applied context.
This course will enable participants to gain a practical working knowledge of gas and power markets as well as the main players and common traded instruments. Delegates will gain a practical understanding of the various dimensions of risk for utilities active in gas and power markets and the various tools to manage and transfer those risks.
We will present standard approaches to hedge energy exposures with derivatives with physical forward, futures, swaps, and options. Numerous case studies and hand-on Excel examples will illustrate contract payoffs, potential hedge gains and losses, derivatives valuation, communication and reporting.
What Will You Learn?
- POWER PRICES, DRIVERS, BEHAVIOR, AND VOLATILITY
- PHYSICAL HEDGES: PHYSICAL PURCHASE AND SALES
- FINANCIAL HEDGES: FUTURES, SWAPS
- PHYSICAL AND FINANCIAL OPTIONS
- UTILITY HEDGING STRATEGY
- MARK TO MARKET, P/L AND POSITION MANAGEMENT
Who Should Attend?
- Energy Traders and Marketers
- Energy Analysts
- Marketing Managers
- Sales Managers
- Asset Optimizers
- Power Utilities staff
- Power and Fuel purchasing managers
- End-users of derivatives in corporations
- Market Risk Managers
- Credit Risk Analysts
- Risk consultants
- Risk and Audit Committee Members
- CFOs and Treasury Managers
- COOs
- Finance department personnel
- Compliance and Internal Audit
- Middle and Back-Office Personnel
- Government agencies
Course Content
Power Prices, Drivers, Behavior, and Volatility
- Physical and Financial Gas and Power Markets: From Producers to End-users
- Risk dimensions: Market, credit, liquidity, volume, operations, operational
- Long or short? Volumetric and Financial Considerations
- Forward curve analysis for power markets: Shaping and Extrapolation
- Case study: Forward curves vs. Price Forecasts
- Gas and Power Price Drivers in North America
- Net Loads in California: The evolving Duck curve
- Spot and Forward energy price behavior and its volatility structure
- Case Study: CAISO extreme price behavior during August 2020 Heat Wave
Physical Hedges: Physical purchase and sales
- Physical purchase and sale contracts
- Fixed Price, Index, Heat Rate, NYMEX + Basis
- Price Fixing, delivery window and settlement timeline in physical vs. financial contracts
- Mark-to-market and fixed price in physical contracts
- Risk analysis of long and short fixed price positions
Financial Hedges: Futures, Swaps
- Futures contracts
- Margin and settlements
- Case study: Hedging with NYMEX Henry Hub futures
- Swaps (Fixed-for-Floating, Index)
- Basis Swaps and Spread trades
- Hedging locational basis risk with basis swaps
Physical and Financial Options
- Overview of key option concepts
- Options types and payoffs
- Intrinsic and Extrinsic Value
- Key drivers of option premiums
- Using call options to set a cap on costs
- Zero Cost Collars: Benefits and risks
- Use of options in utility hedging programs
Utility Hedging Strategy
- Why should utilities hedge and what risks should they hedge?
- Risk and regret in hedging programs
- Alternative hedging programs: Programmatic, discretionary, risk-based
- Risk appetite statements and risk tolerance
- Common hedging mistakes
- Setting hedge benchmarks and program objectives
- Introduction to risk metrics and key risk indicators
- Case study: Market, credit, liquidity and regret risk from alternative hedging strategies
- Hedging in a low price environment
- Case study: Portland General Electric $100+ million trading loss in Q2 2020 from “ill-advised trades”
Mark to Market, P/L and Position Management (I)
- Book Structure and Position Management
- Front, Middle and Back Office: Roles and Responsibilities
- Key Trading and Trade Capture Processes
- Transaction limit monitoring
- Mark to market vs. Mark to Model
- Case study: Pricing a swap with forward curves
- Mark-to-model: Illiquid instruments and derivatives valuation
- Pricing an option with Black-76. Implied volatility calculations
