Introduction to Hedging and Risk Management for Utilities (VIRTUAL CLASSROOM) - PRM1 

CPE Credits Awarded: 16
Categories: The Natural Gas Industry , The Power Industry, Trading, Derivatives, Hedging and Risk Management, Global Association of Risk Professionals (GARP) Approved Course , Virtual Classroom Courses

Course Date Duration Venue Price Registration Deadline Register
08 Feb 2021 2 Days Globally Online - Los Angeles Time Country: us
$ (USD)1,499.00
8 Jan 2021

UPCOMING SCHEDULE DETAILS:

8-9 February 2021  Los Angeles Timing
Session 1: 8 February 2021 
 9:00am - 3:00pm PST
Session 2: 9 February 2021
 9:00am - 3:00pm PST

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.

The 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.

Throughout the course, delegates will manage a portfolio of physical exposures using derivatives and will compute price risk and mark-to-market exposures.

PRE-REQUISITES

  • Basic Knowledge of Power Markets
  • Good working knowledge of Microsoft Excel. Delegates will receive a pre-course reading package reviewing the main Excel functionality that will be used during the course
  • Basic knowledge of physical transactions and derivatives. Knowledge of basic Physical sales and purchases, forward, futures, options.

Please note: a laptop and Excel version 2007 or later is required in order to engage in market data.

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

WHAT YOU LEARN?

  • POWER PRICES, DRIVERS, BEHAVIOR, AND VOLATILITY
  • PHYSICAL HEDGES: PHYSICAL PURCHASE AND SALES
  • FINANCIAL HEDGES: FUTURES, SWAPS
  • PHYSICAL AND FINANCIAL OPTIONS
  • MARK TO MARKET, P/L AND POSITION MANAGEMENT
  • UTILITY HEDGING STRATEGY
  • PRACTICAL CONSIDERATIONS IMPLEMENTING A HEDGE PROGRAM

COURSE CONTENTS

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

Simulation Game (I)

  • Portfolio Management Simulation Game: Session I
  • Portfolio Management Simulation: Session II

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
  • Case study: Pricing a CRRs and Basis Swaps
  • Mark-to-model: Illiquid instruments and derivatives valuation

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

Practical Considerations Implementing a hedge program

  • General transacting policy considerations
  • Maximum transaction terms
  • Allowed and Prohibited Transactions
  • Trading controls
  • Communication and reporting: Scope and frequency
  • Uses and Abuses of Financial Hedging Instruments
  • Tips for negotiating with hedge counterparties
  • Case study: Portland General Electric $100+ million trading loss in Q2 2020 from “ill-advised trades”

Portfolio Management Simulation Game (II)

  • Portfolio Management Simulation: Session III
  • Portfolio Management Simulation: Session IV

FACULTY

DR CARLOS BLANCO is a financial risk management expert with over 20 years of diverse experience in energy markets. He has worked with some of the largest energy and commodity market firms worldwide providing educational, advisory services and software solutions.

He is the managing director of analytic solutions for Ascend Analytics. He has advised risk groups and senior management in oil, gas, power, mining and trading firms on various matters related to the risk management process including risk policy, hedging strategy, risk model development and validation, risk appetite and risk metrics.

Dr. Blanco is an active faculty member for Mennta Energy Solutions since 2004, and he has conducted a wide range of energy derivatives hedging, pricing and risk management seminars worldwide. A frequent conference speaker and writer, he has coauthored over 150 articles for Energy Risk Magazine, Commodities Now, Energy Metro Desk, Oil and Gas Journal and others.

He is a former VP Risk Solutions at Financial Engineering Associates, Inc (a MSCI/BARRA Company), where he managed the market risk suite of products as well as the firm’s product support and professional services group. He also taught finance at the University of California, Berkeley, and the ABN AMRO Academy.

TESTIMONIALS

Extremely helpful and insightful class.  Very high quality instruction. - G.C., Tacoma Power

GARP rgbMennta Energy Solutions is registered with GARP as an Approved Provider of Continuing Professional Development (CPD) credits. Mennta Energy Solutions has determined that this program qualifies for 16 GARP CPE credit hours. If you are a Certified FRM or ERP, please record this activity in your Credit Tracker at www.garp.org/cpe

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