Data Loading...
Relationship between Transportation and Locational Flipbook PDF
Basis Spreads and Transportation There are parallel methods for moving gas from one location to another — a physical met
144 Views
43 Downloads
FLIP PDF 161.7KB
Course Deal Structuring in Natural Gas Markets Day 1 Basis Spreads and Transportation There are parallel methods for moving gas from one location to another — a physical method: pipeline transportation and a financial method: buying and selling. The interrelationship between these methodologies gives rise to useful transaction structures and the important basis swap market. Closing related to explicit basis swap trading are NYMEX-related EFP’s and EFS’s, which are also covered. Recognizing the tradable risk positions inherent in pipelines allows hedgers to use financial hedges to optimize the value of these assets. Also the ability to isolate locational risk from underlying price risk gives rise to sophisticated gas hedging structures. Relationship between Transportation and Locational Basis
Managing Pipeline Risk
Recovering “sunk” demand costs of pipeline capacity
Selling the long basis spread embedded in pipeline ownership
Monetizing optionality from pipeline ownership
Asymmetric risks
Pipeline revenue under capacity release
Synthetically removing revenue caps using basis trades
Managing Location Risk as a Component of Forward Gas Prices
Component risks in pricing gas
Cost of relocating physical gas exposure
Managing component risks discretely
Pipeline transportation
Isolating basis risk from directional price risk
Financial methods
Hedging with trigger structures
Ownership of pipeline capacity as a basis risk position
Reverse triggers
Ownership of pipeline capacity as an option position Hedging Basis Using NYMEX EFP Settlements
Synthetic Transport Using a Swap
Exchange of Futures for Physical (EFP)
Using a basis trade to fixed transport cost
Avoiding execution risk
Basis swap vs. basis spread
Basis spread pricing
Buying and selling basis
Structure and mechanics of the EFP
The EFS – Exchange of Futures for Swaps
Basis Swaps vs. a Benchmark
Quoting convention for basis swaps
Defining the benchmark
Pipeline capacity ownership as option on basis
Creating a fixed price using NYMEX swaps, basis swaps and futures
Rainbow options on basis
Swing swap options on basis
Hedging basis swaps
Alternative structures for laying off basis risk positions
Optionality on Basis
Group Review
Group Review
Register for COURSE
Course Deal Structuring in Natural Gas Markets Day 1 (continued)
Spark Spreads and Tolling: Hedging & Structuring Tolling, the process of converting gas to power, can be achieved through physical capacity or through a direct exchange, either of physical or purely financial flows. The economic foundations of pricing and evaluating these cross-energy structures are developed in this section along with other common multiple-fuel transaction structures.
Day 2
Natural Gas Tolling
Direct and reverse tolling
Synthetic generation
Synthetic tolling using swaps
Market Implied Heat Rates
Multiple-Fuel Structuring
Extending basis swap concept to cross-commodities
Trading natural gas against electricity
Conversion factors for thermal efficiency
Understanding heat rates and thermal efficiency
The decision to generate or shut down
Evaluating the economics of generating alternatives
Tolling Using Generating Capacity
Sample tolling agreement
Tolling economics
Extrinsic value
Trading and Structuring Spark Spreads
Operating margins for generators
Pricing spark spread swaps
Heat rate implications on spark spread pricing
Optionality in Generation
Tolling through capacity as an option
Owning a put on the spark spread
Pricing Natural Gas as a Spark Spread
Pricing natural gas in power terms (per MWh)
Effective hedge of generating margins
Pricing power in natural gas terms (per MMBtu)
Embedding spark spread swaps
Guaranteeing the competitive position of natural gas vs. power
Monetizing Embedded Optionality in Generation
Selling puts on the spark spread
Selling calls on the spark spread
Dispatch options
Group Review Group Review
Register for COURSE
Course Deal Structuring in Natural Gas Markets Day 2
Time Spreads and Storage There are parallel methods for moving gas positions from one time period to another — a physical method: storage and a financial method: buying and selling. This section examines in detail the relationship between these parallel methods and how they might be mixed and matched to address specific hedging needs.
Stack and Roll Hedging
A common hedge strategy in energy markets
The mechanics of stack and roll hedging
Risks inherent in stack and rolling strategies
Managing Storage with Stack and Roll Relationship between Storage and Shape of the Forward Price Curve
Time spread as measure of contango/backwardation
Buying and selling time spreads
Choosing between physical and financial storage
Optionality in storage
Storage Arbitrage
Synthetic storage
Arbitrage opportunity in lack of forward pricing discipline
Need to package synthetic storage
Weakness in trading software and systems in valuing storage trading
Inter-period exchanges of physical as lending
Managing unknown volume and timing of exposures
Coordinating storage exposures with the hedge
Residual time spread risk
Short-Term Storage Strategies
“Park-and-Loan” programs
Swing swaps
Swing swap options Group Review
Risk Control using Time Spreads
Time spread risk
Rollover hedging
Advantages and disadvantages of rollovers
Evaluating the full cost of gas using rollovers
Time Spread as a Forward Price Component
Decomposing forward price risk into time spread risks
Managing price risk separate from time spread risk
Exploiting ‘outlier’ points on a forward price curve
Locking in gas pricing at a margin below the prior year
Using storage to hedge a time spread exposure Group Review
Register for COURSE
About Paradigm and Our Instructors Paradigm provides practical non-theoretical training in energy derivatives, and their related risk management technologies. Programs are structured to the specific needs of today's dynamic energy industry and are designed to excite participants by knocking down the myths and mystiques built around derivative products. Paradigm's instructors offer participants a clear understanding of the business potential arising from combining physical energy and financial products. The following program is basic level (group-live offering) courses with no prerequisites or advanced preparation required. CPE credits for this class are: Accounting & Auditing 1; Consulting Services 0; Management 1; Specialized Knowledge & Applications 12: Total=14 November 17-18, 2011 — Deal Structuring in Natural Gas Markets — $1,695 USD
REGISTER HERE
Natural gas has a unique profile of risks, and with it an equally unique array of products and concepts to deal with them. For energy professionals grounded in the basic concepts of risk management, this course probes into how those tools and concepts can be applied specifically to deal with natural gas. It also demonstrates how the physical processes of transportation, storage, and generation interface with their financial counterparts; basis spreads, calendar spreads, and spark spreads, to create useful risk methodologies. It is the understanding of this integration of physical and financial that is key to optimal performance in the natural gas and other energy businesses. Program Instructors Paradigm's instructors bring to the classroom the hands-on experience of working in related business areas. Combining this extensive knowledge with their experience in conducting dedicated training for thousands of executives insures that our seminars feature lively interaction between participants and the instructor. Frank H. Ribeiro Frank began his career in the energy sector as an Economist with the Federal Power Commission. He has managed profit-generating deal origination and structuring teams at major international institutions. Since 1994 he has worked in close association with leading natural gas and power marketers, researching the emerging trading and deal structuring techniques evolving in these rapidly deregulating industries, and developing application-based training programs for electric utilities and energy marketers.
Hotel Information • Mention Paradigm — To receive the discounted room rate of $185/night, mention Paradigm when booking your accommodation. Special Promotions • Team Discount — Your organization may send one participant FREE with every 3 Paradigm registered participant. • Early Bird Discount — Register now through October 14th and receive $100 off of your registration fees.
Contact Paradigm
Event Location
Phone: 866.637.1092 Fax: 203.637.5927 E-mail: [email protected] Website: www.paradigmtraining.com
Houston Marriott West Loop by the Galleria 1750 West Loop South Houston , TX 77027 Reservations: 1.800.266.9432. Main Number 1.713.960.0111.
Signup for any session through October 14th and we will deduct $100 from its cost.
Register for COURSE