Using the proper analysis technique can have a serious bottom line impact when valuing a large multi-million dollar asset.

This one-day program is designed to provide an understanding of the various approaches used to value energy and electricity assets as real options. Increase your firm's profits with proven practical techniques for: 1) hourly and forward electric price strategies; 2) determining optimal spark spread boundaries; 3) using ancillary services as real options; and 4) measuring the hidden value in uncertainty and optionality. View Past Seminar Attendees

Understand these 7 important issues:

1. The pros and cons of net present value (NPV), decision analysis (DA), and real options (RO) valuation techniques.
2. Understand the deficiencies of marginal cost valuation, and lean how to develop a real-options approach based on forward price simulation of fuel and energy markets.
3. The most common financial pricing models including start-to-finish development of the GBM and Mean Reversion (Jump Diffusion) models which will be defined, regressed, and simulated.
4. The relationship between financial options and real options, and the three methods of valuing options – Black Scholes, binomial trees, and Monte Carlo simulation.
5. How Black Scholes, binomial trees, and Monte Carlo simulation method are applied to value natural gas storage, electric generation, and energy portfolio assets.
6. The role of volatility, portfolio considerations, and risk management implications to asset pricing and valuation.
7. How to value generation assets using real option competitive price analysis

Seminar Agenda

1. Introduction to Deregulated Market Analysis (2.0 hours)

a. Why Volatility Modeling?

b. A Brief Comparison of Modeling Techniques

c. Successful Valuation Strategy In Deregulated Markets

2. The Fundamentals of Valuation Techniques (2.0 hours)

a. Net Present Value Analysis (NPV)

b. Decision Analysis (DA)

c. Real Options Analysis (RO)

3. The Fundamentals of Real Options Analysis (4.0 hours)

a. Introduction to Real Options Analysis

i. Black-Scholes, Binomial Trees, and GARCH Models

Application: Comparing the results of Black-Scholes, Binomial Trees and Simulation in Valuing Distributed Generation

Detailed Example Using Three Seperate Real Option Approaches to Value Energy Assets

b. Details of Option Model Implementation

i. A Generating Unit as a Strip of Options on a Btu Spread

ii. Measuring Hidden Value in Uncertainty and Optionality

Application: Comparing Power Plant Value from ProSym Marginal Cost Analysis vs. Real Option Competitive Price Analysis

Example Comparing Base-load, Mid-Merit and Peaking Units

c. Monte Carlo Simulation of Stochastic Prices

i. What is Volatility

ii. Modeling Volatility

1. Quantitative Models –

a. Geometric Brownian Motion

b. Mean Reversion

c. Markov Regime Switching

d. Jump Diffusion

e. AR(3) GARCH(1,1)

2. Implied Volatility form Black-Scholes Model

iii. Estimating Volatility

1. Software Considerations

2. Choosing Explanatory Variables

3. Model Selection Criteria

4. Misspecification

d. The Challenge of Forward Price Simulation

e. Mark-to Market via Forward Price Hammers

f. Hourly Unit Commitment and Dispatch Under Price Uncertainty

Application: Developing Optimal Spark Spread "Turn On" and "Turn Off" Boundaries; Using the Unit Commitment Model to Determine an Optimal Operation Schedule

i. Incorporating Engineering Constraints

ii. Incorporating Rational Dispatch Behavior

Application: Valuing Generation Assets Using Real Option Competitive Price Analysis; Step-by-Step Valuation

Example for a Portfolio of Generation Assets

Application: Valuing Ancillary Services

Example of Valuing Expected Revenue from Southern California Ancillary Services Markets

Application: Minimizing Price Risk through Operational Design Flexibility

Example of Valuing the Option of Installing Duel Fuel Capability

Your Instructor

Kenneth Skinner, Ph.D. –Dr. Skinner is Vice President and Chief Operating Officer of Integral Analytics (IA), an analytical software and management consulting firm focused on operational, planning, and market research solutions. Reaching every aspect of the energy industry, the IA proprietary analytical, programming and statistical methods allow clients more precise valuation, faster and more affordably. Dr. Skinner has over 15 years of energy industry experience including 5 years as the Derivative Structuring Manager for Sempra Energy Solutions, a national energy supplier, focused on developing retail commodity supply strategies including portfolio risk management, hedging strategy, and least-cost supply opportunities. Having worked with several energy consulting companies including Summit Blue Consulting, RDI Consulting and PHB Hagler Bailly, Dr. Skinner has significant experience in economic analysis and modeling of energy assets including development of portfolio VaR models, structured valuation of distributed generation and electricity and natural gas commodity transactions, financial risk assessment and valuation of energy hedging strategies.

Who Should Attend this Seminar?

Electric utilities, generators, marketers and industrials; corporate planners, economists, rate making staff, energy and electric power executives; government regulators; traders & trading support staff; marketing, sales, purchasing & risk management personnel; accountants & auditors; plant operators, and engineers.

Prerequisites

This fundamental-to-advanced level group live seminar has no prerequisites. No advance preparation is required before the seminar.

Why Choose PGS?

PGS seminars are known for their clear explanations and in-depth content. Register for a PGS program today, and team up with the leader in electric power and energy education. Join over 5,000 energy and financial professionals who have already attended one or more of PGS's proven courses. View Past Seminar Attendees

Hotel & Seminar Information
This one-day seminar will be held at the hotel listed below or can be conducted on-site at your facilities. The seminar will start promptly at 8:00 AM and will finish at 4:00 PM. The program includes continental breakfast, lunch, and coffee/cookie breaks. Attendees also receive a professionally produced seminar manual that can serve as a valuable office reference. Dress is casual for all seminars. 

NYC Torch Club (NYU Campus)
18 Waverly Place
New York, NY 10003
Telephone 1-212-998-6724
View Venue Website

PGS Energy Training will conduct this seminar at the Torch Club on the campus of New York University. Because of the diversity of hotels found in the area, PGS Energy Training will not be holding a block of sleeping rooms with one particular hotel. Should you need a list of local hotels in the area, please contact us at 412-521-4737 and we can help you with your accommodations.

Registration Fee & Discounts

Register Now and invest in your future. The price for this one-day seminar is $975 (USD).

• Additional attendees and government employees receive a 10% discount.
   
• Sign up for 4 or more classroom seats during the same month and all attendees will receive a 20% total discount. ( If you plan to register 4 or more classroom seats, but want attendees to pay by separate credit cards, register one party now and mention this fact in the "Comments" section of the registration form. We will manually subtract the 20% discount from the first registrant's seminar fee. Tell other parties in your group to mention your name when they register, and we will give them the 20% discount as well.) Please call 412-521-4737 for more information.
  

Payment & Cancellations

Payment is due prior to the start of the seminar by Visa, Master Card, American Express, Diners Club, or corporate check. Seminar fees will be charged to your credit card at the time of registration unless other arrangements have been made. Please make checks payable to "PGS Energy Training" 43 Fawnvue Drive, Suite 700 • Mckees Rocks, PA 15136. Cancellations can be made up to three (3) business days prior to the start of the seminar for a full refund. No refunds will be made thereafter, but credit will be given toward future workshops. Substitutions may be made at any time. For more information on PGS policies regarding administrative matters and complaint resolution, please contact our offices at 412-521-4737.

CPE Credits

This group live seminar is eligible for 7.0 CPE credits. Be aware that state boards of accountancy have final authority on the acceptance of individual courses for CPE credit. As of January 1, 2002, sponsored learning activities are measured by program length, with one 50-minute period equal to one CPE credit. One-half CPE credit increments (equal to 25 minutes) are permitted after the first credit has been earned in a given learning activity. You may want to verify that the state board from which your participants will be receiving credit accept one-half credits.

PGS  Energy Training is registered with the National Association of State Boards of Accountancy (NASBA)  as a sponsor of continuing professional education  on the National Registry of CPE Sponsors. State boards of accountancy have final authority on  the acceptance of individual courses for CPE  credit. Complaints regarding registered sponsors  may be addressed to the National Registry of  CPE Sponsors, 150 Fourth Avenue North, Suite 700, Nashville, TN, 37219-2417. Web site: www.nasba.org. CPAs interested in attending any seminars  should contact our offices for details on CPE credits granted and any prerequisite requirements.