Power Producer Production Valuation

Abstract

The ongoing developments in the electricity market, in particular the establishment of the Prague Energy Exchange (PXE) and the associated transfer from campaign-driven sale to continuous trading, represent a significant change for power companies. Power producing companies can now optimize the sale of their production capacities with the objective of maximizing profit from wholesale electricity and supporting services. The Trading Departments measure the success rate of trading activities by the gross margin (GM), calculated by subtracting the realized sales prices from the realized purchase prices and the production cost, and indicate the profit & loss (P&L) to be subsequently calculated by the Control Department. The risk management process is set up on the basis of a business strategy defining the volumes of electricity that have to be sold one year and one month before the commencement of delivery. At the same time, this process defines the volume of electricity to remain available for spot trading (trading limits).

Keywords

• closed position
• difference from plan fulfillment
• forward price curve
• future position
• gross margin
• historical position
• internal regulation
• mark to market
• open position
• power producer
• planned production