Assets as options – valuation and risk metrics for power plants, gas storage facilities and shipping LNG

Chris Strickland, Director, LACIMA

08.30 Registration

09.00 Valuing assets as options and analysis of relevant models

• Generation assets
o Thermal assets as spread options
o Wind & hydro generation
• Gas storage
o Calendar spreads
• Shipping LNG
o Locational spreads
• Overview of modelling approaches for asset valuation
o Single factor models
o Multi factor models
o Hybrid models
• Model parameter estimation
• Numerical techniques for implementing models

10.30 Coffee break

11.00 Valuation and risk for generation assets

• How to apply the spread option approach to value generation assets
o Incorporation of emissions & start-up costs
• How to apply Monte-Carlo simulation techniques
• How to apply trinomial trees/Least squares Monte Carlo methods
o Wind generators & hydro systems
• Delta hedging vs static hedging of power plants
• Distributional analysis of revenues / costs / number of starts / etc

12.30 Lunch

13.30 Valuation and risk for gas storage facilities

• Comparison of storage valuation methodologies
o Intrinsic
o Rolling intrinsic
o Portfolio of calendar spread options
o Spot optimization
• Detailed examples
o Intrinsic
o Rolling intrinsic
 Simulation of forward curves in single factor and multi factor
• Distributional analysis of cashflows and storage levels

15.00 Coffee break

15.30 Valuation and Risk for the Optionality in Shipping LNG

• Defining shipping locations and reference prices
• Determining optimal decisions for shipping the cargo
• Determining the marker for each destination – transformation of the reference price
• Using simulations to determine expected values

17.00 End of seminar