1 hsbc utilities day november 27, 2008 manoel zaroni torres - ceo tractebels hydro allocation...
TRANSCRIPT
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HSBC Utilities Day
November 27, 2008
Manoel Zaroni Torres - CEO
Tractebel’s Hydro Allocation Process
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At CCEE the “resources” of a generation co. are compared to its sales on a monthly basis.
“Resources” stand for:
Purchases from third parties
Thermal generation
Hydro energy allocated
Difference between “resources” and sales is settled at Spot Price (PLD).
Tractebel 's energy availability is almost fully contracted up to 2010.
Tractebel is entitled to fuel reimbursement by CDE when coal-fired plants are dispatched due to merit order or inflexibility.
Background
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Thermal Generation Exposure to Spot Prices
2008
Assured Energy (Port. MME 303)
PLD Exposure~ 375 avgMW
Inflexibility (CDE)~ 375 avgMW
t
Note: figures referred to CCEE’s settlement point.
MaximumDispatch
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~ 375 avgMW
~ 375 avgMW
Dispatch due to inflexibility (based on the purchase of
200,000 tons of coal per month)
Thermal Substitution Energy (Merit)
Thermal Assured
Energy
Settled by PLD (expenses)
TBLE is entitled to coal reimbursement (by CDE)
2008
Maximum Dispatc
h~ 280 avgMWSettled by PLD (revenue)
Thermal Dispatch (Merit)
Inflexibility
t
1
2
BRL/MWh
Permanence
PLD Curve
Thermal SubstitutionCost
1 - Minimal Exposure Cost2 - Maximum Exposure Cost
Thermal Generation Exposure to Spot Prices
5
Year
“Seasonalized” HydroAssured Energy
Maximum Dispatch
Real Dispatch
Allocated Energy (MRE)
Hydroelectric generation above or belowthe “Seasonalized” Assured Energy is valued by “MRE Tariff” (~ R$ 8/MWh)
Allocated Energy above or below the “Seasonalized” Assured Energy is settled by PLD
Secondary Energy (MRE): settled by PLD (revenue)
GSF < 1 (MRE): settled by PLD (expenses)
t
The impact on the results is less significant than the thermal substitution
Hydro Generation Exposure to Spot Prices
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Mechanisms to Mitigate Thermal Plants Exposure
Hydro Assured Energy
Total Sales Contracts
Purchase Contracts
Thermal Inflexibility
PLD Exposure
Merit Thermal Generation
ok
Net Buyer
at CCEE
Net Seller at CCEE
... and so on
m m+1 m+2 m+3
Portfolio x Resources
An appropriate monthly allocation of the hydro resources over the year can mitigate the
exposure arising from the thermal substitution energy to be purchase at spot price
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Year X1
Hydro Assured Energy
ThermalInflexibility
Thermal AssuredEnergy
Sale Contracts
PLD Expectation
Assured Energy can be allocated monthly over year x1
Decision is taken in Dec. Year x0
(unchangeable afterwards)
t
PurchaseContracts
Monthly Allocation of Hydro Resources
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Year X1
Hydro Assured Energy
Thermal AssuredEnergy
Sale Contracts
Net Buyer at CCEE
Net Seller at CCEE
Thermal Dispatch
PLD Expectation
ThermalInflexibility
t
PurchaseContracts
Monthly Allocation of Hydro Resources
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Regulatory uncertainties
• Risk aversion mechanisms (i.e., Risk Aversion Curve and Target Level)
• Changes in PLD pricing model
• Out-of-merit thermal dispatch
GSF resulting from overall hydro allocation
Unexpected unavailability of power plants
Price/availability of short-term energy purchased from third parties to (i) offset a net buyer position and (ii) leverage future overallocation
Trade off: sales of short-term energy at PLD+Δ% X future overallocation leverage
Decision Traps