Power Trading

Level 4

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4-20 octombrie 2021

The educational program "Power trading " takes place online as an e-learning package being completed with a webinar that will settle the knowledge acquired individually. It includes various modules, study materials, exams and certification. Students who pass the exam can choose to be registered as a Chartered Professional on the Entrima charter.

The "Energy, Energy Markets and Trading" programs available on the Entrima’s e-learning platform are specially designed to expand students' knowledge and skills on electricity. The programs cover electricity production, electricity transmission and infrastructure, electricity supply and consumption, the organization of European energy markets, the role of market participants, the regulation of European electricity markets, the role of governments, tariff and tax setting, energy products and their prices, electricity trading, energy trading platforms, asset and portfolio management, asset-backed trading, power plant optimization, power trading strategies and trading-related processes such as settlement, billing, valuation positions.

Entrima was founded (2014) to provide a solution to market participants for the influx of regulation of capital and energy markets. Various regulatory packages require staff training; education is a mandatory part of the compliance framework. Interpretation of case studies requires specific knowledge of markets, products, prices and trading, as well as value chains of metals, agricultural products, oil, gas, coal and electricity. This means that examination and certification have become important and Entrima has started to offer a learning solution to market participants.

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The webinar is aimed to people who

  • want to get detailed knowledge on power trading;

  • requires training in modern trading methods in order to develop the wholesale trading activity

Benefits

  • The seminar participant benefits from modern interactive teaching methods, benefiting both from the access to a top e-learning platform in this field and from the presence of a lecturer with practical and theoretical experience..

  • Students who pass the exam can choose to be registered as a Chartered Professional at the Entrima charter

  • At the end of the program, in addition to the knowledge gained, students remain with access for eight months to the interactive e-learning platform Entrima, being able to access any course in it.

Curricula

Individual training programs carried out on the Entrima platform:

·Fundamentals of commodity markets pietei marfurilor (130 min, exam)

1. Asset classes – Types of markets

About fixed-income, equity, real estate, FX and commodities

Concerning risk-reward ratios and risk appetite

2. Commodities & commodity markets

About metals, softs & energy, but also freight, carbon & fibres

Covering relationships

3. Production, storage, transport & consumption – Up-, mid- & downstream

Concerning various types of capacity

Including availability and utilization

4. Market participants & their role

About commodity trading firms & investors

Covering risk diversification

5. Spot & forward markets – Physical & financial products

Covering the concept of price volatility

Specifics concerning electricity & natural gas - Balancing

6. Commodity derivatives – Contract specifications & settlement

Physical delivery & cash settlement.

Delivery period & delivery moment

7. Pricing of commodities – Price driving factors

Fundamental & non-fundamental price driving factors

Price analysis, including seasonality & mean-reversion

8. Commodity markets vs. Financial markets

Differences and similarities between the characteristics

A comparison is made concerning markets, products & pricing

9. The role of speculators

About the impact of speculators on price levels

Concerning politicians, policy makers & regulation

·Fundamentals of energy trading (340 min, exam)

1. Liberalisation of the Energy Markets

What is aim of liberalisation? What are the consequences?

2. Risk

Risk and return; the risk-reward ratio; quantification vs. qualification.

3. Market risk

About price risk.

4. Risk management

Identification of risk, measuring risk and control of risk.

5. Volatility

The concept volatility explained; calculation & interpretation of volatility figures.

6. Counterparty risk

Credit risk and delivery risk.

7. Credit risk management

Clearing; netting; credit limits; ratings; sleeving; systemic risk.

8. Liquidity & Liquidity risk

Market liquidity vs. funding liquidity.

9. The trading function

The role of trading business unit.

10. The trading organisation

Front, Middle & Back Office.

11. Trading

What is it and how is it organised?

12. Trading – The reasons for concluding transactions

About procurement, sales, balancing, hedging, arbitrage and speculation.

13. Pricing – The order book

How does trading take place? How are prices set? What orders are executed? When? How?

14. Trading – Order types

What order types are applied and for what reasons?

15. Trading process – Clearing

Central counterparty; clearing house & members; credit risk; margining & collateralisation.

16. Trading process – Settlement

Physical delivery versus cash settlement; settlement procedures.

17. Trading process – Transaction flow

Pre-trade, trade & post-trade processes; tasks & responsibilitis of front, mid & back office staff.

18. Trading process – ETRM system

Energy trading and risk management software; users and purposes.

19. Markets & Products – Spot vs. Forward markets

Spot/prompt vs. forward/futures markets.

20. Markets & Products – Derivatives

What are derivatives? What are they used for? And by whom?

21. Markets & Products – Forwards vs. Futures

What are the differences?

22. Markets & Products – Contract for difference

What is a CFD?

23. Markets & Products – Swaps

What is a swap?

24. Markets & Products – Options

What is a (call/put) option?

25. Trading platforms – OTC markets & trading

How is OTC trading organized? What are master agreements?

26. Trading platforms – Brokerage services

What is a broker? Inter-dealer brokers vs. broker-dealers.

27. Trading platforms – Exchange trading

What features does exchange trading have? How is it organized? Fee structure.

28. Trading platforms – Trading screens & platforms

What details are relevant to traders?

29. Pricing, price drivers & indexation

What factors drive prices? What is an index?

30. FX markets & trading

Exchange rates, Forex exposures; the role of the treasury department.

31. Accounting – Valuation

Bookkeeping & accounting rules; M-to-M.

32. Accounting – Book structure

How do firms organize internal transfers? What is a book structure? How is accounted for P/L?

33. Terminology – Upstream, midstream & downstream

Explanation of the terminology which is related to the value chain.

34. Terminology – Opening & Closing + Long & Short

What do the concepts of long or short imply? And opening or closing?

 

·Power trading – basic level (200 min, exam)

The power value chain

About electricity generation & consumption

Covering transmission in a nutshell

Power generation – Facilities & their characteristics

About power plants, efficiency, carbon intensity & ramping rates

Concerning cost of investment & maintenance and marginal cost

Gross processing margin – Spark & dark spread

About the margin of gas-fired and coal-fired power plants

Concerning dispatch, tolling cost and negative margins

Transmission – Cables, TSOs & balancing

About electricity transmission & congestion management

Concerning the role of TSOs and balancing regimes

Power pricing – The merit order

About supply & demand and the ranking of marginal cost levels

Concerning power consumption – Profiles & shaping

Power products

Power-specific products (15min.blocks; baseload; peak products)

Concerning the difference between spot and forward markets

Renewables – Impact on pricing

About wind & PV – Imbalances & shifts in the merit order

Concerning uncertainty with respect to production forecasts

Dispatch – Allocation of facilities, impact of weather & trading

Re the allocation of generation capacity and/or trading power

Concerning decision making processes at dispatch units

Market coupling – Cross-border transport capacity

About market coupling throughout Europe & its consequences

The optimal flow of power & trading for delivery the day ahead

10.Daily auctions – Price curves & matching

About pricing - supply and demand stacks at auctions

Concerning bidding strategies for generation capacity

 

·Power trading – intermediate level (150 min, exam)

Forward power markets

1. Power forward markets

Convering the differences between spot & forward markets.

About price volatility in spot & forward markets; mean reversion.

2. Power exchanges & brokers

About OTC markets and trading venues for power.

Concerning market liquidity, notional value and open interest.

Power term contracts

3. Power forwards & futures – The varieties

Concerning the most commonly known contracts.

The time-to-maturity and delivery moment/period.

4. Power forwards & futures – The application

Covering asset-backed trading as well as proprietary trading.

About managing power-related exposures.

5. Power forwards curves – Pricing of power forwards & futures

About contango & backwardation, including seasonality.

Covering the convenience yield.

Hedging of power exposures

6. Hedging power production & consumption capacity

About procurement & sales on a forward basis; contract mgt.

Covering assuring future cash flows by price fixation.

7. Hedging power transmission capacity

Locking in potential margins on a forward basis.

Covering location spreads; what these are & how to trade these.

Settlement of power term contracts

8. Settlement of power forwards & futures – Part 1

Including physical delivery & cash settlement.

Covering nomination & periodic invoicing.

9. Settlement of power forwards & futures – Part 2

Concerning the process of cascading.

Covering the consequences of it for the power portfolio

 

·Power trading – advanced level (170 min, finalizat cu examen)

Power portfolio management

1. Accounting – Book structure & internal transfers

About internal transactions & prices, including premiums.

Concerning book structures, cost allocation & P/L responsibility.

Covering upstream, midstream & downstream activities.

2. Customer portfolio

About power supply contracts; including load forecast.

Concerning circumstances, e.g. weather, economic situation.

3. Physical power assets

About make-or-buy decisions & asset-backed trading.

Aggregation of rights & obligations (prod., cons. & settlement).

Power derivatives & flexibility

4. Power swaps – Physical settlement

Concerning solutions for problem solving in the physical world.

About basis swaps, or location swaps.

5. Power swaps – Cash settlement

About financially-settled agreements, including indexation.

Concerning fixed-for floating contracts.

6. Power options – Outright options

About tradable contracts in the OTC markets & on exchange.

Pricing of power options; intrinsic value plus time value.

7. Power options – Application for hedging purposes

About hedging natural short/long positions with call/put options.

About power price caps & floors.

8. Power options – Embedded optionality

About volume flexibility & swing optionality in supply contracts.

Covering structuring and structured deals.

 

·Power trading – expert level (170 min, finalizat cu examen)

Power risk management

1. Power risk management – Value-at-risk of a power position

About the a commonly applied method to quantify an exposure.

Covering the relevant time horizon and confidence level.

2. Power risk management – Risk off-set due to correlation

About statistical data and concepts, and how to apply these.

Concerning pairs or proxies.

3. Power risk management – Value-at-risk of a power portfolio

About the quantification of aggregated power positions.

Considerig opposing long/short positions & correlated positions.

4. Power risk management – Off-setting risk (opposing exposures)

About risk off-setting and netting.

Covering portfolio integration and cross-margining.

Modeling flexibility

5. Modelling – The real option approach

About production capacity & transmission capacity.

About management decisions, such as the right to dispatch.

6. Modelling – Physical power assets as real options

Considering power generation cap. & power transmission cables.

About call options on the spark/dark spread or location spread.

7. Modelling – Complexity: Valuation & hedging of spread options

About structuring, including exotic options.

Including spread option valuation models, e.g. Margrabe.

8. Modelling – Optimizing the hedges

About hedging strategies, e.g. proxy-hedging.

Concerning dynamic risk management; Delta-hedging.

9. Modelling – Weather elements (precipitation & wind data)

About the impact of renewables on the power markets.

Hydro: Precipitation, cascading, pump storage.

Wind: Concerning temperature, location, direction, wind roses, diurnal cycle,

pressure gradient force, coriolis force, friction.

Completion webinar:

  • A recap of the online courses that have been followed to embed the materials in a solid manner

  •  Flexibility in power portfolios

  • Optionality in contractual power assets and in physical power assets.

  • How to monetise/capitalise this flexibility/optionality

  • How to manage this flexibility/optionality

Cost

  • 1600 EUR/person;