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<\/a><\/p>\nThe most sensitive to the price of Henry Hub is NRG followed by AEP.\u00a0 NRG could potentially see an upside of almost 100% if Henry Hub prices move to our higher end range.\u00a0 The least impacted by changing Henry Hub are NextEra and Calpine fleet.\u00a0 The Calpine slope is interesting as it seems somewhat counterintuitive.\u00a0 Examining Calpine fleet shows that they have the lowest gas heat rate (efficiency of plant \u2013 low HR= highest efficiency) fleet ~7.8 mmbtu\/MW.\u00a0 In addition, their fleet is 90+% gas compared to the next highest at 60%.\u00a0 The combination does not help them if gas prices were to stay low.\u00a0 Their units do generate more as the gas prices go down, but this does not lead to greater profitability \u2013 see figure below.\u00a0 The good news for the generating assets is the slope of profitability is asymmetrical \u2013 more upside than downside.\u00a0 This logic has supported some lack of action to hedge power. \u00a0However, there is always a point where some hedging would be logical particularly for regulated assets and those trying to manage earnings expectations. \u00a0AEC can help identify those points.<\/p>\n
Reviewing the basis impact shows the risk reward as being much more symmetrical.\u00a0 The redacted figure below shows Dominion generating portfolio seeing the most impact if basis were going to change followed by Entergy.\u00a0 This makes sense for both given their exposure to the east basis.\u00a0\u00a0 The least impacted by basis change are TVA and Exelon.\u00a0 Given this knowledge, Dominion and Entergy should be trading\/hedging themselves for basis risk.<\/p>\n In terms of weather risk, we ran the last 12 years weather pattern in our models and compared it to the 10 year average.\u00a0\u00a0 The following redacted figure was produced. \u00a0In terms of weather risk, it is also very asymmetrical as in Henry Hub.\u00a0\u00a0 In general, there is more upside on a cold winter than downside on a warm winter.\u00a0\u00a0 However, in AEP’s case, that difference is very narrow given the historical weather pattern.\u00a0\u00a0 They almost have as much to lose on a warm winter as they can gain on a cold winter.\u00a0 Calpine can produce the greatest gain if weather were to duplicate last year\u2019s pattern.\u00a0\u00a0 The fleet with the smallest standard deviation from the 10 year average weather pattern was Southern.\u00a0 This makes sense given the geographical location.<\/p>\n <\/p>\n Subscribing to the Winter Power Outlook can get you all this analysis.\u00a0 All this analysis is available to you for only $3000.\u00a0\u00a0 We will also supply a free 1 month access to PMA-NT.\u00a0 Plus if you are the first five customers you can get a custom scenario based on the permutations already used.\u00a0\u00a0 You can create your very own extreme case (e.g. Basis up 30%, 2013-2014 Weather, Plus Henry at $5.5\/mmbtu, double forced outage rates).\u00a0\u00a0 There is no other place to get so much information for so little.\u00a0 The report will be even larger and more comprehensive than the Summer Outlook we produced this year.\u00a0 If you take the time to review and understand the report, you will be fully prepared to understand the risk and key variables driving the power markets this winter.<\/p>\n The above analysis can be customized for you. \u00a0If you want to understand how a generation portfolio may be impacted by weather, price, load, environmental policy, hydro generation, nuclear outages, etc…we can process it through our PMA models to get you your portfolio outcome. \u00a0Output can range from profitability, fuel consumption, generation by month. \u00a0 The time period can be as little as one month to as long as 20 years.<\/p>\n Please call or email to sign up for the Winter Power Outlook, PMA-NT , PMA-LT or a custom run.\u00a0dkb@allenergyconsulting.com<\/a>\u00a0or 614-356-0484.<\/p>\n Your Grateful Energy Consultant,<\/p>\n David<\/p>\n David K. Bellman<\/a><\/p>\n<\/a><\/p>\n<\/a><\/p>\n
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