Gas Market Flexibility Instruments

1-2 October, 2012, Amsterdam

HOW TO USE STORAGE AND TAKE-OR-PAY CONTRACTS

Gas Market Flexibility Instruments

Cyriel De Jong, KYOS Energy ConsultingCourse Leader

This two day course on fl exibility instruments in the natural gas market focuses mainly on gas storage, swing and take-or-pay contracts.

A summary of the courseThe purpose of the course is to provide a better understanding of fl exibility instruments, their value drivers, risk factors, portfolio management, trading and hedging strategies.

In the course we will study how fl exibility instruments fi t into a company’s portfolio to manage variations in demand. You will learn how to value the instruments, use them in a portfolio of products and assets, and develop trading and hedging strategies around them. The course explains a number of contract structures, which include oil indexation, penalty structures, period quantity constraints, make-up and carry-forward rights.

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Who should attend?The course aims to attract a wide range of people active in the natural gas value chain, including energy traders, asset developers, portfolio and risk managers, energy market analysts, regulators and consultants.

The course does not require any in depth knowledge of specifi c areas. The instructors will present technical details in an intuitive and understandable manner, ensuring the course remains appealing and clear both to quantitative and non-quantitative people.

Case study and trading gameThe course is highly practical. Several case studies will be worked out using specialized analysis models for storage and swing (Take-or-Pay) contracts. The models will be provided for the duration of the course and a month thereafter.

Apart from case studies, the course also features an energy trading game. The goal is to optimize a portfolio of energy customers while trading in the market and optimizing the storage and swing products.

Gas Market Flexibility Instruments

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ProgrammeCourse sessionsSession 1: European gas markets and gasstorage developments

▶ Overview and development European gas ▶ markets and trading hubs ▶ Traditional use of fl exibility instruments ▶ Overview of swing / Take-or-Pay contracts

Session 2: Storage valuation: Tradingforwards in a dynamic hedging strategy;intrinsic, rolling intrinsic and basket-of spreads valuation

▶ Overview valuation approaches to physical and fi nancial storage

▶ Forward curve building: from tradable contracts to an ‘expected’ curve

▶ Understanding intrinsic value ▶ Developing a cash-fl ow valuation model for a storage investment

Session 3: Gas price dynamics and the realoption approach to storage / swing valuation

▶ Volatility defi nitions (historical versus implied) and estimation procedures for spot and forward prices

▶ Mean reversion: defi nition, estimation approaches and impact of seasonality

▶ Forward curve dynamics: short-term, long-term and summer-winter spread

▶ Correlation and cointegration between gas and oil prices

▶ A storage as a basket of time-spreads ▶ Pricing American-style options: a tree based approach versus least-squares Monte Carlo

Session 4: Applying storage / swing valuationand hedging strategies in practice

▶ Assumptions behind diff erent valuations: impact of market liquidity constraints, volatility, mean-reversion and interpreting delta hedges

▶ Guidelines for setting up a backtest

Before Cyriel de Jong foundedKYOS, he was assistant professor atErasmus University. Since 2001 hehas been a trainer in energy marketsmainly focusing on fi nancial riskmanagement and energy fi nance. Cyriel has done a great number ofprojects related to energy derivativevaluation, risk management andinvestment analysis (including realoptions). He is particularly active inthe application of fi nancial simulationmethodologies to value power plants,gas storages, long-term contracts, andtransportation. Cyriel holds an MScin Econometrics from the Universityof Maastricht and a PhD in Financial Derivatives from Erasmus University.

“I highly recommend this course as it gives insights into the product complexity in both a quantitative and economic approach. It brings a strong understanding of the challenges and proposes clear solutions. I appreciated the openness of the teachers towards their proprietary models and their eagerness to take discussions into the details.” Roberto Frassanito, Energy Structured Management, CW&CEE at EGL Trading AG

“If you are starting out with building a storage model, or indeed just want to know a little more about the models that are used in the Gas industry, I would highly recommend this course to you. The accompanying material is a valuable resource to have at your disposal, while the course is useful, run by nice guys, in a great location - what more can you ask for?”Ben Evans, Quant Trading at WINGAS GmbH Trading) at Trianel Gmbh

“The course was very interesting and everything was well organized. I would recommend it.”Alice Sozzi, Gas Risk Controlling at E.ON

Cyriel de JongPartner, KYOS Energy Consulting

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LEADERLEADERLEADERCOURSE LEADER

LEADER LANGUAGEThe workshop will be delivered in English.

DATE 1-2 October 2012, Amsterdam, The Netherlands

SCHEDULEEach day starts at 09.00 and fi nishes at 17.00hrs.

REGISTRATIONhttp://www.energy-expert-network.com/coursesE-mail: [email protected]:+46 (0) 85 333 2599

FEESEarly Bird 2225€ (register before 20 August) + Dutch VATStandard price 2475€ + Dutch VAT

MULTIPLE REGISTRATION DISCOUNTRegister two or more people from the same companyand get a 10% discount per person.

FOOD AND BEVERAGEFood and beverages will be provided to theparticipants during the day. Specifi c wishes can besubmitted to the organization.

LAPTOPProvided the character of the workshop participantsare required to bring a laptop, which has installed MSExcel.

DOCUMENTATIONParticipants receive documentation, calculations andexercises in a manual.

ABOUT THE ORGANIZERS

ENERGY EXPERT NETWORKThe Energy Expert Network is a network of experts and hands-on energy market participants that provides companies with tailored courses.

The Energy Expert Network consists of the ‘best of the best’ industry experts, well known for their knowledge and experience in teaching energy industry professionals. Energy Expert Network also provide open courses on fi xed dates in co-operation with external experts.