Risk Management

Energy portfolio risk management is a fundamental business requirement for companies operating in competitive energy markets. Market participants are exposed to price, load, weather, counterparty credit, transmission congestion, and operational risks. These risks can be effectively hedged through risk management policies appropriately tailored for corporate objectives, and with supporting analysis and analytic tools.

Nexant has extensive industry expertise in assisting clients to assess, improve, develop and deploy energy risk management programs. This includes the extensive use of our proprietary tools, building customized sophisticated analytic solutions for clients, and offering a full suite of risk management consulting services to assist clients in implementing state-of-the-art ERM programs, as follows:

• Statistical methods for market data analysis
• Modeling financial instruments for energy markets
• Portfolio risk exposures (VaR) analysis
• Mark-to-market position of term transactions and assessing and monitoring counterparty credit risk exposures
• Gas and power price movements, distribution, and volatilities
• Risk management policies and procedures development for market exposure, counterparty credit risk, operational risk, and reporting

Within this ERM portfolio framework, we also employ our industry expertise and analytic tools to assist clients in developing real option analysis as a powerful tool for the valuation of generation and financial assets. To manage financial risks, market participants require both detailed market structure analyses and realistic operational models of their portfolios, and they need to be able to utilize efficient valuation methodologies as part of their due diligence processes. As carbon allowances and renewable generation add complexities to energy portfolios, effective valuation will become more important.