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Enron Mail |
Did you guys get this?
I was too interested in the conversation to interrupt with comments about risk/return & valuation of assets for utilities. I thought I would mention to you, however, that when decisions are quantified, utilities usually use classical decision analysis, i.e., von Neuman utility curves. If the decision is for unregulated assets or impacts shareholders directly, it is the President's curve; if the decision would be covered in rates, it is the customers' curves or equivalently the PUC's curve. I think if I were going to approach valuation in commodities where the assumptions of Black/Scholes do not apply, I would start with the CAPM for large industries in an area, use pro formas to translate this to utility curves for the input commodities, and add the utility curves. Another issue: The factor that explains why Enron is lowest bidder is its role in the market. In the 1930s, Keynes argued that if most market participants with long position were hedgers, futures prices would be higher than spot; if they were speculators or traders, future prices would be lower than spot. Traders must be compensated for holding the risk; hedgers (including utilities and consumers) are willing to pay a premium for the certainty. Consequently, Enron traders have bigger bid/ask spreads and lower bid prices. Just some random thoughts, Michael -----Original Message----- Date: 01/04/2001 10:41 am (Thursday) From: "Heather Mason" <hmason@hesinet.com< To: HQ3.EM5(Michael Schilmoeller) Mark Your Calendar-Tuesday January 23, 2001 Downtown Houston Hyatt Hotel Henwood will be hosting a comprehensive ERCOT Symposium on Tuesday, January 23, 2001. A team of Henwood regional power market specialists will be presenting the latest analysis and information to assist you in preparing for the new ERCOT Restructured Power Market, in addition to an anlysis of the issues now playing out in the WSCC markets. Coffee and registration will begin at 9:30 AM and the program will run until 3:00 PM. Lunch and snacks will be provided. Agenda topics include: * What will be the critical-success factors for qualified scheduling entities operating in ERCOT's new wholesale & retail markets? * How will market restructuring impact mid to long-term wholesale prices? * What is the outlook for new generation? * What are the impacts of upcoming emission regulations on ERCOT's generation resources? * What are the new analytical tools available to capture market uncertainty impacts to your supply contracts and generation assets? * What are the restructuring lessons learned from the California experience and the implications to ERCOT? In conjunction with this Program, Henwood will have a demonstration room available to present its latest software applications and e-business solutions. A nominal $75 registration fee is required to reserve a space in the workshop. For more information or to reserve your spot, please contact Heather Mason at Henwood: hmason@hesinet.com or 916/569-0985. About Henwood: Henwood offers integrated business solutions, strategic consulting, and innovative e-Business applications to meet the challenges of the restructured energy markets throughout North America, Australia, and Europe, serving clients that include eight of the ten top utilities in North America, in addition to energy services providers and power marketers.
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