Risk management in a power pool
2000
This paper shows how volatile pool prices can introduce significant earnings risk to generating company operating in a competitive power pool. The paper describes how the use of certain financial instruments, “contracts for differences”, can help to limit the financial risk, improve the level of earnings for generating companies and stabilize the cost of meeting unpredictable demands. Examples are presented to illustrate what can be done to minimize the risk and to maximize potential profits.
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