The following six companies participate, along with others, in the Southern Anta
ID: 2248348 • Letter: T
Question
The following six companies participate, along with others, in the Southern Antarctica electrical energy market:
Red: A generating company owning a portfolio of plants with a maximum capacity of 1000 MW
Green: Another generating company with a portfolio of plants with a maximum capacity of 800 MW
Blue: A retailer of electrical energy
Yellow: Another retailer of electrical energy
Magenta: A trading company with no generating assets and no demand
Purple: Another trading company with no physical assets
The following information pertains to the operation of this market for Monday 29 February 2016 between 1:00 and 2:00 PM.
Load forecasts : Blue and Yellow forecast that their customers will consume 1200 MW and 900 MW respectively during that hour.
Long-term contracts June 2015: Red signs a contract for the supply of 600 MW at 15 $/MWh for all hours between 1 January 2015 and 31 December 2020
July 2015: Blue signs a contract for the purchase of 700MW for all hours between 1 February 2016 and 31 December 2016. The price is set at 12 $/MWh for off-peak hours and at 15.50 $/MWh for peak hours.
August 2015: Green signs a contract for the supply of 500MW at 16 $/MWh for peak hours in February 2016
September 2015: Yellow signs a contract for the purchase of electrical energy. The contract specifies a profile of daily and weekly volumes and a profile for daily and weekly prices. In particular, on weekdays between 1:00 and 2:00 PM, the volume purchased is 550MW at 16.25 $/MWh.
Future contracts All contracts are for delivery on 29 February 2016 between 1:00 and 2:00 PM
Options contracts In November 2015, Red bought a put option for 200MWh at 14.75 $/MWh. The option fee was $50.
In December 2015, Yellow bought a call option for 100MWh at 15.50 $/MWh. The option fee was $25.
Outcome The spot price on the Southern Antarctica electricity market was set at 15.75 $/MWh for 29 February 2016 between 1:00 and 2:00 PM.
Owing to the difficulties at one of its major plants, Red was able to generate only 800MW. Its average cost of production was 14.00 $/MWh
Green generated 770 MW at an average cost of 14.25 $/MWh
Blue's demand turned out to be 1250 MW. Its average retail price was 16.50 $/MWh.
Yellow's demand turned out to be 850 MW. Its average retail price was 16.40 $/MWh.
Assuming that all imbalances are settled at the spot market price, calculate the profit or loss made by each of these participants. (HINT to check yourself: Magenta's profit was $287.50)
Date Company Type Amount Price 10/9/15 Magenta Buy 50 14.50 20/9/15 Purple Sell 100 14.75 30/9/15 Yellow Buy 200 15.00 10/10/15 Magenta Buy 100 15.00 20/10/15 Red Sell 200 14.75 30/10/15 Green Sell 250 15.75 30/10/15 Blue Buy 250 15.75 10/11/15 Purple Buy 50 15.00 15/11/15 Magenta Sell 100 15.25 20/11/15 Yellow Buy 200 14.75 30/11/15 Blue Buy 300 15.00 10/12/15 Red Sell 200 16.00 15/12/15 Red Sell 200 15.50 20/12/15 Blue Sell 50 15.50 15/1/16 Purple Sell 200 14.50 20/1/16 Magenta Buy 50 14.25 10/2/16 Yellow Buy 50 14.50 20/2/16 Red Buy 200 16.00 25/2/16 Magenta Sell 100 17.00 28/2/16 Purple Buy 250 14.00 28/2/16 Yellow Sell 100 14.00Explanation / Answer
Answer) The profite or loss made by each participant is given below:-
Company Profit($) Red 650 Green 1280 Blue 1325 Yellow 515 Magenta 287.50 Purple 125