Energy Convergence: The Beginning of the Multi-Commodity Market / Edition 1 available in Hardcover
- Pub. Date:
Praise for Energy Convergence
"Another outstanding contribution to the understanding of risk management by Peter Fusaro. A useful work for the workplace, executive management training, and the classroom."
-Dennis O'Brien, Director, Institute for Energy Economics and Policy and John A. Brock Professor for Energy Economics and Policy
Sarkeys Energy Center, University of Oklahoma
"Energy Convergence identifies and addresses the key elements in the ongoing development and evolution of the energy trading markets. This book is an important addition to the literature on contemporary energy trading markets. It pulls together in one place thoughtful discussions about the way the energy markets are converging from different starting points."
-Andrea S. Kramer, Partner, McDermott, Will & Emery, and author of Financial Products: Taxation, Regulation, and Design
"Peter Fusaro is the worldly-wisest commentator on commodity markets and exchanges that I know and should have been listened to far more often than he has been. This new book provides everyone with a fresh opportunity. With several colleagues he has written the best up-to-date introduction to market risk management and energy trading which should be studied by both the new practitioner and the oldest hand on the exchange."
-Napier Collyns, Cofounder of Global Business Network, former Public Director of the New York Mercantile Exchange
"Peter Fusaro has once again assembled a team of energy professionals to provide their views on emerging commodity markets and evaluation techniques. The book provides an excellent overview of market developments and market interactions, as well as presenting the business case for convergence of commodity markets via online trading and the Internet. Overall, a very unique and insightful book."
-Wayne Moore, Manager, Risk Control, Generation and Energy Marketing, Southern Company
"Considering the recent upheavals in U.S. energy markets, from the California electricity crisis to Enron's demise, this volume provides a timely introduction for anyone interested in developing a better understanding of the turbulent nature and complex interdependencies of energy markets."
-Riaz Siddiqi, President and CEO, Capstone Global Energy, LLC
About the Author
PETER C. FUSARO is founder and President of Global Change Associates, a New Yorkbased energy consulting firm offering strategic advice on energy industry restructuring, price risk management, and energy e-commerce solutions. He is the author of Energy Derivatives: Trading Emerging Markets and the author and editor of Energy Risk Management.
Read an Excerpt
Energy ConvergenceThe Beginning of the Multi-Commodity Market
By Peter C. Fusaro
John Wiley & SonsISBN: 0-471-21946-0
Chapter OneThe New Millennium in Energy Trading
Peter C. Fusaro President, Global Change Associates Inc.
The premise of this book is that commodity trading is evolving in many areas of the energy complex and extending into emerging commodity markets, such as emissions, telecommunications broadband, and weather trading. However, the thread that brings all these markets into focus is that are emerging and converging markets. No book currently published has tackled this subject for commodity trading, and what have been published sporadic magazine articles. In this book, the best emerging market energy experts have been chosen to disclose the latest developments in the field of energy convergence and multicommodity trading. This book is meant as a companion piece to the author's other two books on energy risk management entitled Energy Risk Management (McGraw-Hill, 1998), and Energy Derivatives: Trading Emerging Markets (Energy Publishing Enterprises, 2000).
This chapter provides the overview of developments of the new emerging markets catalyzed by the Internet electronic trading developments. The chapter also lays out the broad themes of the book and argues why the is now for the development of these multicommodity markets and they failed in the past.
Running through the individual chapters, we seethat Dr. Antoine Eustache, Global Index Manager at Dow Jones Newswires of Princeton, New Jersey, explains the intricacies of index construction in the age of Internet. Dr. Eustache has created the first electric power indexes in the United States and Europe for trading electricity, and the first bandwidth indexes during 2001. He is looking at creating metals and emissions trading indexes for the future. He is the world's expert in creating emerging market indexes for trading and provides insights into future market developments for other commodities.
Chapter 3 examines the weather reinsurance markets and was written by Nick Ward, an experienced broker at Spectron Energy Group in London. The weather trading markets have generated much press over the past five years but actually little liquidity despite all the hype. Nick Ward will show why this is occurring and why this is leading us back to the reinsurance markets and their financial instruments.
The status of the telecommunications bandwidth trading is examined in Chapter 4 by J.P. Crametz of RateXchange Labs, Palo Alto, California. RateXchange is one of the first exchanges trading telecommunications bandwidth. Mr. Crametz is a leading researcher at Stanford University's Business Laboratories. While bandwidth trading will never be as large as the energy market, it is a growing and robust market ripe for commoditization. It is also a converging market with electric power. Mr. Crametz is working on the ground floor of one of the fledgling bandwith trading exchanges.
The importance of pricing energy options is shown by Dr. Robert Brooks in Chapter 5. Dr. Robert Brooks, President, Financial Risk Management LLC and finance professor, University of Alabama, Birmingham, Alabama, is an options expert and modeler. Energy options are unique to themselves and have implied volatility like no other commodity market. Dr. Brooks is a renowned energy options specialist who has worked with the Southern Company in trading strategies. He helps define the necessity of options trading in emerging markets and explains their value to the layperson.
In Chapter 6, Nedia Miller, CTA of New York, New York. Dr. Miller is a leading expert of the new FAS 133 hedge accounting rules for energy. She is an ex-NYMEX floor trader and has given many seminars on FAS 133 to KPMG, Royal Bank of Scotland, and Bank of Montreal. This ruling is changing not only how energy companies hedge, but their trading strategies as evidenced by the Enron debacle.
Dr. Markus Reichel, President of EconTrade in Dresden, Germany, in Chapter 7 explains the antecedents of trading in these emerging markets. Dr. Reichel focuses primarily on the emerging markets of Poland and Ukraine, which are just beginning to open up for energy trading. Dr. Reichel is a leading expert on Eastern Bloc energy liberalization and trading.
In Chapter 8, Alessandro Mauro, Manager of Risk at Energia SpA in Milan, Italy, focuses on the Italian energy trading markets. He was formerly with PwC and ENI, the Italian oil company. Mr. Mauro will focus on the emerging gas and electric markets in Italy that have evolved from the EU Energy Directives.
In Chapter 9, Kirk Vann, CEO, Freight Advanntage and Advannce Energy in Houston is a very experienced oil trader examining the changes underway in the tanker markets. Mr. Vann has more than 25 years trading oil for Enron and Glencore, and has established a model for the shipping industry on how they should hedge their freight rates, which are very variable and volatile. Tankers provide the lifeblood of global energy trading for oil and gas.
In Chapter 10, William A. Klun, vice president of DZ Bank, AG, in New York investigates market risk for financing merchant power plants. These are plants that have no retail load.
P. Kumar and Shiva Gowrinathan of the New York-based software company Nirvanasoft, Inc., examine and explain the importance of convergent software systems for energy trading, in Chapter 11. They examine the current software architecture and take a look at these new information technology developments for the energy industry.
In Chapter 12, Howard Margulis, partner, Squire, Sanders & Dempsey LLP in New York investigates energy risk management in the merger context looking at the legal and tax issues as well. Mr. Margulis is a leading attorney in the area of energy projects finance and shows how the use of energy derivatives can reduce the cost structure of energy projects. Mr. Margulis was formerly a partner at Baker and McKenzie.
In Chapter 13, Kelly Douvlis examines retail gas and electricity risk for industrial and commercial customers.
In Chapter 14, the author, Peter Fusaro, proposes a radically new concept in emissions trading through the use of structured products. He presents the background for the Kyoto Protocols and the United States experience in emissions trading as the nexus for launching C[O.sub.2] emissions trading. Green finance is using the project finance mechanism to jump-start the C[O.sub.2] emissions trading market.
Finally, in Chapter 15, the author investigates the phenomenon of energy convergence for financial, energy, and Internet markets. Besides summarizing the themes of the previous chapters of the book, Fusaro provides a forward spin on how these new financial and commodity markets will converge in the age of market liberalization, consolidation, and globalization.
Excerpted from Energy Convergence by Peter C. Fusaro Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
The New Millenia in Energy Trading (P. Fusaro).
The Importance of Market Indexes in Emerging Industries (A. Eustache).
Weather Derivatives and Reinsurance (N. Ward).
Looking Forward: The Development of Bandwidth Market Liquidity (J. Crametz).
New Techniques in Energy Options (R. Brooks).
The New Accounting Rules for Derivatives: FAS 133 & Its Impact on Energy Convergence (N. Miller).
The Central and Eastern European Energy Sector Reforms: Convergence versus Divergence (M. Reichel).
An Italian Road Map to the New Energy Markets (A. Mauro).
Freight Trading: The Emerging Commodity Market (K. Vann).
Market Risk in Electric Generation Finance (W. Klun).
Convergent Systems (P. Kumar & S. Gowrinathan).
Energy Risk Management in the Merger Context (H. Margulis).
Managing Energy Risk for Industrial and Large Commercial Entities (K. Douvlis).
Green Finance: The Emerging Financial Markets for Protecting the Environment (P. Fusaro).
Energy Convergence: What's on the Horizon (P. Fusaro).
Glossary of Energy Risk Management Terms.