The mission
Our candidates are on a worldwide mission to analyze, understand and discover the richness of energy and environment activities. Like all GDF SUEZ employees, they are committed to responsible energy.
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The 2 teams
Perrine and Julien
currently in France
Marc and Laure
currently in France
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Trading et Portfolio Management chez GDF SUEZ |
10/11/2010 |
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The Golden Mission is not just about gas plants. Today we introduce you to a top strategic area of GDF SUEZ: one of its two dealing rooms, the Brussels room. |
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For our last two days in Brussels, we take off our overalls and enter the GDF SUEZ dealing room.
At Electrabel, around 200 people work in the Trading & Portfolio Management (TPM) department. The average age is 32 and each has a desk with four to 16 computer screens facing him or her. It gives the impression of being in a huge gaming room, an impression reinforced by the traders crying out enthusiastically or the reverse. However, don’t be fooled – everything here is taken very seriously. We are at the heart of GDF SUEZ’s strategy in Europe and for this reason we are not authorized to film or photograph what happens.
The aim of this department is to obtain the best match of energy generation to demand. Electricity cannot be stored so you have to generate exactly what is needed: not too much since the surplus is a clear loss, nor too little, since this involves buying in electricity. Thus based on a number of parameters like weather conditions, plant availability, interconnection capacity and the prices of raw materials (gas, coal, fuel oil, etc.) and electricity on the European market, Electrabel chooses:
- either to generate the electrical energy itself by buying raw materials that provide a profit margin and so favour certain production tools. (For example, if the price of coal increases while that of gas decreases – assuming stable CO2 prices and efficiency levels – then gas plants would be favoured over coal ones);
- or to buy energy on the markets.
This involves several stages:
1. Central Portfolio Management (CPM)
This involves long-term decisions covering one to four years. The aim is to forecast the time when the market prices will be the most interesting. To do this, a spread is calculated, which corresponds to the profit from each generating method (gas, coal or fuel oil plants, etc.) in accordance with the spot market prices for future delivery. It is therefore the profit made on the sale of electricity generated less the cost of raw materials and green certificates (CO2 emission rights). When the spread is positive, Electrabel generates the electricity with its plants and sells it on the market. If the spread is negative, then it is preferable to suspend activity and buy the electricity directly on the market. This is called the “make or buy” decision.
2. Local Portfolio Management (LPM)
This takes care of short to medium-term choices, from the same day to up to a year. Its role is to fine-tune the forecasts made by the CPM, since of course some events are unforeseeable – for example, if there is a strike at methane terminals that blocks supplies and affects the market gas price. It also informs itself of operational down times for plants when maintenance is scheduled. In addition, it can factor in the weather forecast, which has a major role in the field of energy and is proving to be more reliable in the short term. For instance, if it is hotter than forecast on November 4, households switch on their heating less, thus reducing electricity use.
In addition, every two days the LPM writes reports on current energy market events, covering politics, economics and so on. Its better knowledge of the market allows it to prepare the merit order chart that classifies the types of plant (gas, fuel oil, coal, etc.) in accordance with their profitability (the spread).
3. Dispatching
This is directly linked to the Electrabel energy facilities. Based on the merit order chart issued daily by the LPM, it will optimize the facilities’ generation by distributing the production plant by plant. Each hour it will match generation to demand (balancing) on an intra-day basis, thanks to the flexibility of the hydroelectric plants, and certain gas plants and the buying or selling of electricity on the market. Dispatching works 24 hours a day: it must also react as quickly as possible if an unforeseen event occurs, such as if a plant stops functioning.
Lastly, we should mention Trading. Unlike Portfolio Management (PM), Traders have a much greater risk tolerance: they are interested in price volatility, that is, the extent of price variations between two points in time. The larger it is the more they maximize financial gains with suitable positions (buying and selling).
Their main role is to act as intermediaries between the PM and the market, as well as to maximize very short-term gains.
We hope we have shed some light on this subject for you.
The Golden Eyes
4 comments on this post
Loic
11/11/2010
Tres interessante cette decouverte des differentes filieres du Groupe! Continuez comme cela… et on vous attend de pieds fermes en Thailande!
The Golden Eyes
11/11/2010
Et de nôtre côté nous avons hâte d’y être! (Qui ne rêve pas d’aller en Thaïlande ?)
Loic
11/11/2010
c’est prévu pour quand exactement?
The Golden Eyes
11/11/2010
Nous n’avons pas encore les dates précises, mais il me semble que c’est pour fin janvier / début février. Nous vous tiendrons au courant dans tous les cas.