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Financial Analysis of Projects and Energy Trading


Development of methodologies and softwares for:

(i) Economic and Risk Analysis of Investments on Power Generation and Transmission Projects– The main product of this research line is the ANAFIN model. Based on the discounted cash flow methodology, it is able to determine some indicators concerning the project economic viability, such as the NPV, IRR, ROE, etc.; Besides, automatic sensitivity analyses of the most relevant parameters of the project can be done; risk analysis taking into account VaR and CVaR are also allowed. The ANAFIN model is able to evaluate all sort of generation projects, including hydro, thermal, wind and Solar PV. All tax and trading rules of the Brazilian regulatory framework are taken into account. Concerning to risk analysis, the main sources of non-systematic risk are considered when evaluating each kind of project. For example, considering power generation facilities, the variability of inflows to reservoirs (hydrological risk) can be considered the main source of non-systematic risk for hydropower plants (HPPs). For thermal projects, this would be fuel availability and price. For wind and solar power plants the main source of risk would be intermitance of the wind speed and solar radiation. Such risks have a direct impact on the electricity generation of the power plants, which can lead them, for example, to possible contractual exposures over time.

(ii) Portfolio Optimization of Energy Contracts - The main product of this research line is the development of the ECOMERC computational model, which adopts optimization and statistical techniques to assist in the definition of an energy trading strategy that maximizes return, taking into account a risk limit that the investor is able to accept. In the ECOMERC model the return is given by the expected value of the distribution of the present values of the net revenues, and the risk is measured by the CVaR at a given confidence level of this distribution. The commercialization strategy is associated to the allocation of energy in short and long term contracts and also in the spot market. The uncertainties regarding the generated energy, as well as those associated with spot price, are taken into account by the model.

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