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Structured Products
PPL EnergyPlus continues to seek opportunities to expand the scope and breadth of its generation supply and capacity, energy and ancillary services portfolio. For wholesale market participants, PPL EnergyPlus provides the following products and services:
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Tolling Agreements: This product provides a premium for the right to dispatch a generating facility and market all of the facility’s capacity, energy and ancillary services. The tolling agreement purchaser provides the fuel necessary to operate the facility according to the dispatch instructions. The facility owner/operator retains operating risk in the form of performance guarantees to the tolling agreement purchaser. The tolling agreement purchaser assumes market risk. This is generally a physical product, but can also be financial.
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Heat Rate Call Options: This product provides a premium for the right to call on energy at a strike price determined by an agreed upon heat rate and fuel price index (natural gas and/or oil). The heat rate option premium paid to the seller represents market value of the option at the time of the sale, and the option purchaser bears the risk of change in market value of the option going forward. The standard heat rate call option is a 5x16 financial product, but can be for non-standard hours and can also be physical.
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Power Purchase Agreements (PPA): This product provides a fixed price for a block of energy and capacity. The PPA price represents the market value on the date of the sale, and the PPA buyer bears the market price risk going forward. PPAs can also be based on a monthly or daily fuel price times an agreed upon heat rate (but still according to a fixed block delivery schedule). PPAs are either financial or physical.
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Wholesale Load Transactions/Full Requirements: This product can be structured to provide a fixed price for all of a customer’s energy, capacity and ancillary services needs, or can be structured with floating price elements and fixed price caps, floors or other elements customized to limit various risks to suit the customer’s risk tolerance.
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Swaps: These products can be agreements to exchange locations, generation types (heat rates) or other energy products. Swaps can be physical or financial.
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Credit: In addition to working with traditional guaranties, cash and letters of credit, PPL EnergyPlus can accept or provide a variety of structured alternatives such as asset backed lien facilities (primary or subordinated) and other structured products.
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