Towards risk management in a deregulated and competitive electricity supply industry

Malgas, Isaac (2002-12)

Thesis (MBA)--Stellenbosch University, 2002.

Thesis

ENGLISH ABSTRACT: The energy sector of the South African economy is poised to change in extraordinary ways. In just a few short years from now, the days will be gone when generators are guaranteed of their income and where regional distributors have the monopoly in the regions that they are servicing. Other energy markets in the world, such as oil and gas, have been free of regulation for many years. More recently, local policymakers have been focussing on increasing competition in the electricity sector and in so doing, liberate electric utilities from government's long established control. The shift away from government regulation of energy will lead to something even more important than placing downward pressure on the price of a MWh. It will instigate the development of multiple trading centres and platforms that are dedicated to competition in the free trade of electricity and related products. With the deregulation of the electricity supply industry and the inevitable introduction of competition, the real risks of energy trading will be faced by generators and distributors alike. This research investigates the changes that are set to occur within the next few years, based on developments that have unfolded in countries where electricity supply industries have been privatised and utilities and distributors are managing their risks in this new competitive environment. It explains how the South African Electricity Supply Industry may change with respect to the develop of markets which provide risk cover to industry players, the practices assumed by utilities in international electricity supply industries to minimise their risk exposure, and how industry players can use derivative instruments to manage their risks better.

AFRIKAANSE OPSOMMING: Die elektrisiteitsvoorsieningssektor is gereed om groot veranderings te maak. Binne 'n paar jaar, sal ons die einde sien van die dae waar kragstasies gewaarborg is van hulle inkomste en waar streeksvoorsieners die monopolie het in die streke waarin hulle verskaf. Ander energie markte in die wêreld, soos die van olie en natuurlike gas, is al sonder regulering vir baie jare. Meer onlangs het beleidsrade hul tyd toegewy aan die instelling van kompetisie in die elektrisiteitsvoorsieningssektor om utiliteitsmaatskappye vry te maak van staatsbeheer. Hierdie beweging weg van staatsbeheer sal lei na iets meer as net die afwaardse druk op die prys van 'n MWh. Dit sal die begin merk van die ontwikkeling van veelvoudige verhoë wat toegewyd is aan kompetisie in die vrye handel van elektrisiteit en soortgelyke produkte. Met die deregulering en die onvermydelike indiening van kompetisie, sal die ware risikos van energie handel aanvaar word deur voortbrengers en verskaffers van elektrisiteit. Hierdie navorsing stel ondersoek in die veranderings wat van plan is om te gebeur in die volgende paar jaar en is gebaseer op die ontwikkelinge wat in lande afgespeel het waar elektrisiteitsvoorsieningsnywerhede geprivatiseer is en waar voortbrengers en verskaffers van elektrisiteit hulle risikos bestuur in hierdie nuwe mededingende sektor. Dit verduidelik hoe die Suid-Afrikaanse elektrisiteitsvoorsieningsnywerheid mag verander teen opsigte van die ontwikkeling van markte wat risiko versekering aanbied vir utiliteitsmaatskappye, die praktyke wat deur hierdie spelers toegepas word om hulle blootstelling aan risikos te verminder, en ook hoe hulle afgeleide instrumente gebruik om hulle risikos beter te bestuur.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/53195
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