RISK-BU et CARMEN
Deregulation of the retail market, the growth of wholesale energy markets and international expansion have exposed the EDF Group to fluctuations in energy market prices that could significantly impact its financial results. The EDF Group’s response has been to introduce an energy markets risk management policy (for electricity, gas, carbon, oil products and CO2 emission permits), which applies to EDF and all those entities over which it exercises operational control.
AN EDF GROUP-WIDE RISK MANAGEMENT POLICY
The energy markets risk management policy is designed to:
- set the overall framework within which Group entities operate (in terms of energy generation, optimisation and marketing) and interact with EDF Trading
- consolidate the structured energy market exposure of all entities over which EDF exercises operational control
- implement a Group-wide coordinated hedging policy
The policy is supported by a system of risk measurement and risk indicators, with alert procedures that are triggered to notify the Group management team of any risk threshold being exceeded. The Risk-BU and CARMEN software packages were developed against policy and ensure its appropriate application at entity level. They also calculate the risk indicators identified in the Group-wide policy. These software packages are distributed by R&D and used by Group entities to regulate energy market risks in France and internationally: EDF Energy, Everen, EDF Hungaria, SSE, EDF Belgium, EDF Fenice, etc.
Risk-BU enables asset portfolio modelling (customer contracts, generating resources, hedges, etc.) and portfolio management simulation based on a set of price scenarios. The results generated can then be used to calculate the various risk indicators identified in the policy:
- mark to market
- sensitivity to market conditions (delta, gamma, etc.)
- Value at Risk (VaR)
- Earnings at Risk (EaR)
CARMEN enables the calibration of market parameters (market volatility and inter-market correlations) needed to simulate coherent future market conditions in Risk-BU.