Our Analytical Capability
Timera Energy has a sophisticated in-house analytics capability that supports our work with clients. We use analytical techniques which draw on latest industry best practice. Our models have been widely used by clients to support the purchase, sale, monetisation and risk management of assets, contracts and portfolios.
Our capability supports the detailed analysis of asset valuation, hedging & optimisation and risk management. This covers individual assets (e.g. power plants, gas swing/storage contracts, interconnectors). It also covers the management of portfolio value (e.g. the valuation & hedging of LNG portfolio contract and supply chain flexibility).
We also have a comprehensive set of fundamental models and supporting datasets for analysis of European gas and power markets and the global LNG market.
Value and risk analysis
Our analytical approach focuses on capturing the key drivers of value and risk:
- Asset exposures to commodity prices
- Commodity price behaviour
- Ability to manage asset exposures via contracting, hedging and optimisation
Our analysis of value and risk is based on a respect for uncertainty. We use a range of stochastic models of spot and forward prices to analyse the complex dynamics between exposures, commodity prices and contracting, hedging & optimisation decisions.
Our analytical capability spans an asset lifetime horizon, from the prompt hedging & optimisation of assets in spot and forward markets, to long term valuation, contracting and exposure management. But we tailor our analytical approach to tackle different problems. For example:
- Valuation of an asset over a lifetime horizon vs hedging & optimisation of an asset over the liquid forward curve horizon
- Standalone asset valuation vs the incremental impact of an asset on portfolio value (important in less liquid markets)
Importantly we use a consistent methodology across all of our analysis, as illustrated in the diagram below. For example, for asset lifetime valuation analysis we explicitly account for the hedging and optimisation strategy used and ensure this is aligned to the way the asset will actually be managed by the owner.
Where appropriate we build in a lack of perfect foresight of market prices into our analysis to align to the actual challenge faced by asset operators or risk managers.
We believe it is important to recognise every analytical methodology’s limitations and rigorously challenge assumptions. We strive to verify our conclusions using different analytical approaches to bound a problem.
Timera Energy has an extensive market modelling capability and associated datasets that cover:
- European power markets
- The pan-European gas market
- The global LNG market
These supply and demand models have been developed to provide maximum insight into the evolution of the factors driving marginal pricing and flows. Our market modelling capability has been applied extensively in client work to support analysis of the impact of market dynamics on asset value and risk.
Our work is underpinned by an awareness of the limitations of fundamental market analysis given the inherent uncertainty involved. However when appropriately applied, we believe that fundamental analysis can provide powerful insights into key market price dynamics. But we focus our analysis on understanding the drivers of market behaviour rather than trying to predict the future.
We utilise observable market price data whenever practical. The market information we use is not limited to the forward curve horizon; there are a range of valuable sources of information on long run market pricing which can be derived from asset transactions, share prices and long term contract prices.
We also see value in understanding long run fundamental benchmarks, for example the long run cost of production. But there are limitations in relying on these measures given that actual market pricing can deviate from fundamental benchmarks for prolonged periods of time.