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Workshop “Energy Assets, Investment under Uncertainty and Real Options”, Low Carbon Programme
October 30, 2014 @ 8:00 am - October 31, 2014 @ 5:00 pm
Energy Assets, Investment under Uncertainty and Real Options
30th and 31st of October 2014, Madrid
This Workshop is organized jointly by BC3 Basque Centre for Climate Change, Repsol Foundation and The University of the Basque Country in the framework of the Low Carbon Programme.
Description of the Workshop:
The energy sector is a fundamental pillar for the development of any society. Its specific weight both in the real sector and the financial sector of the economy can hardly be overlooked. Energy investments typically take place in highly uncertain environments. Thus, we are witnessing the progressive liberalization of the markets for inputs and outputs, strong demand from emerging economies, discoveries of new reserves, growing security concerns, pressing environmental issues, and so on.
In the case of investments in energy assets, this plethora of risk factors combines with huge amounts of money, decades-long time horizons, irreversibility considerations, and a number of flexibility options such as the possibility to defer investment, or to operate facilities at different rates, among others. Note here that investors or managers are naturally interested in maximizing the value of their assets which calls for optimally exercising these options. Against this background of ever greater complexity, futures contracts on commodities keep on gaining breadth and depth, which in turn expands the possibilities for hedging operations and more accurate valuations.
Under these circumstances, the traditional valuation approaches based on discounted cash flows lead to poor decision making, which may be particularly onerous in the case of energy investments. In this regard, it is broadly accepted in the financial literature that valuation techniques based on the methods for pricing options (such as Contingent Claims Analysis or Dynamic Programming) are superior. In view of the above features, investments in energy assets can be properly valued as real options.
This workshop aims at making a contribution to the valuation of energy investments. To this end the workshop brings together a number of world renowned experts in futures markets, commodity prices, asset pricing models, and energy engineering.
Repsol Foundation, Calle Acanto, 22, 28045 Madrid