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Fundamental Modeling & Pricing Forecasting Services

  • ARR, FTR and Congestion Strategy

  • Capacity Valuation

  • Electric Market Studies and Dispatch Modeling

  • Energy Price Forecasting

  • Volatility and Option Value

    ARR, FTR and Congestion Strategy

    CornerStone advises utilities and hedge funds on investment strategies based on assessing and forecasting congestion.  CornerStone applies this knowledge to both advise on financial investments in FTRs through the ISO auction process, and to help utilities and investors make decisions regarding the value of generation assets based on their location on the grid.  CornerStone has developed proprietary databases, tools, and algorithms that it utilizes when assessing congestion and developing ARR and FTR strategies. 
    • For a $100M hedge fund that participates in FTR auctions in MISO, PJM, NYISO, and ISONE, led the investment efforts over a three year period.  Responsible for managing path selection, bid prices, portfolio strategy, and the actual mechanics of participating in the auctions.

    • For a power industry investor assessed historical, current, and future LMP and congestion for specific power plants as part of due diligence for asset acquisition.

    • For a Midwest utility developed regional dispatch models and consolidated them into an Eastern Interconnect model.  This model is used to calculate LMP and congestion to support trading and investment strategies. 
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    Capacity Valuation

    CornerStone advises customers on capacity value by assessing supply and demand on region-wide as well as locational basis, likely capacity additions and retirements, and potential capacity market regulation changes.  This analysis includes an understanding of the supply and demand structure inherent in each ISO; a strong background in development in order to assess the probability of new plant additions; an understanding of the revenue requirements to support new generation and financial modeling to distill the data into a $/kW capacity price by time increment.  CornerStone has applied this analysis to capacity markets wherever they exist in the U.S.

    • For an independent power producer developed forward price curve for capacity market to support $700 million financing in ISONE.  Pricing included sensitivity analysis and likely financial implications of multiple scenarios including change in generation supply as well as potential changes in capacity market regulations.

    • For the non-regulated business of a Midwestern utility developed capacity price forecasts for the development of new peaking units as well as evaluating the acquisition and divestiture of existing units.

    • For the acquisition of a generating plant in New York City evaluated the impact of new combined cycle and peaking units as well as retirement of existing units on capacity prices in New York City.

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    Electric Market Studies and Dispatch Modeling

    CornerStone performs market analyses which provide a macro-level overview of regional markets, and which help to determine the economics of new capacity or the expected future spot prices of electricity and fuel. In addition, the CornerStone team possesses nonpareil expertise in building, integrating, and maintaining industry leading dispatch models to assist in: optimizing daily generation dispatch, asset valuation, and energy and FTR trading operations.

    • For a major Midwest utility created proprietary models and software systems to develop the industry’s first integrated price forecasting model including gas, electricity, coal, and emissions allowances for forecasting LMPs and congestion.  These models were adopted by the utility as their standard model for non-regulated business, and were utilized in all generation asset valuations.  These models were also relied upon by the trading operations for emission allowances and the utility’s ARR allocations.
    • For a Western energy company developed electric market analyses, electric LMP dispatch models and proprietary fundamental analysis models to support origination, trading and structuring.  Developed models/systems in support of real time and term electricity trading allowing traders to instantaneously integrate demand, in-house marked gas prices, generation supply, and user variables to develop energy price projections.
    • For a leading Independent Power Producer developed market studies and dispatch models to provide operational level detail for its NEPool generation fleet.

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    Energy Price Forecasting

    CornerStone projects energy prices based on fundamental dispatch modeling as well as historical price relationships.  Energy pricing is projected for the market average as well as for specific trading nodes or delivery points within each market.  The modeling includes proprietary inputs for the operating characteristics of each generating unit, such as heat rate, emissions rates and variable O&M cost.  This fundamental analysis is supported by a historical pricing database that CornerStone maintains for every reported node in each ISO.  These energy price forecasts are utilized to project power plant revenue for power plant acquisition and development; assess PPA price competitiveness; assess congestion; and evaluate the financial value and price impact of new transmission lines and generating capacity. 

    • For an East coast IPP projected energy prices for ISONE, NYISO and PJM to support billions of dollars of acquisition efforts.  Over $2 billion in power plants were profitable acquired based on these market price projections.

    • For a hedge fund prepared congestion analysis to support hundreds of millions of dollars in FTR bids over a multi-year period.  Analysis focused on node specific LMP, congestion and line losses.  FTRs investments were supported in MISO, PJM, NYISO and ISONE. 

    • For a Mid-Atlantic utility assessed the cost of Provider or Last Resort Obligation based on the expected market pricing.  Analysis focused on potential changes in load as well as changes in market price of electricity.

    • For a Midwest utility developed the industry’s first integrated price forecasting model including gas, electricity, coal, and emissions for forecasting LMPs, congestion, and emission allowance prices.

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    Volatility and Option Value

    CornerStone advises clients on volatility and option value, both in projecting energy pricing as well as valuing assets.  We apply volatility analysis to enhance the accuracy and usefulness of fundamental energy and congestion pricing models.  This volatility analysis can be specific to the node or the ISO and based on the specific project (e.g., long-term asset valuation, on-peak day trading).  CornerStone also values real options inherent in the power industry including option value of: fuel switching, output mix (e.g., electricity versus syn-gas), operational flexibility and environmental technology.  CornerStone applies volatility and option value to assist clients in valuing assets, making capital expenditure decisions, financing, entering into PPAs, and trading energy. 

    • For a major IPP’s due diligence on power plants in the mid-Atlantic and northeast U.S. CornerStone incorporated stochastic processes with fundamentals-based electric price forecasting to better represent the volatility inherent in electricity prices.  CornerStone successfully presented its forecasts to debt rating agencies, which represented the first time in the industry that volatility value was included in a rating process.
    • For a development project of two combined cycle units totaling 1,600 MW assessed volatility and option value inherent in competing natural gas fuel supply options, backup fuel firing hours, and design parameters such as duct firing.  Analysis was applied in development, engineering design, and construction financing support.  Units were successfully developed and constructed.

    • For a 7,000 MW generating fleet assessed the value of real options such as: brownfield development, repowering, fuel switching, and ancillary service sales revenue.  This analysis was used to support acquisition, equity and debt structuring, and subsequent resale of the portfolio.

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