Companion files

Energy Trading

A Practitioner’s Guide to the Flat Book, the Hours It Averages Away, and the Margin Call That Arrives First

Julian R. Sterling

These are the four Excel workbooks that go with the book. Every figure the book prints is reproduced in them by a live formula rather than a typed constant, and all four are built on the same eight-row price duration curve — change an hour count, a price, the heat rate, the load shape or the declared price move, and every dependent number moves. Each one ends with a Checks sheet setting the printed figure beside the computed one: 50 controls in all, every one green, recalculated in LibreOffice.

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The four workbooks

• Chapters 2 and 5

  The price duration curve

  The year’s 8,760 hours sorted and grouped into eight rows, and the two averages it yields. The time-weighted average is 70.1872, and the annual baseload forward is set equal to it by construction — which is why no figure in this book rests on a view about the price level. The average over the plant’s 8,000 available hours is 73.6250, because the outage removes the cheapest hours of the year, and the difference between those two numbers is the source of one of the book’s two headline errors.

  Also on the sheet: how many hours price below the average (a majority of them), the highest hour as a multiple of the forward, and what deleting the top 100 hours does — it moves the annual average by 2.1918 and removes 19.8548 per cent of a power station’s margin.

  The_Price_Duration_Curve.xlsx · XLSX · 8 KB

• Chapters 4, 5, 6 and 7

  The plant, four ways

  The dispatch built row by row off the curve: marginal cost 65.32, 3,900 running hours of 8,000 available, 2,418,000 MWh, and a gross margin of 60,792,240 of which 42.7202 per cent is earned in 350 hours. Then the same plant valued four ways — must-run and baseload-hedged, each priced at the annual forward and at the average of the hours the block actually covers.

  Two results fall out. A baseload hedge priced on its own hours, dispatched with buy-back, is worth exactly what the unhedged plant is worth: hedging a plant as a block does not destroy its optionality. And the wider gap a careless reader would quote, 36,650,855.53, is two things: 17,051,415.53 of an average taken over the wrong hour set, and 19,599,440 of genuine convexity. A second sheet moves the 760 outage hours to the top of the curve, where they cost 36,057,216.

  The_Plant_Four_Ways.xlsx · XLSX · 11 KB

• Chapters 8, 9 and 10

  Shape and the retail book

  A book of 4,200,000 MWh sold at a fixed 78.50, hedged with a flat block bought at the forward, booking a margin of 25,883,698.63. Then the load shape, as a multiplier on average load, normalised so the year’s volume is exactly the contracted figure. The flat block costs 294,786,301.37; the hours cost 317,068,468.18.

  The difference is the shape cost: 22,282,166.81, or 5.3053 per MWh, which is 86.0857 per cent of the margin the desk booked. The price the book is really exposed to is not 70.1872 but the load-weighted 75.4925. The multipliers are inputs: flatten them towards 1.00 and watch the cost fall away, which is the cheapest way to see that the whole effect is a covariance between load and price.

  Shape_and_the_Retail_Book.xlsx · XLSX · 9 KB

• Chapters 11, 12, 13 and 14

  Margin and liquidity

  The position report says the book is 91.7031 per cent hedged and short 760,000 MWh, and both figures are correctly computed. The sheet then reconciles them to the plant’s actual output and finds a true short of 2,542,000 MWh, 3.3447x the reported one, because the hedge was sized on 8,000 hours and the plant runs 3,900.

  Then the cash. A declared parallel rise of 40.00 puts 198,400,000 of variation margin out of the door the next morning against 158,000,000 of cash and undrawn facility. With both legs cleared on one exchange the same position calls 30,400,000: a factor of 6.5263x, decided by where the paperwork sits. The declared move is a cell, so the call, the day-one position, the move that exhausts liquidity and the implied position limit all move with it.

  Margin_and_Liquidity.xlsx · XLSX · 9 KB

Conventions used throughout

Blue text	a hardcoded input — you may edit these
Yellow fill	an assumption that decides the answer
Black text	a formula — do not overtype these
Checks sheet	the printed figure beside the computed one, with a PASS or a FAIL

Why the checks matter more than the models

A workbook that agrees with a book proves nothing on its own — the author wrote both. What the Checks sheets do is different: they force the model to reproduce a number that was printed before the model existed, from a formula rather than from the number itself.

On this book the discipline caught the book’s own headline. An early draft valued the power station as a flat block covering its 8,000 available hours and priced that block at the annual forward of 70.1872, which is the average of all 8,760 — including the 760 cheapest hours, the ones the outage removes. The block should have been priced at 73.6250, the average of the hours it actually covers. On the wrong price the plant’s apparent option value was 36,650,855.53; corrected, it is 19,599,440, and the missing 17,051,415.53 turns out to be a mispricing rather than optionality. A book about averages taken over the wrong set of hours had taken an average over the wrong set of hours, and the correction is in the text rather than quietly removed from it.

Where a shortcut and the full computation disagree, both are shown. The hour-set component is 4,960,000 multiplied by an unrounded 3.43778539, not by the printed 3.4378, and the two differ by 72.47; the flat retail block costs 294,786,301.37 on the unrounded average and 294,786,240.00 on the printed one. Neither gap is smoothed away, because a reader who can see the gap is a reader who will not be surprised by it.

Opening the files

The workbooks open in Microsoft Excel, LibreOffice Calc, Google Sheets and Numbers. They use no macros and no add-ins, so nothing needs to be enabled or trusted. If your spreadsheet asks to update links on opening, decline — there are none.

Also by Julian R. Sterling

The other books with companion files. The full list of titles is on the author page.

• Credit AnalysisOne borrower, four defensible EBITDAs, and the add-back argument worth fifty times the covenant headroom.
• Breaking Into European Defence ProcurementThe money and the instruments, the 35 per cent content test, and proposal economics.
• Closing the DealTwo defensible bridges 20.70 million apart, a peg worth 7.00 million, and the six choices that remove 6.60 of a 12.00 earn-out.
• CMBS and CRE CLOsWhere the loss actually lands, from appraisal reduction to realised severity, and what the B-piece is really being paid for.
• How to Read a Commercial LeaseThe three refinements chapter 19 names and never performs, and the renewal rate below which the mark-to-market is worth nothing.
• How to Read a Credit AgreementWhere the default actually comes from, the cure that costs 5.5 times the other, and the capacity nobody adds up.
• How to Read a Limited Partnership AgreementWhat the clawback actually collateralises, and why every dollar won on the tax clause lands in the uncollateralised column.
• How to Read a Private Funds Financial StatementsThe Harbourgate reporting pack, five worked cases, and rebuilding your own account.
• How to Read a Real Estate Loan AgreementThe cure ratio in closed form, the four-point window in which the cheap cure works, and the cure sized to the wrong threshold.
• Insurance Capital for Asset ManagersWhy the same fund costs two insurers different amounts, and what opacity costs a manager in euros.
• Logistics and Industrial Real EstateNet effective rent, the ageing asset, and the development letting decision.
• Office Real EstateA six per cent yield that returns 3.2 per cent once the re-letting cycle is paid for, and the headline-to-net-effective rent arithmetic.
• Operational Due Diligence in Private EquityThe rating model built and then broken, and why refining a rubric weakens it.
• Personal Finance for BeginnersWhat a minimum payment really does, and what the snowball and the emergency fund actually cost.
• Private Equity Investor RelationsWhat a fund has returned, read six ways — and the eleven-point gap between them.
• Private Equity Real EstateBoth worked waterfalls to the dollar, the two capital stacks, and the arithmetic of the promote made changeable.
• Private Markets PerformanceThirty-one of the thirty-three figures chapter 19 publishes reproduce exactly — and the two that do not are named rather than quietly adopted.
• Raising a Real Estate FundThe chapter 17 funnel run on a calendar — when the first close actually lands, and why more travel does not help.
• Real Estate FinanceFour people look at one building and reach four numbers; the lender is whole only above 105,109,489, twelve per cent below today’s value rather than forty.
• Real Estate Financial ModelingProperty, development and fund models built line by line, and the modelling test worked end to end.
• Real Estate Fund ManagementThe waterfall of 6.11, the build-to-core of 8.7 and the proceeds gap, reproduced as live formulas rather than asserted.
• Real Estate Joint VenturesThe JV waterfall and promote, the complete venture, and failure to fund.
• Real Estate Transaction Due DiligenceWhat the diligence cost, which workstreams paid for themselves, and the investigation the book skips, priced.
• REIT Analysis and ValuationFFO of 532.0, AFFO of 381.0, net asset value and dividend safety — every figure a formula you can change.
• Retail Real EstateThe occupancy cost of every unit in a centre, the sixteen per cent of the rent roll no tenant can sustain, and the right-size-convert-or-hold decision priced.
• Sale and LeasebackA €179.5 million transaction end to end, with rent cover measured on the entity that actually signs the lease.
• Self-Storage Real EstateThe cohort engine behind a 590-unit store, and the rate increase on existing customers priced against the move-outs it causes.
• Senior Living and Healthcare Real EstateThe resident engine of a seventy-bed home, the payor mix, and a rota costed at the employer's real hourly rate.
• Significant Risk TransferThe bank's ceiling and the investor's floor derived independently, and the narrow band of prices at which both can say yes.
• Stock Market Investing for BeginnersWhat compounding and fees actually cost, with figures — and a calculator for your own.
• Student Housing Real EstateRevenue per available bed against the rate card, the letting campaign week by week, and the cost base of a 520-bed scheme.
• The AIFMD II HandbookThe reverse stress test computed, and the facility term that moves it more than any asset.
• The Asset-Based Finance HandbookThe borrowing base off a live loan tape, the Meridian transaction, and trigger design.
• The CBAM Compliance HandbookWhat 2027 really costs, how big the buffer should be, and the term the surrender formula counts twice.
• The Co-Investment PractitionerWhat dilution really costs, what a pay-to-play clause is worth, and how much to hold back.
• The Continuation Fund HandbookThe Thalia transaction, the bid funnel, and the fees behind the roll decision.
• The Data Center Development HandbookThe underwrite computed: the levered return the chapter never builds, and what a twelve-month slip costs.
• The Distressed Debt InvestorWhere the fulcrum security actually breaks, and what an 80-cent recovery is worth once composition and time are priced.
• The ESG Manager in Private EquityThe exit in equity and IRR, the line the book drops, and the half-turn nobody controls.
• The EU AML HandbookThe back book sized, and the month beyond which no headcount recovers a one-year window.
• The Evergreen Fund HandbookWhat the sleeve costs, and the headline IRR at which a closed-ended fund merely ties.
• The Family Office ProfessionalWhat an office costs, and the level of wealth at which building one starts to pay.
• The Fund Finance ProfessionalChapter 8 builds the reported-to-eligible NAV bridge; chapter 9 computes every ratio without it. Two points at every state — and what a subscription line does to the IRR.
• The Growth Equity InvestorWhat a pro rata cheque really costs, and the band where defending your ownership loses money.
• The Infrastructure Investment AnalystDebt sculpted to a coverage floor, and one asset valued twice to the last decimal.
• The Private Credit InvestorThe two coverage ratios are not measured on the same thing: the erosion is 47.7 per cent, not the 28.7 the headline implies.
• The Private Equity Fund Controller PlaybookThe book defines IRR, DPI, RVPI and TVPI, tells you to update them at the exit, and prints not one value. Computed: a 1.833× deal inside a fund at 0.892 TVPI.
• The Private Equity Operating PartnerThe value creation bridge built in full, and who actually made the return.
• The Private Fund Compliance OfficerThe grey zone as basis points, a broken deal four ways, and how many items you must test.
• The Private Markets Limited PartnerWhat a co-investment programme really saves, and the loss rate that erases it.
• The Private Markets Valuation SpecialistThe book describes its illustrations without numbers on purpose. These files close the chain, with every step visible.
• The Private Wealth FundraiserThree peaks, years apart, and the signature that tells a forecast miss apart.
• The Real Estate Asset ManagerBusiness plans, leasing, and what deferring the work on a building actually costs.
• The Real Estate Debt InvestorThe margin against the return on capital, the floor priced, and what prepayment protection buys.
• The Real Estate Development ManagerThe residual appraisal, the worked scheme, land diligence and the risk register.
• The Real Estate Secondaries InvestorAn eighteen per cent discount to net asset value that is really 9.18 once the reported value is unsmoothed.
• The Venture Capital AssociateWhat defending a position costs, and how many companies a reserve pool actually defends.
• Treasury ManagementFive people quote the cash balance of one company on one morning, from 214,000,000 to 68,400,000, and all five are right.
• Financial Planning and AnalysisRevenue three per cent above budget, operating profit sixteen per cent below it, and not one figure misstated.
• Financial Risk ManagementA fund inside every limit that cannot meet a redemption — and the number that decides it is the one with no currency attached.
• Business ValuationThree advisers land 26.8 per cent apart on one company, and the whole gap turns out to be 1.96 points of perpetual growth.
• Quantitative FinanceThree models agree to a quarter of one per cent about a number that one unobservable input moves a hundred and three times as much.
• Asset ManagementFour people quote four returns for one mandate, all correct and 2.7017 points apart — forty-eight times the manager’s net skill.
• Alternative InvestmentsA manager reports 13.29 per cent and the endowment earns 6.26 — both correct, and only a third of the advertised advantage arrives.
• Venture CapitalOne company out of twenty-eight returns 56.7 per cent of the fund, and half the capital goes in after the decision — at half the return.
• Machine Learning for FinanceFive people quote the accuracy of one credit model, all five are right, and the number that decides how much money it makes is none of them.
• Commercial Real Estate InvestingThe equity earned 8.6647 per cent and the investor received exactly 8.0000 — the preferred return, and nothing above it.
• Mergers and AcquisitionsThe board paper says the deal creates 13,436,667 of value. The arithmetic says it destroys 17,530,855. Nobody is lying.
• DerivativesThe treasury report says the hedge cost 1,233,698. That is the interest differential, not a cost.
• The Private Equity Secondaries InvestorThe seller’s floor beside the buyer’s ceiling — and the zone that usually is not there.
• Construction Cost ControlA contract sum of 26,301,102 became a final account of 29,153,363 on the building that was drawn — and 85.8 per cent of what was lost was knowable on the day it was signed.
• Pricing StrategyA list price of 148.00, a pocket price of 112.51, and the nine deductions in between — with what one point of price is actually worth.