Contractual Innovation in the UK Energy Markets: Enron Europe, The Eastern Group, and the Sutton Bridge Project (200-051)

Esty, Ben and Tufano, Peter (2000) Contractual Innovation in the UK Energy Markets: Enron Europe, The Eastern Group, and the Sutton Bridge Project (200-051). [Case]

Abstract

In December 1996, Enron Europe and The Eastern Group were on the verge of signing an innovative transaction in the utility industry. Eastern was going to buy a long-term option to convert natural gas into electricity from Enron, thereby giving it the economic right to operate a "virtual" power station. This structure was vastly different from the traditional independent power plant (IPP) structure, and the executives involved had to convince their superiors of its wisdom before they could proceed. This case was jointly written for Large-Scale Investment and Corporate Financial Engineering, and it covers topics related to both project finance and financial engineering. It illustrates a new paradigm in the electric power industry: the creation of virtual power stations backed by physical power stations with merchant exposure. It also illustrates how physical operations (constructing and operating a power plant) can be used to offset contractual obligations and trading exposures.

Item Type: Case
Keywords: finance, accounting, financial management
Subject(s): Finance
Date Deposited: 13 Apr 2016 11:32
Last Modified: 13 Apr 2016 11:32
Funders: n/a
URI: http://eureka.sbs.ox.ac.uk/id/eprint/6020

Actions (login required)

Edit View Edit View