Soon after it was formed, the company hired a number of professional traders and engaged in modest speculative trading and “back-to-back” wholesale transactions. Results from the speculative trading were poor, and the Risk Committee severely limited subsequent trading activities. This left traders with little to do, and all but one soon left the company. Today, the entire (speculative) trading department comprises that one trader.
A modest wholesale business continues. The focus is on plain vanilla "load serving" deals. The firm is actively seeking to take over public utilities’ wholesale clients. The approach is extremely conservative.
The firm was “forced” to get into the retail electricity business by the holding company. To date, this has been a “loss leader” with a risk manager commenting: “We sell electricity at a loss, but maybe we are learning some lessons from it.”
There is a Power Marketing group that engages in short-term transactions of under a week. The firm has no generating facilities, but has not ruled out ultimately purchasing some.
The board of directors is actively engaged in the operation of the firm and are very conservative about risk. They perceive a need to identify the right niche for the firm in the deregulated marketplace but don’t want to “invest another 10 million dollars just to see it lost.” Accordingly, the company faces significant business risk as it plans a strategy for the future, but it... [continues]
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