Large electric utility is looking to fix its cost of gas

Assignment Help Financial Management

Reference no: EM13925495

Entergy, a large electric utility is looking to fix its cost of gas purchases over the next 3 years. Entergy currently buys gas in the spot market at the Henry Hub spot price. Entergy has received a proposal from Sempra Energy which would effectively fix the cost of Entergy’s gas purchases over the 3-year period via a fixed for floating (spot) swap contract, and the fixed swap price would equal $4.75 while the floating price would be the Henry Hub spot price.

a) Describe the flow of payments if both parties agree to the swap terms.

b) What is Sempra's market exposure after the swap is undertaken and what could they do to hedge it?

Reference no: EM13925495

Questions Cloud

Calculate the net pay for both chad and jordan for december : What amounts will BJ's report on the 2013 W-2s for each employee?

The initial cost of project : The initial cost of a project is $10,000. There is a 30% chance that it will be highly successful, in which case cash inflows of $4,500 are expected for the next four years. There is a 70% chance that the project will be unsuccessful, in which case a..

Write a program with main() method that tests the examgrade : Create a new student with valid first/last name, invalid id, and valid status.

Drew conclusions to promotional goals, business environments : Wrote in a clear, concise, and organized manner; demonstrated ethical scholarship in accurate representation and attribution of sources; displayed accurate spelling, grammar, and punctuation.

Large electric utility is looking to fix its cost of gas : Entergy, a large electric utility is looking to fix its cost of gas purchases over the next 3 years. Entergy currently buys gas in the spot market at the Henry Hub spot price. Describe the flow of payments if both parties agree to the swap terms.

Prepare a report on sensory receptor in humans : Prepare a report on sensory receptor in humans

Many other food brands : Rogala Foods, Inc. sells Oscar Mayer, Jell-O, Tassimo, and many other food brands.

How many independent bets does he make per year : How many bets does he make per year? How many independent bets does he make per year? What does this tell you about his alphas?

Double-declining-balance method of depreciation : On January 1, a machine with a useful life of five years and a residual value of $40,000 was purchased for $120,000. What is the depreciation expense for year 2 under the double-declining-balance method of depreciation?IFRS Multiple Choice Questio..

User Account

All Pages