The Mark-E Aktiengesellschaft in Hagen, a regional energy services provider associated with Südwestfalen Energie und Wasser AG (SEWAG), manages and markets power plants with a capacity of approx. 1,000 MW. Mark-E also offers innovative contract models, e.g. the purchase of a power plant slice with day-ahead nomination rights.
In order to evaluate power plants in due consideration of uncertain prices for electricity, coal, and CO2, the company requested that Decision Trees carry out calculations for the years 2008 to 2012 with the stochastic optimization model DT.PLANTVAL.
Extensive sensitivity analyses have taken place which showed how the value of power plants changes depending on the parameters of the price processes (short-term and long-term volatilities, jumps, etc.). It has become evident that the stochastic optimization led to significantly higher valuations than deterministic models. However, an unrealistic overrating is avoided, which could occur if the traditional Black Scholes models were used in the finance industry.