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Energy Risk Management

Energy derivatives can help middle market and large corporations manage the financial risks posed by volatile energy prices by creating financial transactions to hedge oil, natural gas, and fuel prices.

Derivatives may be utilized to:

• Buy energy at current prices on a future date
• Minimize exposure to rising energy prices
• Potentially capitalize on fluctuating prices

With $7 billion in commitments in the energy industry and a strong presence in the global derivatives markets, Wachovia has the resources and knowledge to design customized solutions for your financial objectives.

Among the energy derivative structures offered:

• Forwards—Purchase or sale transaction where delivery is delayed to a specified future date. Forward contracts set a price or pricing formula: fixed (firm) or with floors, ceiling, and/or inflation escalators.
• Swaps—A way to fix the price of energy to be purchased or sold in the future, swaps are exchanges between two parties where one agrees to exchange a fixed price for a floating price. Types of swaps include: differential, margin or crack swap, participation, double-up, extendable, pre-paid, curve lock, and backwardation swaps.
• Options—A contract that gives the buyer the right to buy (call option) or sell (put option) at a specified price (the “strike” price) over a specified period of time. Types of options include: American or European, straight puts or calls, caps and floors, costless and participating collars, bull and bear spreads, and swaptions.

Energy Research in Your Inbox

To receive in-depth analysis and up-to-date information about the energy markets via email, please contact us at commodityderivatives.marketing@wachovia.com.

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