Learning Platform - "Markets & Trading"

Course: Procurement & Sales

About the Course

The programmes “Procurement & Sales” are specifically designed to expand delegates’ knowledge of, and skills with respect to, (sourcing or) supply contracts, the variety of contract types, the pricing of those contracts, volume aspects and risks and opportunities of those agreements.


In the first level of the “Procurement & Sales” programme focus is on energy procurement and energy sales. Supply contracts are focused at and various types of agreements are covered. Aspects such as pricing and volume off-take are included. Per type of contract risks and opportunities are described and explained. This helps sales staff to become better in explaining customers (optimisation of communication and therewith effectively more sales), whereas consumers will become better informed about how they can contract energy (and therewith be more cost-effective and risk conscious).

Course Contents

Introduction to energy procurement & sales

  • Covering the difference between the wholesale & retail markets
  • Re business-to-business (B2B) & business-to-consumer (B2C)

Types of energy supply contracts

  • The characteristics of supply contracts, including force majeure
  • About pricing; fixed & floating, including indexation
  • Covering click contracts

Take-or-pay contracts

  • About the minimum off-take volume
  • Concerning invoicing & securing future cash flows

Volume flexibility contracts (basics)

  • About an minimum and maximum off-take
  • Covering the pros & cons for supplier and consumer

Swing contracts (basics)

  • Regarding fixed total volume but various allocation over periods
  • About the advantages & disadvantages for supplier & consumer

Embedded optionality

  • About click options, validity options, swing options & more
  • Concerning option pricing & risk premium
  • Covering structuring of contracts

Volume flexibility contracts (advanced)

  • About the pricing of flex options & flex contracts
  • Regarding the hedging process of a flex contract
  • Covering the concept of Delta-hedging

Swing contracts (advanced)

  • About the allocation process
  • Covering pricing of swing options & valuation of swing contracts
  • Concerning the hedging process of such a contract

Exam & Certification


In the second level of the “Procurement & Sales” programme focus is on pricing of energy and energy products. This programme covers premium in the pricing of energy contracts. Premiums are added for volume flexibility in the sense of actual off-take, imbalance of portfolios and validity time are taken into account. In this programme pricing is also touched upon in the sense of market liquidity. Next to liquidity volatility is covered and attention is also given to profiles and profile premiums.

Next, focus is on the pricing of forward agreements for future off-take. The price dynamics of these instruments are brought forward in light of the energy markets. The programme therefore includes the time value of money and the cost of carry. Next, forward curves are considered and it is explained what shape they can have (at what levels) and how this may fluctuate over time. Students are explained how these forward prices influence the contract prices of customers.

Course Contents

Pricing – Energy products

  • Price driving factors – Factors of influence (wholesale & retail)
  • About fundamental & non-fundamental price drivers
  • Including taxation & subsidy

Pricing – Forward curves (Basic)

  • Concerning contango, backwardation & convenience
  • About the storage theory, expectations theory & the cost of carry

Pricing – Forward curves (Advanced)

  • Regarding seasonality in the commodity business
  • About marginal cost and mean-reversion

Price volatility

  • About future volatility, expected volatility & historical volatility
  • Regarding market risk & risk management

Premiums in contract price

  • About the structuring of contracts
  • Concerning profile premium, validity premium, liquidity premium, risk premium & imbalance premium

Hedging with forward & futures

  • Covering producer & consumer hedges
  • About the hedging of natural short positions with term contracts
  • Re the hedging of natural long positions with forwards/futures
  • Concerning the rolling of a hedge; roll yield

Exam & Certification


In the third level of the “Procurement & Sales” programme the focus is on hedging of market risk by energy producers as well as on the mitigation of price risk by energy consumers. That is why this programme touches upon hedging techniques and strategies. Students learn about the application of swap contracts. Attention is given to various types of swaps and how they can be of service to manage energy exposures.

The programme also incorporates the application of option contracts as hedging instruments and how these can be applied to mitigate market risk. Attention is also given to combination of options, in order to form option strategies.

Course Contents

Consumer hedges with options (part I)

  • About the creation of a price cap & the related premium
  • Concerning the remaining potential to profit from price fall

Consumer hedges with options (part II)

  • About a vertical call spread
  • About a collar – the set up of a protective construction at no cost

Producer hedges with options (part I)

  • About the creation of a price floor & the related premium
  • Concerning the remaining potential to profit from price increase

Producer hedges with options (part II)

  • About a vertical put spread
  • About a collar – the set up of a protective construction at no cost

Consumer hedges with swaps (part I)

  • Explaining what a swap is & how it can be applied by a consumer
  • Regarding on average swaps
  • Covering capped swaps

Consumer hedges with swaps (part II)

  • Including more types of swaps for consumers
  • About participation swaps
  • About range out swaps

Producer hedges with swaps (part I)

  • Explaining what a swap is & how it can be applied by a producer
  • Regarding on average swaps
  • Covering capped swaps

Producer hedges with swaps (part II)

  • Including more types of swaps for producers
  • About participation swaps
  • About range out swaps

Exam & Certification


In the fourth level of the “Procurement & Sales” programme focus is on another aspect of pricing of energy and/or energy contracts, namely benchmarks, price references and price baskets. Students are explained what indices are and how they are constructed. In the programme it is also covered what indices are published for by exchanges and price reporting agencies. The programme also touches on the purposes of indices.

Next, the book structure is covered. The way accounting is organized and accounts are set up is thoroughly explained. Students are learned what interaction takes place between the sales department and the trading entity. Therefore internal transfers are included and explained. This automatically implies that internal transfer price (ITP) mechanisms are also covered. The factors that set ITPs are set out and discussed upon. ITPs consist of various premiums and those are thoroughly taken into account.

Course Contents

Pricing & valuation – Mark-to-market

  • Concerning the accounting against actual value/price
  • About settlement price calculations
  • Covering the liquidation value

Pricing & valuation – Price reporting agencies

  • About accepted benchmarks
  • Covering Platts, ICIS, Argus Media & others
  • Concerning IOSCO principles, ethical codes & policies

Pricing & valuation – Indices & indexation

  • About index calculation & publication
  • Concerning the characteristics of an index
  • About what indices are used for & what an index may indicate

Accounting – Book structures

  • About accounts/books; at division, department & personal level
  • Concerning lock-in models, for the hedging of physical assets
  • The relationship between the business units Trading & Sales

Accounting – Internal transfers

  • About deals between the business units ‘sales’ & ‘trade’
  • Covering transactions between ‘trade’ & ‘treasury department’
  • Re transfers between ‘generation’/’asset management’ & ‘trade’

Accounting – Internal transfer pricing

  • About liquidity premium & validity premium
  • Concerning risk premium & profile premium
  • Covering performance management & P/L responsibility

Exam & Certification

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