Feedback Appreciated
Hi I have an interview with the trading arm of a European utility company tomorrow in London. It would be great if you guys could help me improve the weaker parts of my interview answers. I gave these answers to a person from HR last week but I don't think they realised why these are bad answers.
1) What challenges will we be facing in the future?
Monetary easy policy in the US has raised fears of inflation which has prompted investors to buy commodities, in particular, oil as a hedge. This drives up the price of oil which will also increase the price of power. This will increase the cost of business and potentially lower demand for these products.
(The main problem with this answer is that I don't understand how higher prices affect traders. The body of my argument seems more applicable to the utility company rather than the trading arm and my conclusion seems unconvincing.)
The Dodd-Frank Act in the US has significant implications for the energy trading industry. Essentially it could reduce positions in the energy future's trading market. This will lead to a decline in hedging opportunities and cash flow.
(I think this is a better example although it's a pity that it applies to the US instead of Europe.)
I won't write any more questions now until I see if anyone's is interested. I'd love to hear your thoughts. Cheers.
You should steer your questions/answers towards European economy and regulations instead of the US. However I don't have any inputs for you since I'm not familiar with what is going on within the utilities industry in Europe.
For power, they don't mind high input prices as it can drive up the price of the power significantly, hence higher margin.
I agree. I have come up with a new answer which I think is an improvement.
1) What challenges will we be facing in the future?
The biggest challenge will be to update risk models in line with changes in the markets, of which there are many. Regulatory risk in particular is a cause for concern as it difficult to analyse all the implications. On the national level we have government regulation different aspects of the power markets. On the EU level we have development of interconnection capabilities and on a global level we have regulation of CO2.
I guess my question is are you interviewing for risk job or are you interviewing for a trading job. Depends on which one it is your answer can cater more towards the specific opportunity.
It's a graduate scheme where you rotate through different departments such as credit risk, power operations and gas operations. They say I can get into trading eventually but only once I've learnt all the fundamentals, so maybe 2 years from now. This seems to be the standard amongst all the energy companies I've looked at.
I have another question. What do you identify to be the major characteristics and differences in power and gas trading? I would imagine that since power is more complicated there is a heavier quant side to it and this might make it more appealing than gas.
First off, I have very little experience to the European Model. I know in Europe its a whole different market right now. Natty is actual what $7 there?
I would not say Power is more complicated. Yes analyzing the data and how the actual dispatch is created is alot of quant heavy numbers and data tables. But you can trade power with simple models and the correct assets in the right markets. You do not need insane derivatives to make $$$.
Some differences -Natty has alot more trading points and basis's. This allows the market/grid to become more efficient as a whole over time. -Natty is traded on a storage curve, Power does not have storage so the arb opps in each come in different situations. -Power plants are more responsive, than a producer in terms of shutting in or changing supply sources. Power plants reacts faster. -Power is more connected to regulatory measures.
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