June 2007 Capital Adequacy Extension © Copyright 2007, CCRO. All rights reserved. Page 74 of 92 Figure 8.1 Cash Flow at Risk Assessment This method requires one to make assumptions regarding the timing of receipts and settlements of cash from sales and payments for cost of goods sold, among other items. While determining the timing of such cash flows can be extremely difficult, the determination process itself can provide useful insights into a company’s cash flow situation. From this point, a company can make a determination of their potential cash flow situation at various different confidence intervals. 1 (1) 3 2 JV Investments 1 3 1 2 Margins on Derivatives 15 11 21 19 Power Sales (5) (3) (9) (8) Gas Purchases BUDGETED TARGETS CASH FLOW COMPONENTS 2 2 2 2 Notes Payable (5) (2) (7) (4) Equipment Cash Flow From Financing Cash Flow From Investing 5 6 7 6 Net Cash from Operations (2) (1) (3) (2) Taxes (1) (3) (1) (2) Margins on Derivatives T+4 T+3 T+2 T+1 (3) (1) (2) (1) Interest 3 5 5 6 Net Cash Flow Cash Payments Made For: Cash Received From: Cash Flow From Operations 1 (1) 3 2 JV Investments 1 3 1 2 Margins on Derivatives 15 11 21 19 Power Sales (5) (3) (9) (8) Gas Purchases BUDGETED TARGETS CASH FLOW COMPONENTS 2 2 2 2 Notes Payable (5) (2) (7) (4) Equipment Cash Flow From Financing Cash Flow From Investing 5 6 7 6 Net Cash from Operations (2) (1) (3) (2) Taxes (1) (3) (1) (2) Margins on Derivatives T+4 T+3 T+2 T+1 (3) (1) (2) (1) Interest 3 5 5 6 Net Cash Flow Cash Payments Made For: Cash Received From: Cash Flow From Operations Commodity Foreign Exchange Interest Rate Equity Rates MARKET RISK PROJECTIONS MAPPED RELATIONSHIPS E(x)=6 E(x)=5 E(x)=5 E(x)=3 CFaR @ T+1 CFaR @ T+2 CFaR @ T+3 CFaR @ T+4