FINGRID ELECTRICITY MARKET DAY

28 April 2015

NASDAQ COMMODITIES PRODUCT OFFERING

2

EXISTING PRODUCTS

POWER• Nordic • German• UK• Dutch• El-Cert

EMISSIONS• EUA • EUAA• CER

GAS• UK Gas• Spark spreads

FUTURE DEVELOPMENTS

• Nordic futures • Average Rate future/options• Continental energy markets• Steel• Coal

FREIGHT• Dry• Tankers • Fuel Oil• LPG• Iron ore

SEAFOOD• Salmon

THE NORDIC POWER MARKET

NASDAQ COMMODITIESThe most liquid power market for 20 years

4

OMEL

PowernextOpcom

GME

POLPXEEXAPX-ENDEX

BelpxPXE

EXAA

OMIP

HUPX

Borzen

EPEX Spot

2014 Nasdaq Commodities

Members 120 Exchange/ 390

Nordic Power

Turnover

vs

Consumption

Underlying value

€ 45 billion

Exchange

vs

OTC61,6 %

TC

38,4%

NOMXC

61,6 %

OTC

38,4%

+1 500

400

TWh

4

Nordic Power: 95% of all power derivatives are cleared

58% 42%

Nasdaq

OTC

financial

physical

CLEARED VOLUMES NORDIC POWER

0

500

1 000

1 500

2 000

2 500

3 000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Cleared volumes Nordic Power Yearly 2005-2015 (TWh)

On Orderbook Off Orderbook

Low volatility

Low prices

Oversupply

Funds and banks exiting

Regulations

Political influence

NORDIC POWER – PRODUCT STRUCTURE

Reference Price for Nordic Futures and DS Futures:

NORDIC SYSTEM PRICE

Currency: EUR

Tick size: 0,01 EUR/MWh

Min contract size: 1 MW * h in the contract

Electricity Price Area Differential (EPAD, formerly CfDs)

AREA PRICES – NORDIC SYSTEM PRICE

EP

AD

s

Deferred Settlement Future (DS Future, formerly Forward)

Cash settlement, only in delivery period

Note: Years are cascaded to quarters, and quarters to months.

Q1* Q2* Q3* Q4*

JAN | FEB | MAR

YEAR*

APR | MAY | JUN JUL | AUG | SEP OCT | NOV | DEC

W W W W W

D D D D D

FuturesDaily cash settlement mark to

market

ELECTRICITY PRICE AREA DIFFERENTIAL (EPAD)

ELECTRICITY PRICE AREA DIFFERENTIAL (EPAD), FORMERLY CFD

• Congestions between different areas can result in different area prices

• Nordic ENO Futures and DS Futures contracts do not fully cover the price area risk

• This lead to a poor matching between the compensation from the DS Future and the real power price

• Market players need the instrument EPAD to hedge against deviations between the local area price and the common Nordic system price

NASDAQ EPAD PRODUCT OFFERING

Price area Weeks Months Quarters Years

Oslo, Tromsø, Copenhagen, Århus , Tallinn and Riga

N/A 2 3 3

Stockholm, Luleå, Sundsvall, Malmö, Helsinki5 4 4 4

9

EPAD:

Example: SYHEL= Helsinki ΔP = Helsinki area price - system price

Market makers in the Nordic power market:

• Vattenfall: Nordic Base (full curve), Swedish EPADs and Helsinki

EPAD (not weeks)

• Dong and Energi Danmark: Danish EPADS

• RWE: Nordic Base (full curve), has withdrawn from quoting

EPADs

• Latvenergo and Lietuvos Energijos: Riga EPADs

NORDIC POWER VOLUME 2014Risk Group Type On Orderbook (MWh) Off Orderbook (MWh) Total Cleared (MWh) Part of Total Cleared

ENO Base DSFutures 826 789 717 499 816 560 1 326 606 277 88,6%

EPAD-Stockholm DSFutures 5 399 656 47 703 676 53 103 332 3,5%

EPAD-Helsinki DSFutures 4 019 747 40 231 683 44 251 430 3,0%

ENO Base Futures 17 436 086 3 703 011 21 139 097 1,4%

ENO Base Options

14 965 080 14 965 080 1,0%

EPAD-Århus DSFutures 4 823 812 6 326 089 11 149 901 0,7%

EPAD-Malmö DSFutures 1 821 973 5 928 777 7 750 750 0,5%

EPAD-Copenhagen DSFutures 3 683 048 3 991 555 7 674 603 0,5%

EPAD-Sundsvall DSFutures 1 082 897 3 097 887 4 180 784 0,3%

EPAD-Luleå DSFutures 1 101 389 1 561 761 2 663 150 0,2%

EPAD-Oslo DSFutures 94 394 1 293 362 1 387 756 0,1%

EPAD-Tromsö DSFutures 570 899 812 132 1 383 031 0,1%

EPAD-Tallinn DSFutures 11 040 253 050 264 090 0,0%

EPAD-Helsinki Futures 35 112 119 655 154 767 0,0%

ENO Peak DSFutures

73 896 73 896 0,0%

EPAD-Riga DSFutures 21 886

21 886 0,0%

EPAD-Stockholm Futures 3 360 12 600 15 960 0,0%

EPAD-Luleå Futures 1 680

1 680 0,0%

EPAD-Malmö Futures 1 680

1 680 0,0%

EPAD-Sundsvall Futures 1 680

1 680 0,0%

EPADS represent 9 % of total cleared volume in 2014. The historical figure has been in the range of 6.5 – 9 % (2008-2014)

IMPLEMENTATION OF PTRS AND FTRS COULD THREATEN THE NORDIC POWER MARKET MODEL

STATUS

Transmission rights have limited value for hedging purposes, where liquid and reliable day-ahead prices are formed at both sides of a (congested) border.

Nevertheless, the lack of EPAD-sellers and the wide spread in some priceareas in the Nordic power market, makes it hard and costly for suppliers to enter markets, where they do not have physical production.

CONCERNS • The European NRAs should be given the possibility to choose their preferred hedging

instrument

• An FTR is purely financial settled and should be classified as a financial instrument with

the same terms for trading and clearing as similar hedging instruments (EPAD)

• Introducing PTRs/FTRs in the Nordic market may split the liquidity between FTR/PTR and EPADs

• Establish a monopoly for organizing auctions and a (secondary market) for FTR/PTR

is highly questionable

• Expected that only a few participants may participate in the PTR/FTR auctions

• The Nordic TSOs have been given an exception from auctioning of FTR/PTRs.

Will they continue to have an exemption?

HOW TO IMPROVE HEDGING •

• Market participants are exposed to the bidding Zone risk. A hedging instrument needs to cover such risk

• If an area fails to have sufficient liquidity the following opportunities may be evaluated:

• Auction single EPADs will support the Nordic system price • Auction pair of EPADS (EPAD COMBO) can give market participants a synthetic fully firm

FTR obligation• Introduction of market makers in EPADs in bidding zones with no sufficient liquidity• Reduce number of price areas

Few and homogeneous products leads to less market fragmentation and more competition.

BENEFITS WITH EPAD AUCTIONS

BENEFITS WITH EPAD AUCTIONS

Sufficient for price area hedging purposes

Provides full firmness for bidders

Supports the day-ahead-auction and creditability of the System Price

Social welfare gains through increased competition

Increase the liquidity in the secondary EPAD market

TSO receives the congestion from the area

NO impact on transmission capacity allocation (ATC)

NO administrative hassle (no nomination) to handle the physical cross border flows.

Transparency (auction results are made public)

Market participants with hedging needs can already access the EPAD market

FINAL REMARKS

16

APPENDIX

MARKET SHARE PER CUSTOMER CATEGORY

0.00

30.00

60.00

90.00

120.00

150.00

180.00

210.00

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jan

-11

Mar

-11

May

-11

Jul-

11

Sep

-11

No

v-1

1

Jan

-12

Mar

-12

May

-12

Jul-

12

Sep

-12

No

v-1

2

Jan

-13

Mar

-13

May

-13

Jul-

13

Sep

-13

No

v-1

3

Jan

-14

Mar

-14

May

-14

Jul-

14

Sep

-14

No

v-1

4

Jan

-15

Mar

-15

TWh

On Orderbook traded Market Share per Customer CategoryMonthly 2011-2014

Turnover Credit Institution Finance/Fund Fundamental

OPEN INTEREST TWH

0

100

200

300

400

500

Open Interest Nordic Power Monthly (TWh)

Series1

OPEN INTEREST MWENOYR-16 8264ENOYR-17 5635ENOYR-18 2540ENOYR-19 1026

MARKET SHARE PER COUNTRY

Non-Nordic members market share in 2007 = 17 % / 2014= 33 %