european spot gas market methodology - amazon s3 › cjp-rbi-icis... · 9/23/2013 · 06 european...

Date of last formal methodology consultation: 15 February 2013Expiry date for this methodology: 15 February 2015

European Spot Gas Market methodologyMethodology last updated: 23 September 2013

02 EuropEan spot gas markEt mEthodology

List of contents

• IntroductiontoEuropeanSpotGasMarkets(ESGM)

• Generalmethodology

• Rationaleforgasmethodology

• Listofprimarypricereferences

• Definitionofhubs

• Recentchangestothismethodology

• PRICEASSESSMENTS–Generaldefinitions

• PRICEASSESSMENTS–Guidelinesfortheexerciseofjudgement

• PRICEASSESSMENTS–Datausedkey

• PRICEASSESSMENTS–Exclusionofdata

• PRICEASSESSMENTS–Indicativeassessments

• PRICEASSESSMENTS–Widthofbid/offerspreads

• PRICEASSESSMENTS–Typesofmarketinformationusedandcollectionprocess

• PRICEASSESSMENTS–Transactiondatathreshold

• PRICEASSESSMENTS-Verificationofsources

• PRICEASSESSMENTS–Definitionsofperiods

• THEHERENINDEX–Generaldefinition

• INDICES–Guidelinesfortheexerciseofjudgement

• INDICES–Criteriafortheexclusionofdata

• INDICES–Volume

• INDICES–Typesofmarketinformationusedandcollectionprocess

• FORMULATIONOFHERENINDICES

• ESGMTRADESTABLES–Generalandcountryspecificdefinitions

• SPARKSPREADS

• SECONDARYDATAINESGM

• CURRENCYCONVERSIONS

• OTHERPRINCIPLESANDGUIDELINES

– Changestomethodology – Consistency – Datastandards – Deliverylocations – Keysubmitterdependency – Marketcommunication – Marketdataverification – Minimumdatathreshold – Qualityspecifications – Selectionofparticipants – Units


EuropeanSpotGasMarkets(ESGM)containsindependentpriceassessmentsandindicesformatureandemerginggasmarkets,aswellasin-depthanalysisonpricedrivers,authoritativecommentaryoneachday’stradingactivityanddailynews.Coverageforsomemarketsstretchesbackasfaras1994andacomprehensivepricehistorydatabaseisavailableforthisreport.

ESGMispublishedeveryEnglishworkingdayintheeveningasaPDFwithdataalsoavailablethroughanFTPfeed.

Anadditionalserviceforearlypriceassessmentsonkeymarketsisavailable.ThisserviceiscalledESGMIntradayUpdate.

Introduction to European Spot Gas Markets (ESGM)

ICIScontinuouslydevelops,reviewsandrevisesitsmethodologiesinconsultationwithindustryparticipants.Productspecificationsandtradingtermsandconditionsusedareintendedtoreflecttypicalworkingpracticesprevalentintheindustry.

ICISpublishesmarketassessmentsbasedoninformationcontinuouslygatheredfrommarketparticipantsabout:spottransactions,spotbidandofferlevels,contractpricenegotiations,pricesofrelatedcommodities,andrelevantfreightcosts.

ICISdoesnotmakeretrospectiveadjustmentsorchangestopriceassessmentsbasedoninformationreceivedafterpublicationtimeinallcasesorafteranycut-offpointspecifiedinindividualmethodologydocuments.

ICISregardsallarm’s-lengthtransactionswhichmeetitsspecificationcriteriaascarryingequalweight.

ICISusesproprietarymodelswherenecessarytonormalisedatatothetypicalspecificationsforcargosizeanddaterangesgivenforeachcommodity.

SomeICISassessmentsaretheproductofcalculationalone,forexampleinmarketswhereinsufficientmarketactivitytakesplacetopermitpriceassessment,orwhereamarkethabituallyitselfsetspricesaccordingtoaformula.Suchcalculatedassessmentsarenotedassuchintheirdetailedmethodologyspecifications.

ICISendeavourstocross-checkallthetransactioninformationitgathers.ICISwillnotuseinformationforassessmentpurposeswheresuchcheckscallintodoubttheaccuracyoftheoriginalinformation,orwhereatransactionappearstohaveoccurredundercircumstancesthatrenderitnon-repeatableorotherwisemarkedlyunusual.

General methodology


AllICISgaspricescontainedinESGMareintendedtoprovideareliableandaccuratemeasureofphysicalmarketvalueontheover-the-countertradedmarkets.

Inordertodothis,ICIShasadoptedtwodifferentmethodologicalapproaches,whichcanbeappliedasreliablemeasuresbutatdifferentstagesinthedevelopmentoftradeataparticularlocation:assessmentandindex.

AssessmentFormarketsatallstagesofdevelopment,ICISdeemsitsassessmentmethodologytobeappropriate.Thismethodologyisdesignedtodiscoverthetradablevalueofacommodityataparticularpointintime.Itisparticularlyusefulinallowingacomparisoninvalueacrossvariousgeographiesandforvariousdeliveryperiods.MostassessmentsinESGMaremadeatthecloseofthetradingday,asthisisthetimeatwhichmostcompaniesneedtomarktheirpositionstomarketandfinalisetheirphysicaltradingpositions.ICISprovidesearlierassessmentsforsomemarketsasanadditionalservice,subjecttocustomerdemandandmarketliquidity.

TheBidandOfferrangepublishedinICISassessmentsrepresentsthehighestbuyer’sbidandthelowestseller’sofferattherelevantclosingtimeofeachmarket.

Somecompanieschoosetousethemidpointbetweenthisbidandofferasthebestindicatorofmarketvalue.

ICISusestransactiondataaswellasbidandofferdatainitsassessmentprocess.Transactioninformationisusedtoverifybidorofferinformationwhenavailable.

Whereatransactioncanbeconfirmedatexactlythetimeofthepublishedmarketclose,itwillnotnecessarilysupersedeafirmbid-offerspread.Thisisbecauseonthemoreactivegasmarkets,ICISconsidersthedepthandcontinuityofbid/offerinformationtobethemostreliablemeasureofmarketvalue.Onthelessactivecontracts,therewillnottypicallybeatransactionexactlyattheICISpublishedassessmenttime.Seethesectionentitled“Exerciseofjudgement”below.

Rationale for gas methodology

IndexAnindexisformedusingtransactiondataonly.Thismethodologycanprovideareliablemeasureofmarketvaluewhenmarketshavedevelopedtoapointofrelativelyhighliquidity.Amechanistic,deals-basedindexforacontractwithlowliquidityleadstoerraticswitchesfromdefineddefaultmethodologies.

ThisiswhyICISwillnottypicallypublishanindexuntilithasatleastsixmonths’worthofdatashowingthatatleast10dealshavebeencompletedforeachindexperiod.

Indicesarenotconsideredtobeanaccuratewaytorepresentpricedifferentialsbetweendifferentgeographiesanddeliverycontracts,astheydonotrepresentmarketvalueatasetpointintimebutratheranaverageofdealsdoneoveragivenperiodoftime.

AllICISindicesareformedofaweightedaverageofdealsdone.Criteriaforinclusionorexclusionofdealsaredescribedbelow.

Theindicesarepublishedasasinglevalue,tothreedecimalplaces.


Hub Assessments Indices Units quotedBritishNBP Day-ahead,Weekend,WDNW,BOM,six

monthsahead,11quartersahead,10seasonsahead,twogasyearsaheadandtwocalendaryearsahead

Within-day,Within-dayCumulative,Day-ahead,Day-aheadCumulative,Weekend,SpotWeekend,Monthly,MonthlyCumulative,DailyMonthAhead,VolatilityIndex

p/th

BelgianZeebrugge Day-ahead,Weekend,WDNW,BOM,threemonthsahead,sixquartersahead,threeseasonsahead,onegasyearaheadandonecalendaryearahead

Day-ahead,Day-aheadCumulative,Weekend,SpotWeekend,Monthly,MonthlyCumulative,DailyMonthAhead

p/th

BelgianZTP Day-ahead,Weekend(onlyonthelastEnglishworkingdayoftheweek),onemonthahead,onequarteraheadandoneseasonahead

€/MWh

DutchTTF Day-ahead,Weekend,WDNW,BOM,sixmonthsahead,10quartersahead,10seasonsahead,onegasyearaheadandfourcalendaryearsahead

Day-ahead,Day-aheadCumulative,Weekend,SpotWeekend,Monthly,MonthlyCumulative,DailyMonthAhead

€/MWh

FrenchPEGNord Day-ahead,Weekend(onlyonthelastEnglishworkingdayoftheweek),BOM,threemonthsahead,threequartersahead,threeseasonsaheadandonecalendaryearahead

Day-ahead,Day-aheadCumulative,SpotWeekend,Monthly,MonthlyCumulative

€/MWh

FrenchPEGSud Day-aheadandWeekend(onlyonthelastEnglishworkingdayoftheweek)andonemonthahead

Day-ahead,Day-aheadCumulative,SpotWeekend

€/MWh

FrenchPEGTIGF Day-aheadandWeekend(onlyonthelastEnglishworkingdayoftheweek)

€/MWh

GermanNCG Day-ahead,Weekend,WDNW,BOM,fourmonthsahead,fourquartersahead,fiveseasonsaheadandthreecalendaryearsahead

Day-ahead,Day-aheadCumulative,SpotWeekend,Monthly,MonthlyCumulative,DailyMonthAhead

€/MWh

GermanGASPOOL Day-ahead,Weekend,WDNW,BOM,threemonthsahead,fourquartersahead,fiveseasonsaheadandthreecalendaryearsahead

Day-ahead,Day-aheadCumulative,SpotWeekend,Monthly,MonthlyCumulative

€/MWh

AustrianVTP Day-ahead,Weekend(onlyonthelastEnglishworkingdayoftheweek),threemonthsahead,twoquartersaheadandthreeseasonsahead

Day-ahead,Day-aheadCumulative,SpotWeekend

€/MWh

ItalianPSV Day-ahead,Weekend(onlyonthelastEnglishworkingdayoftheweek),BOM,threemonthsahead,fourquartersahead,twoseasonsahead,onegasyearaheadandonecalendaryearahead

Monthly,MonthlyCumulative €/MWh

CzechVTP Day-ahead,Weekend(onlyonthelastEnglishworkingdayoftheweek),BOM,twomonthsahead,twoquartersahead,oneseasonaheadandonecalendaryearahead

€/MWh

SpanishAOC Onemonthahead €/MWh

TurkishUDN Day-aheadand7-dayex-post.IndividualForwardWeekenddayspublishedonaFridayonly.Ex-postWeekenddaysassessedindividuallyforthedaysfollowingthelatestEx-Postassessment

TL/1,000sm3.Convertedto €/MWh,$/MWhand$/MMBTu

Primary price references published in ESGM are as follows:


NBP:TheBritishvirtualgashuboperatedbytransmissionsystemoperator(TSO)NationalGrid,coveringallentryandexitpointsinmainlandBritain.

Zeebrugge: ThephysicalgashubatZeebrugge(ZeeBeach)inBelgiumoperatedbyHuberator,a100%subsidiaryofBelgianTSOFluxys.

ZTP: ThevirtualgashubinBelgiumoperatedbyBelgianTSOFluxys.

TTF: ThevirtualgashubcoveringallhighcalorificentryandexitpointsintheNetherlands,operatedbyDutchTSOGasTransportServices.

GASPOOL:AsubsidiaryofDONGEnergyPipelines,Nowega,GastransportNord,GasunieDeutschlandTransportServices,ONTRAS–VNGGastransportandGascade.WiththeintegrationofthemarketareaH-GasNorthernGermany,StatoilDeutschlandTransportisalsoinvolvedinthismarketareacooperation.

NCG: NetConnectGermanyisajointcompanyforoperatingthemarketareacooperationfromthegridcompaniesbayernets,FluxysTENP,OpenGridEurope,GRTgazDeutschland,terranetsandThyssengas.

PEG Nord:TheFrenchvirtualgashubcoveredbythehighcalorificentry/exitnorthmarketzoneoperatedbyGRTgaz.

PEG Sud:TheFrenchvirtualgashubcoveringthesouthernmarketzoneoperatedbyGRTgaz.

PEG TIGF: TheFrenchvirtualgashubcoveringthesouthwestmarketzoneoperatedbyTIGF.

VTP:TheAustrianVirtualTradingPointoperatedbytheCentralEuropeanGasHub(CEGH).

PSV:ThevirtualgashubrunbyItaliannetworkoperatorSnamReteGas.

Czech Republic:Thevirtualgashub,VTP,coveringtheCzechRepublic,operatedbyNET4GAS.

AOC: ThevirtualgastradingpointcoveringtheSpanishtransportsystem,operatedbyEnagas.ExcludesundergroundstoragesitesandLNGterminals.

Turkey: Thevirtualgashub,UDN,operatedbyBOTAS.Thisexcludessystementrypoints.

Definition of hubs


Date Price reference Change 23September2013 N/A Addssection:PRICEASSESSMENTS–

Datausedkey

7August2013 N/A Addsdetail.Removesrepetition.Correctsindexthresholdwording

7August2013 N/A Correctsdealthresholdwording

28May2013 Turkishgasprices,tradetable,BOTASbalancingprice

Added

18March2013 CzechRepublicBOM,secondmonthahead,frontseason;PSVthirdmonthahead,second,thirdandfourthquartersahead;NCGfourthmonthahead;GASPOOLfifthseasonahead;PEGNordthirdquarterahead,frontyear

Additionalpriceassessments

2January2013 VTPpriceassessmentsandindices ReplacedCEGHpriceassessmentsandindices

26November2012 PEGNordBOMpriceassessment;PSVBOM,frontquarter,frontseasonandfrontyearpriceassessments

Added

29October2012 CzechDay-aheadpriceassessment AddedtoEnd-of-dayDay-aheadClosingPrices

1October2012 ZTPpricesandtrades Added

Recent changes to this methodology

General definitionsAllpriceassessmentspublishedinESGMrepresentICIS’close-of-daybid-offerrangesforflatgas(noswing,100%take-or-pay)deliveredatanumberofphysicalandvirtualhubs.

Day-aheadandallotherpromptclosingprices(definedasallcontractswithdeliveryuptoBalance-of-month)areassessedat16:30LondontimeonallEnglishworkingdays,exceptonthefinalworkingdayimmediatelypreceding25Decemberand1Januaryeachyear,whenthesepricesareassessedat12:00Londontime.

Curveprices(definedasallcontractsfromthefrontmonthforwards)areassessedascloselyaspossibleto16:30Londontimeattheearliestoratthetimeofthelatestliquidmarketifthisisafter16:30onallEnglishworkingdays,exceptonthefinalworkingdayimmediatelypreceding25Decemberand1Januaryeachyear,whenthesepricesareassessedascloselyaspossibleto12:00Londontime.

AssessmentsarebasedonbidsandofferswidelyavailabletothemarketattheICISclosingtimesabove.

Price assessments

“Bid”isdeemedtobethehighestpricebidbybuyersatthepublishedassessmenttime.

“Offer”isdeemedtobethelowestpriceofferedbysellersatthepublishedassessmenttime.

Price assessments – Guidelines for the exercise of judgement ICISgivesprioritytothehighestbidandthelowestofferinitsassessmentprocess.

ICISfirstattemptstoestablishafirmbid/offerspreadasthebasisforallofitsassessments.ICISalsodiscoverstransactioninformation.Thistransactioninformationisusedassupportingevidencetoestablishmarketvalue.Wherethistransactioninformationiswithintheestablishedbid/offerspreaditmayalsobeusedtonarrowtheICISassessmentbid/offerspread.

WherenoconfirmedtransactionorbidandofferinformationisavailableatthetimeICISassessesthemarket,itwilluseothertypesofmarketinformationtoassessvalue.


Themostregularformofalternativemarketinformationusedtomakeassessmentsisthevalueofspreads,eitherbetweencontractsfordifferentdeliveryperiodsonthesamehuborbetweencontractsforthesamedeliveryperiodonotherEuropeanhubs.

Thevalueofcomponentperiodswithinagivencontractwilltypicallybeusedwhereconfirmedmarketinformationisavailableforthesecomponentperiodsandnotthecontractitself.Similarly,whereconfirmedmarketinformationisavailableforacontractforalongerdeliveryperiod,thiswilltypicallybeusedtoassesscomponentcontracts.Thisisdescribedasinterpolation/extrapolation.

Whereonlyabidorofferisavailable,orwherethebid/offerspreadiswiderthantheICISpublishedmaximum(seesectionbelow:“Widthofbid/offerspreads”)atthetimeICISassessesthemarket,confirmedspreadinformationmaytakepriorityoverbid/offerinformationinformingtheassessment.

Wheretransactioninformationisavailableattheassessmenttime,itmaybesupersededbymarketspreadinformationininstanceswherethetransactionisdeemednottoberepeatable.ICISmaymakethisjudgementincaseswherethereisnobid/offerinformationimmediatelyfollowingthetransactiontosupportamovementinvalue.Itmayalsomakethisjudgementwhereasingledealattheclosingassessmenttimefallsoutsideoftheprevailingrangeofconfirmedbid/offerorspreadactivityatothertimesofday.Thislogicalsoappliestosituationswhereabid/offerspreadatthecloseisuncorrelatedwiththerestoftheday’smarketactivityandwhereICIScandiscovernofundamentalreasonforthechangeinmarketstructure.

ICISmayalsodisregardtransactioninformationwherethedealisforacontractwithadeliveryperiodoverlappinganothermoreliquidcontract,andwheremarketinformationforthemoreliquidofthetwoindicatesadifferentpricelevelorpricetrend.Thisisbecauseonactivelytradedgasmarkets,participantsdonottypicallyleavearbitragebetweenacontractanditsconstituentparts.

ICISonlyusesgeographicspreadinformationbetweenhubswhereastrongpricecorrelationhasbeendemonstratedbypasttradingactivity.

ICISdiscoversthevalueofbothtimeandgeographicspreadsthroughboththecollectionofspreadtradeand

bid/offerinformation,aswellastherelationshipbetweenhubswhenbothoutrightcontractsaretrading.

WhereICISusesspreadinformationinitsassessmentprocess,itgivesprioritytoinformationavailablefor16:30Londontime.Ifthisisnotavailable,itwilltakeevidenceofmarketactivityclosesttothistime.

Whereamarkettypicallydoesnottradeasaspreadtoothermarketsandwherethereisnoconfirmedbid/offerortransactioninformationatthetimeoftheclosingassessment,ICISmayusebid/offerortransactioninformationclosesttothistime.ICISmayrefertoshiftsinfundamentalsupplyanddemandinformationtoexplainandunderstandasignificantchangeinpricedirectionatmarketclose.

Price assessments – Data used keyForeachassessmentpublishedinESGM,ICISgivesaconcisedescriptionofwhichtypeofmarketdatawasusedtoformtheassessment.Thisisdoneusingastandardisedkeycode.Asingleletterpublishedalongsidetheassessmentdenotesthetypeofinformationusedastheprimarybasisfortheassessment.AnyothertypeofinformationICISmayhavegatheredforthatgradecanbeconsideredassupportingandofsecondaryimportanceintheformationoftheassessment.

Thedefinitionofthekeyisasfollows:

B–Bid/offer

T–Transaction

S–Spread

F–Fundamentals

I–Interpolation/extrapolation

Price assessments – Exclusion of dataInlinewithitsEditorialStandardspolicy,ICISreportersactivelyseektoidentifyanomalousmarketinformationandexcludeitfromtheassessmentprocess.Forgasmarketassessments,thisisdonebythedailyinformationgatheringandverificationprocesscarriedoutbyreporters,whereby


markettransaction,bidandofferinformationisconfirmedandverifiedbymultiplesources.ThecontextofICISreporters’knowledgeofthefundamentalsupply/demandsituationonagivenmarketisalsousedtoverifytransactiondatathatappearstobeanomalousbutmaybedoneatapricelevelexplainedbychangesinthephysicalmarket.

Inassessinggasmarkets,ICIStakesintoconsiderationonlyarm’s-lengthtransactionsbetweennon-affiliatedparties.

ICISdoesnotacceptbidsoroffersthatarenotfirm.Anybidorofferwhichisdemonstrablynotfirmwillbedisregardedandfurtherbidsoroffersfromthesamecounterpartymayalsobedisregarded.Forexample,ifacompanyindicatestothemarketthatitisbiddingorofferingatacertainpriceandvolumebutICIScanconfirmthatitlaterrefusedtotransactwhenthatbidwashitorofferlifted,itwillnotusethatcompany’sbid/offerinformation.

ICISalsoexcludesfromitsassessmentprocesstransactionswhereICISreportershavereasonablegroundstodoubtthetransactionisrepresentativeoftypicalmarketbehaviour:forexample,whereadealisconcludeddisregardingthebestbidorofferonthemarket;wherethereisevidencethatamarketparticipanthasdisclosedonlypartofitsmarketactivitytoICIS;orwhereatransactionliesoutsidetheprevailingrangeoftypicalmarketactivityasestablishedthroughothermarketevidence.

ICISactivelyseekstoverifythetimeatwhichreportedtransactionstookplace.Ifsuchverificationcannotbeobtained,ICISmayexcludethetransactioninformation.

ICISrecordsinstancesofanomalousdataandreviewstheseinstancesonaregularbasiswithaviewtodeterminingifapatternexists.

Wheremarketreportershaveconcernsoverthebehaviourofamarketparticipant,thiswillbeescalatedusingtheICISEscalationProcessforComplianceandRegulatoryIssues.Thiscanbefoundinthecompany’sComplianceManual.

Price assessments – Indicative assessmentsWhereabidandofferattheassessmenttimehavenotbeenconfirmedbyICIS,theassessmentwillbemarkedasindicative.

ICISseeksconfirmationfromatleastthreeindependentandnon-affiliatedmarketparticipantsinordertoassessapriceasnon-indicative.

Ifspreadvaluehasbeenconfirmedattheassessmenttimeandthepriceoftherelatedoutrightcontractvaluehasbeenconfirmed,ICISwillnotmarkanassessmentasindicative.

Forexample,wherethevalueofthebasiscontract(spreadbetweentheNBPandZeebruggemarkets)hasbeenconfirmedandtheNBPclosingassessmentisconfirmed,theZeebruggeassessmentwillnotbemarkedasindicative.

ICISwillnotpublishabid/offerspreadwiderthan0.5p/thor€0.5/MWh.Iftheconfirmedbid/offerspreadiswiderthanthisrange,ICISwillnarrowthespreadusingthealternativemarketevidencedescribedaboveandmarktheassessmentasindicative.

Price assessments – Width of bid/offer spreadsICISpublishesaminimumbid/offerspreadof0.025p/thor€0.025/MWhandamaximumof0.5p/thor€0.5/MWh.

TheexceptionistheTurkishmarket,wheretherearenomaximumspreadlimitsatthetimeofthelatestmethodologyupdate.TheTurkishmarketisintheveryearlystagesofdevelopment.Transactionsarestilloccurringatwidelyvaryingpricesnotalwaysdictatedbymarketfundamentals,makingitimpracticalandunrealistictonarrowbid/offerspreads.

Price assessments – Types of market information used and collection processICISgathersmarketinformationprimarilyviatelephone,instantmessengerande-mail.ListsoftransactionsareprimarilycollectedelectronicallyandICISemploysadatamanagementteamtocollectandde-duplicatethisdata.ICIShasdesignedbespokeprogrammestostandardisethevariousdatafeedsreceived,forthepurposesofreporterverificationandpublication.


Price assessments – Definitions of periodsAllperiodsquotedarebasedonthestandardEuropeandefinitionoftheGasDay.Thisrunsfrom06:00:00until05:59:59localtimeonthefollowingday.Theexceptionsareasfollows:

1.Turkey08:00:00to07:59:59localtime.

2.Spain,0:00:00to23:59:59localtime.

Allpricesareforflatgas,noswingand100%take-or-paytobedeliveredforthedurationofthecontracttothehub.

Prompt contracts:

Day-ahead: ThisreferstothenextworkingGasDayinEnglandfollowingthedateofthereport.InareportpublishedonFriday,Day-aheadwouldnormallyapplytothefollowingMonday,providedthatMondayisnotapublicholiday.Inthiscase,Day-aheadwouldrefertothenextworkingday,thatisTuesday.

7 Day ex-post:(Turkishmarketonly)ThisisthepricetradedthedayafterdeliveryandreportedbyICISsevendaysafterthetransactiondate.Transactionsarefinancialandnotphysical.SaturdayandSundayassessmentsarepublishedseparately,ratherthanaWeekendcontract,andappearonthesecondMondayfollowingthetransactiondates,assumingthisisanEnglishworkingday.IftheMondayisnotaworkingdayinEngland,theassessmentsarepublishedonthenextworkingday.

Weekend: ThiscoversthefirstSaturdayandSundayfollowingthedateofthereport.Othercontiguousnon-workingdays–typicallyBankHolidayMondaysandGoodFriday–willbeaddedtothecontracttocreateathree-orfour-daydeliveryperiod.

WhenChristmasDayandBoxingDay(25-26December)andNewYear’sDay(1January)fallmid-weektheseshallbeconsideredadditionalWeekenddeliveryperiods.Forexample,if25-26DecemberfallonaTuesdayandWednesday,theWeekendcontractquotedontheMondayofthesameweekwouldrefertoTuesdayandWednesday.Theweekendafter25-26Decemberwouldbeassessedasacontractforthefirsttimeon27December.

WDNW: ThecontractcoverstheWorkingDaysNextWeekperiodtobedeliveredoneveryworkingdayintheweekfollowingthedateofthereport.Typicallythiscovers

Marketinformationincludesbids,offersanddealsdonebysourcesorseen/heardbysources.ICISreportersalsoinvestigatethereasonsformarketpricemovementsandcross-checkinformationreceivedagainstmarketfundamentalsdata,primarilygatheredfromtransmissionsystemoperators.

Informationistypicallygatheredbetween10:00and17:30Londontimeonthedaytheassessmentispublished.ICISmaydisregardinformationreceivedafter17:30Londontime.

Ontheworkingdaysimmediatelypreceding25Decemberand1January,whentheseareEnglishworkingdays,ICISassessesmarketsearlierandgathersinformationbetween09:00and13:15Londontime.

ICISwillneveruseinformationreceivedafterassessmentshavebeenpublishedtoretroactivelycorrectanassessment.

Price assessments – Transaction data thresholdICISdoesnotimposeaminimumtransactiondatathresholdonitsassessmentprocess.

Alongsideitsroleinassessingthemoreactiveandmaturegasmarkets,ICISplaysaroleinbringingpricetransparencytonewmarketswheretradingandmarketinformationcanbesporadic.Suchmarketsarenotconducivetominimumdatathresholds.

Intheabsenceofbothtransactionandbid/offerinformation,ICISproceduresaredescribedaboveinthe“ExerciseofJudgement”section.

ICISdoesimposeaminimumdatathresholdonitsindices,however(seesectionbelow:“DEFINITIONOFHERENINDICES”).

Price assessments - Verification of sourcesICISverifiesthatallsourcesareactiveparticipantsoftheEuropeangasmarketsbycheckingtheyhaveashipperand/orsupplierlicenceorareregisteredtotradeatarelevantvenue.

Inaddition,ICISreportersusetheindicatorscontainedinthesectionentitledValidationChecksonSourcesfromthecompany’sDataStandardsPolicy.ThispolicycanbereadinfullintheICISComplianceManual.


Years: AYearreferstotheGasDaysofthe12-monthperiodfrom1January-31December.

Gas Year: AGasYearreferstotheGasDaysofthe12-monthperiodfrom1Octoberofaparticularcalendaryearandendingon30Septemberofthefollowingcalendaryear.ThetitleoftheGasYearalwaysreferstotheyearinwhichthecontractcommences.Forexample,GasYear2013startson1October2013.

thefivedaysfollowingthenextWeekendcontract.Inthecaseofathree-dayweekendcoveringSaturdaytoMonday,MondaywouldbeexcludedfromtheWDNWcontract,whichwouldinsteadcoverTuesday-Friday.

Similarly,inthecasewhereChristmasDayandBoxingDay(25-26December)fallonaTuesdayandWednesday,theWDNWcontractassessedonthepreviousFriday(21December)willreferonlytothefollowingMonday(24December).TheWDNWcontractassessedonMonday(24December)willrefertoThursdayandFriday(27-28December)only.

BOM: Balance-of-monthisfordeliveryoneachoftheremainingdaysofthecurrentmonth,excludingthenextDay-aheadorWeekendcontract,whicheveristhesooner.

Forexample,onaThursday,BOMwouldnormallyapplyfromthefollowingSaturdaytotheendofthemonth(remainingdaysofthemonthminusDay-ahead).OnaFriday,BOMwouldnormallyapplyfromthefollowingMondaytotheendofthemonth(remainingdaysofthemonthminusWeekend).

ShouldthenextDay-aheadorWeekendcontractcoverthelastdayordaysofthecurrentmonth,thedeliveryperiodtowhichBOMapplieswillswitchtothenextmonth.ShouldthenextDay-aheadorWeekendcontractcoverthefirstdayordaysofthenextmonth,BOMwillapplytothesubsequentdaysofthatmonth.

Curve contracts:

Months:MonthlycontractsrefertotheGasDaysofthestandardcalendarmonths.

Quarters:AQuarterreferstotheGasDaysofthethree-monthperiodsbeginningon1January(Q1),1April(Q2),1July(Q3)and1October(Q4).

Seasons: ASeasonreferstotheGasDaysofthesix-monthperiodrunningfromeither1April-30September(Summer)orfrom1Octoberofoneyearto31Marchofthefollowingyear(Winter).ThetitleoftheWinteralwaysreferstotheyearinwhichthecontractcommences.Forexample,Winter2013startson1October2013.


The Heren Index – General definitionAllICIS’marketindicesarevolume-weightedaveragesoftradesgatheredandverifiedbyICISduringthecourseofitsmarketreportingactivities.AllofthetradesverifiedbyICISandnotexcludedaccordingtothecriteriasetoutbelowarepublishedbyICISonadailybasisviaitsFTPserviceandtransactionsforaselectionofkeycontractsaresummarisedinESGMonadailybasis.

Indices – Guidelines for the exercise of judgement ICISreportersareresponsibleforidentifyinganomaloustradesandexcludingthembeforetheindexiscalculated.Pleaseseethesectionbelow“CriteriaforExclusionofData”.

Indices – Criteria for the exclusion of dataInlinewithitsEditorialStandardspolicy,ICISreportersactivelyseektoidentifyanomalousdealsandexcludethemfromtheindexcreationprocess.Forgasmarketindicesthisisdonebythedailyinformationgatheringandverificationprocesscarriedoutbyreporters,wherebytransactioninformationisconfirmedandverifiedbymultiplesources.

Confirmationissoughtfrombothpartiestothedeal.If,asisoftenthecase,bothcounter-partiesareunwillingtoconfirm,confirmationisacceptedfromonesideonly.However,corroborationisalsosoughtfromothermarketparticipants.Ifnodirectconfirmationisavailable,thedealmaystillbeincludedifitiscorroboratedbyothermarketsourcesandifICISitselfregardsitasbeingwithintheprevailingmarkettrendfortheperiodinquestion.

ICISonlyacceptsarm’s-lengthtransactionsbetweennon-affiliatedpartiesforinclusioninitsindices.

ICISdoesnotaccept“wash”or“round-trip”tradesforinclusionwithinitsindices.

ICISexcludesfromitsindicestransactionswheremarketreportershavereasonablegroundstodoubtthatatransactionisrepresentativeoftypicalmarketbehaviour:forexample,whereadealisconcludeddisregardingthebestbidorofferonthemarket;wherethereisevidencethatamarketparticipanthasdisclosedonlypartofitsmarketactivitytoICIS;orwhereatransactionliesoutsidetheprevailingrangeoftypicalmarketactivityasestablishedthroughothermarketevidence.

ThecontextofICISreporters’knowledgeofthefundamentalsupply/demandsituationonagivenmarketisalsousedtoverifytransactiondatathatappearstobeanomalousbutmaybedoneatapricelevelexplainedbychangesinthephysicalmarket.

DealsmaybeexcludedifICISisnotabletosatisfactorilyconfirmthetransactiontime.

Dealsdoneinnon-standardvolumeswillbeautomaticallyexcludedfromICISindices.See“volume”sectionbelow.

Wheresleevedealshavebeenidentifiedandarenotdeemedtobeoff-market,ICISwillremoveonelegofthesleeveinordertopreventskewingoftheindexthroughdoublevolumereportingforoneagreedtransactionprice.

ICISrecordsinstancesofanomalousdataandreviewstheseinstancesonaregularbasiswithaviewtodeterminingifapatternexists.

Wheremarketreportershaveconcernsoverthebehaviourofamarketparticipant,thiswillbeescalatedusingtheICISEscalationProcessforComplianceandRegulatoryIssues.Thiscanbefoundinthecompany’sComplianceManual.

Indices – VolumeDealsdeemednon-standardinvolumesizewillbeautomaticallyexcluded.Forgasmarketsthismeansdealsofaclipsizewhichisnotamultipleof5,000therms/dayor5MWh/h.

ICISsetsamaximumvolumelimitabovewhichdealswillautomaticallybeexcludedasnon-standard.FortheNBPandZeebruggehubsthemaximumvolumeistwomillionthermsforallpromptdealsand500,000thermsforallcurvedeals.Theselimitsapplytotheamountbeingdeliveredperday.

ForallotherEuropeanmarketsthemaximumlimitis2,000MWh/hourforpromptdealsand300MWh/hourforcurvedeals.

Formarketsintheearlystagesofdevelopmentorlowliquiditytheseparametersarenotapplied.MarketsfallingintothiscategoryaretheTurkish,SpanishandCzechmarkets.Frenchhubsfallintothiscategorybecauseofthedifferenceintradedunits(seesectionbelow:ESGMTradesTables).

Indices


Indices – Types of market information used and collection processICISgathersmarketinformationviatelephone,instantmessengerande-mail.TransactionsareprimarilycollectedelectronicallyandICISemploysadatamanagementteamtocollectandde-duplicatethisdata.ICIShasdesignedbespokeprogrammestostandardisethevariousdatafeedsreceived,forthepurposesofreporterverificationandpublication.

Marketinformationincludesbids,offersanddealsdonebysourcesorseen/heardbysources.ICISreportersalsoinvestigatethereasonsformarketpricemovementsandcross-checkinformationreceivedduringthecourseofthisinformationgatheringprocessagainstmarketfundamentalsdata,primarilygatheredfromtransmissionsystemoperators.

Informationistypicallygatheredbetween10:00and17:30Londontimeonthedaytheassessmentispublished.ICISmaydisregardinformationreceivedafter17:30Londontime.

TransactionseligibleforinclusioninICISindicesmusthavebeenconductedbetween06:00and17:30LondontimeonanEnglishworkingday.

Ontheworkingdayimmediatelypreceding25Decemberand1January,ICISassessesmarketsearlierandgatherstransactioninformationbetween09:00and13:15Londontime.

TransactionseligibleforinclusioninICISindicesintheabovecircumstancesmusthavebeenconductedbetween06:00and13:15Londontime.

ICISwillneveruseinformationreceivedafterindiceshavebeenpublishedtoretroactivelycorrectanindex.

Formulation of Heren IndicesICISpublishesavarietyofvolume-weightedtrade-basedindicesfordifferentcontracts.Thesearepricedinpence/thermfortheNBPandZeebruggemarketsandin€/MWhforallothermarkets.Forthedurationofthecontractcoveredbytheindex,thepricevaluesflatgas,deliveredonano-swing,100%take-or-paybasis.

ContractdeliveryperiodsareidenticaltothosedescribedaboveinPriceAssessments–DefinitionofPeriods.

Formulation of the Within-day index

HerenWithin-dayindicesarevolume-weightedaveragesofallWithin-daytransactionscollectedinESGMonthesamedayforgastobedeliveredonthespecifiedmarket.

TheWithin-dayindexrequiresaminimumofthreetransactions.Ondayswhentherearefewerthanthreeeligibletransactions,theindexispublishedasthearithmeticaverageoftheprevious20indices.

Formulation of the Cumulative Within-day index

TheCumulativeWithin-dayindexisavolume-weightedaveragepriceofalltheWithin-daytransactionsincludedinESGMsofarthatcalendarmonth,uptoandincludingthepublicationdate.OnthefirstEnglishworkingdayofanewmonth,theCumulativeWithin-dayindexwillresetandwillbeidenticaltotheWithin-dayindex.

Thecumulativeindexrequiresaminimumofthreetransactions.Whentherearefewerthanthreeeligibletransactionstheindexwillnotbedisplayed.

Formulation of the Day-ahead index

TheDay-aheadindexisavolume-weightedaveragepriceofalltheDay-aheadtransactionsincludedinESGMforgastobedeliveredtotheassociatedmarket.

TheDay-aheadindexrequiresaminimumofthreetransactions.Ondayswhentherearefewerthanthreeeligibletransactions,theindexispublishedasthemidpointofthebid/offerpriceassessmentpublishedfortheDay-aheadcontract.


Formulation of the Cumulative Day-ahead index

TheCumulativeDay-aheadindexisavolume-weightedaveragepriceofalltheDay-aheadtradesincludedinESGMsofarthatcalendarmonth,uptoandincludingthepublicationdate.OnthefirstEnglishworkingdayofanewmonth,theCumulativeDay-aheadindexwillresetandwillbeidenticaltotheDay-aheadindex.

Thecumulativeindexrequiresaminimumofthreetransactions.Whentherearefewerthanthreeeligibletransactionstheindexwillnotbedisplayed.

Formulation of the Weekend index:

TheWeekendindexisavolume-weightedaveragepriceofalltheWeekendtransactionsincludedinESGMsincetheexpiryofthepreviousWeekendcontractandforgastobedeliveredtotheassociatedmarket.InatypicalworkingweekthiswouldcoverallWeekendtransactionssourcedbetweenMondayandFridaybeforetheperiodofdelivery.

Theindexrequiresaminimumofthreetransactions.Ondayswhentherearefewerthanthreeeligibletransactions,theindexispublishedastheaverageofthemidpointsofthebid/offerWeekendpriceassessmentpublishedforthatmarketduringalltheworkingdayswhichfallinthesamecalendarweekastheWeekendindexandprecedethepreviousindexweekend.

Formulation of the Spot Weekend index

TheSpotWeekendindexisavolume-weightedaveragepriceofalltheWeekendtransactionsincludedinESGMonthedatebeforethestartofthedeliveryperiod.InatypicalworkingweekthiswouldrefertoallWeekendtransactionssourcedonaFriday.

Theindexrequiresaminimumofthreetransactions.Ondayswhentherearefewerthanthreeeligibletransactionstheindexispublishedasthemidpointofthebid/offerWeekendpriceassessmentpublishedforthatmarketduringthefinalworkingdayimmediatelyprecedingtheindexweekend.

Formulation of the Monthly index

TheMonthlyindexiscalculatedonthefinalworkingdaypriortothestartofdelivery.TheMonthlyindexisavolume-weightedaveragepriceofalltheMonth-aheadtransactionsincludedinESGMforgastobedeliveredtotheassociatedmarketandwhichhavebeensourcedsincethestartofthemonthpriortodelivery.

Theindexrequiresaminimumofthreetransactions.Whentherearefewerthanthreeeligibletransactions,theindexispublishedasthearithmeticalaverageoftheallthemonth-aheadbid/offerpriceassessmentmidpointspublishedforthatmarketduringthecalendarmonthpriortothedeliverymonth.

Formulation of the Monthly Cumulative index

TheMonthlyCumulativeindexisavolume-weightedaverageofallmonth-aheadtradessourcedsincethestartofthemonthpriortodelivery.Theindexisupdatedoneachworkingday.BytheendofthemonthpriortodeliverytheMonthlyCumulativeindexwillbethesameastheMonthlyindex.

Theindexrequiresaminimumofthreeeligibletransactions.Whentherearefewerthanthreeeligibletransactions,theindexwilldisplayN/A.

Formulation of the Daily Month-ahead index

TheDailyMonth-aheadindexisavolume-weightedaveragepriceofallthemonth-aheadtransactionsincludedinESGMonthedayofpublicationforgastobedeliveredtotheassociatedmarket.

Theindexrequiresaminimumofthreetransactions.Whentherearefewerthanthreeeligibletransactions,theindexispublishedasthearithmeticalmidpointofthatmarket’smonth-aheadassessmentpublishedthatday.


ESGM trades tables – General and country-specific definitionsTradingdataispublishedfortheBritish,Belgian,Dutch,French,German,Austrian,Italian,Czech,SpanishandTurkishmarketsonadailybasis.FulltradelistingsareavailablebyFTPdownload.Theover-the-counter(OTC)transactionsprovidedarethosereliablyidentifiedbyESGMonthedateofthereport.Dealsarelistedbydeliverydate,volumeandprice.

DealsexcludedbyICISreportersasnon-standardoranomalousarenotincludedinthisdata.

Gastradesconductedin€/MWharetypicallytransactedinhourlyclipsizes.TheexceptionistheFrenchmarketwheretransactionsaredoneonaperdaybasis.ThustheFrenchvolumespublishedhavebeencalculatedbydividingtheoriginaltradedvolumesby24toobtaina€/MWh/hourfigureconsistentwithneighbouringcountries’tradingunits.Thisisthenconvertedtoproduceatotalvolume.NBPandZeebruggetransactionsaredoneonaperdaybasisandthenconvertedtoproduceatotalvolume.

InESGMunderthepagewiththetitle‘Trades’twotablesarepublished.Thefirsttableshowsthetotalvolumetradedineachmarket,inMWh,withapercentagebreakdownoftradebetweencurveandpromptcontracts.PromptisdefinedasallcontractswithdeliveryuptoBalance-of-month.Curveisdefinedasallcontractswithdeliveryincludingandforwardsofthefrontcalendarmonth.Thetotalnumberoftradesisalsolisted.

Thesecondtableshowsthedailyhighandlowtradesforeachmarketforthefollowingkeycontracts:Day-ahead,frontmonth,frontquarter,frontseasonandfrontCalendarYear,allinMWh.Ifnotradehasbeenreportedthen“n/a”willbeshown.

Spark spreadsTheBritishandGermangasandpowerpricesquotedinESGM’sSparkSpreadtablesarederivedfromthepriceassessmenttablesanddailyindicesinESGMandsisterpublicationEuropeanDailyElectricityMarkets(EDEM).Allthepowerpricesquotedareforbaseloaddeliveryand,withtheexceptionofDay-ahead,arethemid-pointoftheclosingpriceassessmentoftherespectivecontractonthedayofpublication.

ICIScalculatesthesparkspreadprofitmarginbytakingthecostofpowerperMWhminusthecostofthegasneededtogeneratethatpower.

Thecostiscalculatedusingindustrystandardplantefficienciestotakeaccountofenergynotconvertedintoelectricalenergyandthereforelost.

ICISusesthestandardgas-firedplantefficiencyfactorof49.13%,anindustrystandardtoallowforefficientsparkspreadtrading,onthebasisthat100,000thermsofgascouldgenerate60MWofpower.

Thesparkspreadvalueisthereforethepowerpriceminusthegaspricedividedby0.4913,ie,sparkspread=powerprice-(gasprice/0.4913).

TheUKgaspriceinpence/therm(Britishthermalunit)isconvertedto£/MWhbydividingbyastandardfactorof2.93071.

Apositivespreadmeansthatitistheoreticallyprofitabletogenerateelectricityfortheperiodinquestion,whileanegativespreadmeansthatgenerationwouldbealoss-makingactivity.However,itisimportanttonotethatthespreadsdonottakeintoaccountadditionalgeneratingchargesbeyondfuelandcarbon,suchasoperationalcosts.

ICISusestheDay-aheadindexvalueforDay-aheadelectricityandgasvaluesinBritainandGermany,andthemidpointofbaseloadpowerpriceassessmentvaluesforallothercalculations.

ForfurtherinformationonthecalculationofSparkSpreadspleaserefertothemethodologydocumentforEuropeanDailyElectricityMarkets.

Other primary data tables in ESGM


ICE Natural Gas FuturesThistableshowstheclosing(“settle”)pricesforthenaturalgasfuturescontractstradedontheIntercontinentalExchange,ICE.PricesandotherdataarepassedtoESGMbyICEatsettlementtime,currentlybetween16:00-16:15Londontime.Closeofbusinessis17:00Londontime.“Change”isthechangefromthepreviousworkingday’ssettlementprice.“High”and“Low”representthehighandlowtradedpricesforthedayinquestion.“Lots”representsthevolumeoftradeforeachcontract:1lot=1,000thermsperday,althoughitshouldbenotedthatundercurrentexchangerulestheminimumtradesizeisfivelots.“Mthtotal”representsthetotalnumberofthermstraded,expressedinmillionsoftherms.“Openinterest”representstheopeninterestforeachcontractatthepreviousday’sclose.Forfurtherinformation,visitICE’swebsite.

Day-Ahead Beach Terminal Capacity Prices ThesearesecondarymarketpricesforBritishentrycapacityatthemostactivebeachterminalsforthefollowingworkingday.PricesareassessedbyESGMinthesamemannerandatthesametimeasspotcommodityprices.

OCM SMP/SAP Report/OCM Trading figures Thesetablesprovideasnapshotofthepreviousday’sactivityontheOn-the-dayCommodityMarket(OCM),whichisoperatedbyexchangegroupICEEndexinordertophysicallybalancetheBritishgassystem.TwotablesareincludedandallinformationpresentedcomesfromTSONationalGrid.ThefirstshowsthelatestpriceandtradeinformationfromthecurrentGasDayasof18:00Londontime.ThesecondtableshowstheOCMactivityfromthepreviousGasDay.SAP(SystemAveragePrice)isthevolume-weightedaverageofallOCMbuysandsellsontheday.SMP(SystemMarginalPrice)BuyisthehighestpriceatwhichNationalGridboughtgasforthesystem.SMPSellisthelowestpriceatwhichNationalGridsoldgasoutofthesystem.SAP7-dayandSAP30-dayareseven-dayand30-dayrollingaverages.Forfurtherinformation,pleasecontactICEEndex.

Oil market price assessmentsICISpublishesthefrontmonthICEBrentcrudepriceat16:30Londontimeeachday.

GasoilandFuelOilpricesaretakenfromtheICISEuropeanProductsreport.Theassessmentsvaluebargesforaforwarddeliverywindowof2-12daysandintheindustrystandardsizeof1,000-5,000tonnes.

TheGasoil0.1%sulphurassessmentisforbargesonanFOBARAbasis.ItisusesGermanDINqualityinlinewiththeIPEGasoilFuturesContract.Coldpropertiesvaryseasonally.

TheFuelOil1%sulphurbargecontractisforbargesonanFOBARAbasis.Itusescrackedmaterialwithatypicalviscosityof380cstat50˚Candadensityof0.965to0.990at15˚C.

National Grid Daily Capacity Summary TheseareNationalGriddailyauctionaveragepricesforWithin-dayfirmandinterruptibleentrycapacityattheninemostactiveBritishbeachterminals.Thetableliststheaveragepricepaid,inpenceperkilowatthour(p/kWh),forbothfirmandinterruptiblecapacity,aswellasthetotalvolumeofcapacityavailableaswellasbookedinkWh.ForfurtherinformationpleasecontactNationalGrid.

WeatherPan-Europeanweatherforecastsona1-5dayand6-10daybasisareprovidedtoESGMbyWeatherServicesInternational.Formoreinformation,pleasee-mail:[email protected]’swebsite

Secondary data in ESGM


Forwardcurrencyratesarecalculatedusing29pricingpoints,sourcedfromBloomberg,at16:30Londontimeeveryday.Thepricingpointsusedareallofthoseavailable:spot,oneweekahead,24monthsahead,andthreetofiveyearsahead.

Usingthesepoints,ICIScalculatesasmoothcurvewhichprovidesratesforeachdayouttofiveyears.Fromthesevalues,ICIScalculatesratescorrespondingtothecontractsquotedinESGM.

Currency conversions


Changes to methodologyAllmarketsevolve,andICIShasadutytoensureitsmethodologiesformarket-reportingevolveinstepwithmarkets.

ICISthereforeregularlyconductsinternalreviewsoftheappropriatenessofitsmethodologies.

Draftchangesarethenmadepublicandcommentrequestedfromindustryparticipants,withaminimumone-monthnoticeperiod,exceptwhere,exceptionally,aforcemajeureevent(naturaldisaster,war,bankruptcyofatradingexchangeetc)makesnecessaryashorternoticeperiod.

ICISiscommittedtoreviewingallcommentsonproposedmethodologychanges,butinsomecasesmayfinditnecessarytoalteritsmethodologiesagainstthewishesofsomemarketparticipants.

Inaddition,ICIShasaformalmethodologyconsultationprocess.ThecompanycommitstoholdingthisconsultationeverytwoyearsforESGM.Thedateofthelastconsultationlaunchedandtheexpirydatebywhichthecompanycommitstoconductingthenextconsultationcanbeseenatthetopofthemethodologydocument.

PleasealsorefertotheMethodologyConsultationProcesssectionofthecompany’sComplianceManual.Thiscontainsdetailedflowchartsdocumentingtheinternalandexternalreviewandconsultationprocess.

ConsistencyICISachievesconsistencybetweenitsassessorsinexercisingtheirjudgementbyrequiringallassessorstounderstandandfollowthisdetailedmethodologyaswellasthecompany’sEditorialStandardsdocument.Inaddition,ICISemployeesarerequiredtocompletestandardtrainingbeforeundertakingtheworkofamarketreporter.Everyreporter’sworkispeerrevieweddailyandspotcheckedbyseniormanagement.

Adherencetotheseprocessesisdocumentedateverystage.

Data standardsICIShasapublicDataStandardsPolicywhichcoversthetypeandqualityofinformationitasksmarketparticipantstoreport.

ThefollowingprinciplesrelatetoICISgasmarketassessmentsandcommentaries:

• Wherepossible,pleaseallowaccesstoactivemarkettradersandallowthemtocommentonactivenewsstories.

• Wherepossible,pleaseprovidemarketdatafrombothfrontandback-officefunctions.

• Wherepossible,pleaseprovidecompletedataandnotasubsection.

• Flaginter-affiliatetransactions.

• Flagsleevetrade.

• Flagspreadtrades.

• WhenasourceorcontactleavestheorganisationpleasecontactICIStothereplacement(ICISrequeststhatboththesourceandtheorganisationcontactsthem).

• Whereinformationisnotvalidatedbythesource(i.e.rumour)pleaseindicateassuch.

Delivery locationsLocationsforICISESGMassessmentsandindicesarechosentoreflectareasoftradedliquidity.Formostmarkets,deliveryisatavirtualhub.Wheretradetakesplaceataphysicalpointonanetwork,ICISmayalsoprovideapricingreferenceforthispoint.Thenatureofthedeliverypointisdescribedinthemethodologydocumentaboveinthesection“DefinitionsofHubs”.

Key submitter dependencyBecauseofthesometimesthinly-tradednatureofcertaingasmarketsandtheexistenceofmarketswheretherearealimitedpoolofactivecounterparties,ICISdoesnotemployminimumrulesonthenumberofsubmitters.ThisisparticularlytrueofthenewestEuropeantradedmarkets,whereICISplaysakeyroleinbringingpricetransparencyandefficienttradingtomarketsintheearlystagesofdevelopment.

ForallmarketsICISonlyconsidersbid/offerdatatobeconfirmedwhenithasbeenverifiedbythreeindependent,non-affiliatedsources.IfthiswasnotthecasethenICISwillmarkanassessmentindicative.Seesectionabove,“PriceAssessments–IndicativeAssessments”.

Other principles and guidelines


Market CommunicationICIScommunicateswithabroadrangeofmarketparticipants–traders,brokers,back-officeemployees,supplymanagers,operationspersonnelandcompanyexecutives–toobtainmarketinformation.

ICIScommunicateswithparticipantsbytelephone,email,instantmessengerandfacetoface.Allinstantmessenger,emailcommunicationandnotesofanyface-to-facecommunicationarearchivedanddetailsoftelephonecommunicationareloggedanddata-based.

ICISdoesnotacceptinstantmessengercommunicationfromunknownparties,andreportersarerequiredtoverifyamarketparticipant’sidentitypriortousinginstantmessagecommunication.

ICISdoesnotregardinanywayasbinding,attemptsbymarketparticipantcompaniestorestrictICIScommunicationwiththeiremployees.ICIShasadutytoitssubscriberstoobtainthemaximumpossibleamountofmarketinformation.ICIStreatsallcommunicationfrommarketparticipantsasconfidential.

ICISreportersareboundbyaCodeofConducttoreporttotheirsuperiorsanycoerciveorthreateningcommunicationfrommarketparticipants,oranyoffersofinducementsofanykindintendedtoinfluenceanassessment.

Whereimpropercommunicationappearstohavetakenplace,ICISwillcommunicateinthefirstinstancewithseniormanagementatthecompanyorcompaniesinvolved,andifnecessarywithrelevantmarketauthorities.

ICISexpectsthehigheststandardsofproprietyfromallmarketparticipants,andregardsallcommunicationsfrommarketparticipantsasrepresentativeoftheviewsofanindividual’semployer.

ICISiscommittedtothehighestlevelsofcustomerservice,andhasaformalfeedbackandcomplaintspolicy,whichcanbeviewedherehttp://www.icis.com/about/icis-feedback-policy/.

Market data verificationICISwillalwaysmakebestendeavourstoconfirmbids,offersandtransactionswiththerelevantparty/parties.ICISattemptstocross-checkallmarketdatareceivedfromabuyorsell-sideparticipantwithaparticipant’stradingcounterparty.

Wherebothcounterpartiestoatransactioncannotorwillnotconfirmthedata,ICISseekscorroborationfromothermarketsources.

Wheretransactionorbid/offerinformationhasbeenreceivedfromatraderratherthanfromacompany’sbackoffice,ICISalwaysseeksconfirmationfromothersources.

WhereICIShasgroundstodoubtanitemofmarketdata,itmayrequestfurtherevidencethatatransactionhastakenplace,includingdocumentaryevidence.

ICIStreatstransactiondatareceivedfromactivebrokeragesasconfirmedandtreatsbid/offerinformationasfirm.Thisinformationwillbeconsideredinconjunctionwithothersourcesduringtheassessmentandindexprocessasdescribedabove.

Inmarketswithlowliquidityandalownumberofcounterparties,ICISmaychoosetouseunconfirmeddata,butonlyinsofarasitisalignedwithothermarketinformationandcomesfromasourcedeemedreliablebyICISbasedonpreviousinteractions.

Minimum data thresholdBecauseofthesometimesthinly-tradednatureofcertaingasmarketsandcontracts,ICISdoesnothaveaminimumdatathresholdforitsassessmentmethodologiesinthesemarkets.ICIS’gasmethodologyisdesignedtofunctionaccuratelyunderallmarketconditionsandtomakeuseofparalleldatawherenodirecttransactionorbid/offerdataisavailable.Seethesectionentitled“PriceAssessments–ExerciseofJudgement”above.

ICISdoesimplementaminimumdatathresholdforitsindices,however.ICISwillnottypicallypublishanindexuntilithasatleastsixmonths’worthofdatashowingthatatleast10dealshavebeencompletedforeachindexperiod.

Whenanindexseriesislaunched,ICISpublishesaminimumnumberoftransactionsanindexmustmeetinorderforaweightedaveragetobecalculated.Ifthenumberofdealsfallsbelowthisthreshold,ICISrevertstoadefaultmethodologyusingitsassessmentsorpreviousindexvalues.Thesedefaultsarespecifiedaboveinthesectionentitled“Indices–definitions”.ICISdoesnotconsidersuchmethodologyswitchesdesirableintermsofconsistencyandtransparencyandendeavoursnottolaunchanindexwhereitbelievesthereisalikelihoodthattheminimumdatathresholdwillnotbemet.


Quality specificationsThephysicalcharacteristicsofthegasvaluedbyICISinitsassessmentsandindicesisdefinedbythenetworkoperatorofthevirtualhuborphysicalinfrastructureowner.Foralistoftheseoperatingcompaniespleaseseethesectionaboveentitled“DefinitionsofHubs”.

Selectionofparticipants

ICIS’policyongeneralmarketdataisthatitwelcomesallinformationregardlessofsourceorconstitutionaslongasitisprovidedingoodfaithastrue.

However,onlyactivemarketparticipantsverifiedassuchbyexistingactiveindustryparticipantsandverifiedasaviablebusinessbyICISinvestigationswillbeallowedtocontributepricedatatoICISforthepurposeofassessingtradablemarketvalueunderthismethodology.

UnitsICISassessesgasmarketsintheunitswhichattractthemajorityoftrade.FormosthubsinEurope,tradingactivityhasconformedtoonestandardunit,usuallyeitherpencepertherm(p/th)oreurospermegawatthour(€/MWh).

ICISusesaconversionfactorof1therm=0.0293MWhwhensuchaconversionisrequired.

UnitsofenergyareusedfortradingpurposesinallactiveEuropeanmarkets,ratherthanunitsofvolume.

Intheearlydaysofmarketdevelopment,however,theremaybemultipleunitstrading.ICISwilltypicallyassessusingthemostregularlytradedunitandpublishparallelassessmentsinotheractiveunits.

ICIS Contact DetailsTocommentonthisdocumentorrequestfurtherinformationpleasecontact:

EdCox Editor,ESGM

[email protected]

+442079111772

LouiseBoddy Director,GlobalEnergyMarkets

[email protected]

+442079111948

For regulatory or compliance issues please contact:

RichardStreet HeadofRegulationandCompliance

[email protected]

+442079111427

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