power & emissions @ nord pool tanja ilic senior vice president sales & marketing nord pool
TRANSCRIPT
Power & Emissions @ Nord Pool
Tanja IlicSenior Vice President
Sales & Marketing
Nord Pool
How to succeed in the new market environment?
Nord Pool
The European Power Scene European consumption 2005
Numbers are in TWh
0 100 200 300 400 500 600
LuxembourgDenmark
GreeceSwiterland
AustriaFinlandBelgium
NetherlandsNorwayPoland
SwedenSpain
ItalyUK
Nordic areaFrance
Germany
Source: UTCE and Nordel
Highest total consumption in the history for the Nordic countries
The Nord Pool group
Physical voluntary day-ahead market ”Elspot”Adjustment market ”Elbas”
Published system price reference for the financial market
Financial-delivery contracts based on Elspot price
Futures, forwards, options and Cfd s with maturities of up to 3-4 years
Direct exchange in competition with brokers
First exchange to trade contracts for European Allowances
EUA forward and spot market
CER forward
Clearing of exchange traded and bilateral derivative contracts
Clearing for both electricity and green markets
Specialist consulting firm providing strategic and management consulting services within the electricity business world wide.
EEX
Nord Pool
APX
PWX
Power exchanges in Europe
Gielda
ECX
Mercado
Borzen
Gestore ITL
Belpex
Towarowa
Opcom Sa
Endex
EXAA
THRU
Mercado
Present situationNord Pool
Largest exchange for power in Europe both physical and financial. Market coupling between the Nordic area working since 1996
Working to increase volume and members through market and sales activities and product/market development – Introduced CER contracts 1st June as the first exchange
Growing more and more customer joining even after 10 years of business and experience
The model for an openand deregulated market
NordicFree Trade Area
400 TWhconsumption
Financial trade is 7 times the consumption
Efficient wholesale market with adequate products and services for companies competing in the market
>420Members
physical and financial market
Emissions – 112 members
The exchangePhysically
traded
Nord Pool 60 %
OTC 40 %
Our reach – Some of our participants
Norway• Energipartner• Statkraft• Norsk Hydro• Elkem• Nordea• DnB Nor
Denmark • Dong• Energi Danmark• Danske Commodities• Nordjysk Elhandel• ScaenEnergi
Sweden• Vattenfall• EON• Sheperd• Alfa Kraft• Öresundskraft
UK • UBS Ltd• Barclays Bank• Morgan Stanley• Merill Lynch• Shell
Finland• Fortum• Sampo Bank• Helsingfors Energi
Other• Fortis• Tudor• J Aron• BHF Bank• Cargill• NUON• RWE• Essent, Eneco and many more
More than 400 members from 21 countries
More then 80 active players..Number of Active Players
Weekly 2004-2007
0
20
40
60
80
100
2004 2005 2006 2007
Market share exchangeMarket Share Nord Pool Financial Market
32,0 % 33,8 %38,2 % 36,1
42,8 %
0%
20%
40%
60%
80%
100%
2003 2004 2005 2006 2007
Nord Pool Exchange Nord Pool OTC
July > 50%
August > 50%
September: 50%
What is important?
Experience and knowledge
Liquidity Product range and product development Competitive terms Netting and cross margining possibilities
Development in an competitive environment
Liquidity is key to success Comprehensive product range for hedging and
trading needs.
Satisfied customers that choose to do their hedging and trading at Nord Pool - Fundamental customer base attract financial players .
Strong sales drive to recruit new customers into the market.
Market Makers
Distribution channels-easy access to Market Place
Product range emissions at Nord Pool
European Union Allowances (EUA) Introducing CER as the first exchange from 1st
June Physical Forward contracts for 2006-2012,
covering the whole Kyoto period Spot contract EUA (Day-ahead) Clearing services includes Over-The-Counter Guarantees physical delivery and financial
settlement Netting between commodities
Netting and cross marginingA future need …
Change in customer needs Multi markets and multi commodities Minimum capital requirement Risk management
Customers require netting of positions and cross margining over products and markets
What are the general drivers?
Globalisation Market coverage Product range Falling borders
Economy of scale Cost pr. transaction
Harmonisation of regulatory framework From national champions to global competitors
Financial strength Completing acquisitions Stand up in competition
ChallangesExchange and market place consolidation
Tougher competition. Exchanges with net loss today will get it even harder tomorrow
Trading energy
Trading in larger markets with high liquidity tight spreads
Environmental focus
Nord Pool is ready and will take the next step to be part of a Global energy market.
Trimming the organisation to be dynamic and fast mover. Infrastructure ready to include new markets and products.
Nord Pool will seek strong strategic partners to stay on top of the business.
Stock exchanges ten years ago
Stock exchanges today
A global market of emission instruments
EUA/CER
CDM Host
JI Host CER
CDM Host
CER
Nord Pool
National Competit
ion authoriti
es in Finland, Sweden, Denmark
and Norway
National
Supervisory
Authorities
Financial and
Energy
Nord Pool Market
Surveillance
Monitoring and legislation of Nord Pool.
Monitoring the market place and the market participants
Physical market:
Auction - supply and demand cross (system price). Mechanism for handling of constraints. Handled by Nord Pool Spot - Elspot
Adjustment market:
Continuous hourly market. Handled by Nord Pool Spot – Elbas
Balance Service:
Operated by Transmission System Operators (TSO)
Financial market:
Cash settled Futures, Forwards and Options. Handled by Nord Pool ASA
Clearing (financial):
Exchange trade
OTC Trade
Handled by Nord Pool Clearing ASA
Financial market
Physical market
Adjustment market
Balance Service
Time
6 Years 24 Hours 0
Physical delivery
Reference price
Cash settled
The concept
Competitive terms
Liquidity Price Products Market coverage Service level
Reporting Customer relation Risk m. services
Solidity Company risk profile
Volume and fee development at Nord Pool Financial Market ( yearly 1993-2006)
0
200
400
600
800
1000
1200
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
TWh
0,00
0,02
0,04
0,06
0,08
0,10
0,12
EUR/MW
h
Volume financial market TWh Average fee trading+clearing (financial market)
Group operational structure
A licensed and regulated clearinghouse
Clearing counterparty for derivative contracts Exchange-
traded OTC-traded
Wholly-owned subsidiary of Nord Pool ASA
A regulated physical marketplace
Clearing counterparty for physical electricity contracts
Separate subsidiary, owned 20% each by Nord Pool ASA and the Nordic TSOs
Nord Pool Spot Nord Pool Financial Markets Nord Pool Clearing
Nord Pool Group
A regulated financial market placeProviding trade in standardised derivative contractsElectricity futures/forwards/optionsEUA spot and forwards, CER forwardsWholly-owned by Nord Pool ASA