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Launching Gas Market on POLPX

Launching Gas Market on POLPX. Leszek Prachniak Director, Quotations Department leszek.prachniak@tge.pl. Particular role of the Commodity Exchange in the gas market in a tariff-based environment. Key role of the Commodity Exchange in the gas market in a no-tariff environment.

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Launching Gas Market on POLPX

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  1. Launching Gas Market on POLPX Leszek Prachniak Director, Quotations Department leszek.prachniak@tge.pl

  2. Particular role of the Commodity Exchangein the gas marketin a tariff-based environment

  3. Key role of the Commodity Exchangein the gas marketin a no-tariff environment

  4. New TNC – four selected definitions

  5. Virtual point – any offtake/delivery point

  6. Minimum requirements for exchange market

  7. Who can trade gas at POLPX

  8. General Information Under the TNS, the following definitions of delivery periods apply on the gas market: • Gas Day corresponds to the day of delivery and is a period from 06.00 hours of the current day until 06.00 hours of the following day. • Gas month corresponds to the month of delivery and is a period from 06:00 hours on the first day of the current month until 06:00 on the first day of the following month. • Winter season is a period from 06:00 hours on the first day of the 4th quarter of the current year until 6:00 hours on the first day of the 2nd quarter of the following year (4th and 1st quarter), • Summer season is a period from 06:00 hours on the first day of the 2nd quarter until 06:00 hours of the 4th quarter (2nd and 3rd quarter). • Gas year is a period from 06:00 hours on 1 October of the current year until 06:00 on 1 October of the following year.

  9. Proposed gas markets • Spot Market • Day Ahead Market(DAM) –contracts with next day delivery of same amount of gas over 24 hours • Commodity Futures Market (CFM) • Monthly, quarterly and yearly Base (24h) forward contracts.

  10. Gas Market – Trading Schedule DAM Continuous trading Registration with TSO 14:00 08:00 12:30 CFM Continuous trading 14:00 08:00

  11. Day Ahead Gas Market-DAM • Trading involves the delivery of equal amounts of gas in all hours of the delivery date. It is a Base type instrument. 1 contract corresponds to the delivery of 1 MWh of gas in all hours of the Delivery Date • Trading is carried out for the duration one day preceding the Delivery Date. • Quotations are provided every day in accordance with the session schedule defined under Detailed Trading and Clearing Rules for the Day Ahead Gas Market. • DAM trading employs the continuous trading system. • Information on concluded transaction (nominations) is submitted to GAZ SYSTEM in the form of work schedules.

  12. DAM Trading Schedule

  13. CFM-Gas • Trading involves the delivery of equal amounts of gas in all hours of the delivery period under the instrument specification. • Trading is carried out on business days from 8:00 am to 2:00 pm. • CFM trading employs the continuous trading system. • The instrument is traded within a period determined in the quotation and execution calendar. The trading period ends two days prior to the execution period (e.g. trading for an instrument with 2013 delivery shall end on 30 December 2012).

  14. CFM-Gas – quoted instruments • The futures market involves trading in forward contracts using the following instruments: • Monthly Instrument – the delivery period corresponds to the gas month and runs from 06:00 hours on the first day of the current month until 06:00 on the first day of the following month • Quarterly Instrument – period from 06:00 hours on the first day of the current month until 06:00 on the first day of the following month, • Yearly Instrument– period from 6:00 hours on 1 January of the current year until 6:00 hours on 1 January of the following year. The delivery period does not correspond to the gas year.

  15. CFM-Gas – Number of Series • Futures Instruments are quoted in series. • Number of series simultaneously quoted for particular instruments: • Monthly Instrument – 3 series; • Quarterly Instrument – 3 series; • Yearly Instrument – 2 series (e.g. contracts for 2013 and 2014 delivery will be quoted in 2012);

  16. No. of Instrument Series • Y_13 • Y_14 Q1_13 Q2_13 Q3_13 M1 M2 M3 November December January

  17. CFM-Gas – Division of Instruments • The division of instruments takes place on the date preceding the start of the execution period. • Yearly, seasonal and quarterly instruments are divided as follows: • A yearly instrument is divided into four quarterly instruments • A quarterly instrument is divided into 3 monthly instruments;

  18. M1 • M2 • M3 • GAS_Y_13 (10) (10) (10) (10) Yearly contract division Q1 Q2 Q3 Q4 (3) Q1 Q1_13 (3) (10) Q2_13 Q2 (-4) Q3_13 Q3 (- 4) Quotations for remaining forward contracts M1 M1 M2 M2 (2) (2) M3 M3 (10) (10) (10) M1 (13) M2 (15) M3 (13) Q2 (10) Q3 (6) Q4 (10) Aggregation of contracts M1 = + = 13 M2 = + + = 15 M3 = + = 13 Q3 = + = 6 10 3 3 2 10 10 3 10 - 4 2012 2013

  19. CFM – Monthly Instrument Specification

  20. CFM - Quarterly Instrument Specification

  21. CFM – Yearly Instrument Specification

  22. Rules for Notifying Transactions to Gaz System (TSO) • POLPX submits information on transactions made (nominations) to the TSO by 2:00 pm • Nominations include the volume of transactions with next day delivery made through POLPX, i.e. the balance of transactions made on DAM and CFM. • Nominations include volumes given separately for each hour of delivery • The TSO accepts for execution all transactions made through the exchange and notified by POLPX • The volume of transactions notified by POLPX under a nomination is executed in its entirety. Nominations are not corrected.

  23. Information Exchange Model – Gas Market TNS Information on transactions made through POLPX

  24. Trading Rules for POLPX Commodity Exchange Market Małgorzata Słomko Legal Advisor Malgorzata.slomko@tge.pl

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  26. New Rules - approved by the decision of the Polish Financial Supervision Authority of 4 September 2012, effective as of 27 September 2012, were only supplemented to include the missing regulations regarding gas transactions made through the Exchange: • appointment of GAZ SYSTEM S.A. as the transmission system operator (similarly to PSE Operator S.A. for electricity) • indication and reference to the Transmission Network Code TNCg in respect of the physical execution of transactions made through the Exchange (similarly to TNCe for electricity) • Shipper who will use gas transmission services under a Transmission contract/transmission ability allocation (PZ), concluded with GAZ SYSTEM S.A. and including at least entry point (170001) and exit point (100001), which is a prerequisite for executing transactions made through the Exchange • Nomination and Shipper Code, necessary for notifying GAZ-SYSTEM S.A. by POLPX about transactions made through the Exchange to be executed (similarly to "scheduling" for electricity) • principles for notifying GAZ-SYSTEM S.A. about gas transactions made through the Exchange to be physically executed (similarly to electricity) • gas transaction fees (similarly to electricity) and conversion of gas units from cubic meters (m³) to megawatt hours (MWh).

  27. Polish Power Exchange GPSA – Gas Purchase and Sale Agreements concluded at the Gas Exchange (trade transactions at POLPX) Legal Basis:POLPX Rules for Commodity Exchange Market Trading and Act on Commodity Exchanges Entities: Exchange Members acting on their own behalf as Shippers, or on behalf of Shippers (A brokerage house can act ,as an Exchange Member, in its own name and on its own behalf as a Shipper, or it can act in its own name but on behalf of a Shipper ) • We trade at a "virtual point" with no specific location; The product offered at the virtual point will be gas fuel – Group E high-methane gas (GZ50); A sale agreement concluded at the Gas Exchange is valid and effective between the parties and to be executed by the TSO Gaz-System S.A. • POLPX requires each Exchange Member to have a transmission agreement with TSO Gaz System + PZ, at least for the virtual point of the Gas Exchange: entry (170001) and exit (100001). • POLPX will not be liable for the physical gas delivery(or electricity delivery); Any gas delivery, including liability for such delivery, will be made under a transmission agreement between TSO Gaz System and Shipper. 2/4

  28. Nomination TSO GAZ–SYSTEM SA Gas Transmission under GPSA by TSO, DSO, SSO (gas delivery under transactions made through POLPX) • Legal Basis: Transmission Agreement + PZ, including at least entry point (170001) and exit point (100001 ) and TNCg • Entities: Shipper • TSO Gaz System assigned two coupled codes to POLPX as a Gas Exchange: Gas Exchange Entry Code 170001 and Gas Exchange Exit Code 100001 and defined the requirements for a Shipper to be able to make transactions at the Gas Exchange: Transmission Agreement + PZ for Entry Point (170001) and Exit Point (100001). • No nomination submitted by POLPX is subject to approval by TSO Gaz System under the TNCg; Any nomination received from POLPX is deemed approved by TSO Gaz System under the TNCg. • Any gas delivery, including liability for such delivery, will be made under a transmission agreement between TSO Gaz System and Shipper. 3/4

  29. We are ready 4/4

  30. Thank you for your attention.

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