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WHY DO WE NEED WELL FUNCTIONING EXCHANGE AND BILATERAL MARKETS?

WHY DO WE NEED WELL FUNCTIONING EXCHANGE AND BILATERAL MARKETS?. Piotr Wąsik Financial Managing Director, Member of the Board VATTENFALL ENERGY TRADING POLAND „The Power of the Market” Congress Warsaw, 8 October 2010. Agenda. Proper market – how should it look like? Costs and risks

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WHY DO WE NEED WELL FUNCTIONING EXCHANGE AND BILATERAL MARKETS?

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  1. WHY DO WE NEED WELL FUNCTIONING EXCHANGE AND BILATERAL MARKETS? Piotr Wąsik Financial Managing Director, Member of the Board VATTENFALL ENERGY TRADING POLAND „The Power of the Market” Congress Warsaw, 8 October 2010

  2. Agenda • Proper market – how should it look like? • Costs and risks • Exchange and OTC markets shape in Poland • What are there still missing? • What are the benefits of a properly functioning market?

  3. Exchange market OTC market Wholesale energy market • Organization and Standardization • Transparency and Anonymity • Access • Reference price • Market security • Bilateral nature • Flexibility and matching • Equal and market rules • Delayed cash flows • Brokers’ role

  4. COSTS Exchange and clearing fees Financing costs Credit risk management Brokerage fees Liquidity risk Counterparty risk RISKS EXCHANGE MARKET OTC MARKET Costs and risks on the exchange and OTC markets

  5. Share of PPX spot market in domestic consumption 8% 7% 6% 5% 4% 3% 2% 1% 0% 2009 03-2010 04-2010 06-2010 05-2010 09-2010 07-2010 08-2010 01-2010 02-2010

  6. Wholesale energy market structure in 2007-2009

  7. Wholesale energy market structure in 2007-2009

  8. … and in 2010

  9. What are the weak points of the wholesale energy market in Poland? EXCHANGE MARKET OTC MARKET Size and liquidity Master agreement standard Tradable horizon Transparency and availability Available products Risk management rules Exchange obligation Trading techniques >1 spot exchange? Role of brokers Entry and operation barriers

  10. What are the benefits of the properly functioning wholesale energy market? COMPETITIVENESS PROPER WHOLESALE MARKET EFFECTIVE MARKET RISK MANAGEMENT RETAIL MARKET DEREGULATION PREPARATION FOR MARKETS INTEGRATION REFERENCE PRICE

  11. THANK YOU FOR YOUR ATTENTION Piotr Wąsik Financial Managing Director, Member of the Board VATTENFALL ENERGY TRADING Sp. z o.o. ul. Złota 59 00-120 Warsaw Poland tel. +48 22 587 50 34 e-mail: piotr.wasik@vattenfall.pl www.vattenfall.com/trading

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