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Power & Emissions @ Nord Pool

Power & Emissions @ Nord Pool. Tanja Ilic Senior Vice President Sales & Marketing Nord Pool . Nord Pool. How to succeed in the new market environment?. The European Power Scene. Physical voluntary day-ahead market ”Elspot” Adjustment market ”Elbas”

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Power & Emissions @ Nord Pool

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  1. Power & Emissions @ Nord Pool Tanja Ilic Senior Vice President Sales & Marketing Nord Pool

  2. Nord Pool How to succeed in the new market environment?

  3. The European Power Scene

  4. 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. The Nord Pool group

  5. Power exchanges in Europe Nord Pool APX Towarowa ECX Endex Borzen Belpex EEX THRU PWX Gielda EXAA Opcom Sa Gestore ITL Mercado Mercado

  6. Present situation • Nord 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

  7. >420 Members physical and financial market Emissions – 112 members Nordic Free Trade Area The exchange 400 TWh consumption The model for an openand deregulated market Financial trade is 7 times the consumption Physically traded Efficient wholesale market with adequate products and services for companies competing in the market

  8. 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

  9. More then 80 active players..

  10. Market share exchange July > 50% August > 50% September: 50%

  11. What is important? Experience and knowledge • Liquidity • Product range and product development • Competitive terms • Netting and cross margining possibilities Development in an competitive environment

  12. 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

  13. 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

  14. 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

  15. 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

  16. Challanges • Exchange 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.

  17. www.nordpool.com Merci ! Tanja.ilic@nordpool.com

  18. Stock exchanges ten years ago

  19. Stock exchanges today

  20. A global market of emission instruments EUA/CER JI Host CER CDM Host CER CDM Host

  21. Nord Pool

  22. Monitoring and legislation of Nord Pool. National Competition authorities in Finland, Sweden, Denmark and Norway Monitoring the market place and the market participants Nord Pool Market Surveillance National Supervisory Authorities Financial and Energy

  23. Time 6 Years 24 Hours 0 Reference price Financial market Physical market Adjustment market Balance Service Cash settled Physical delivery The concept • 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

  24. Competitive terms • Liquidity • Price • Products • Market coverage • Service level • Reporting • Customer relation • Risk m. services • Solidity • Company risk profile

  25. 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 byNord Pool ASA and the Nordic TSOs Group operational structure • A regulated financial market place • Providing trade in standardised derivative contracts • Electricity futures/forwards/options • EUA spot and forwards, CER forwards • Wholly-owned by Nord Pool ASA

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