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Polish Energy Market

Polish Energy Market. Jarek Astramowicz 10 March 2003. Polish Power Sector - Overview. Generation t otal installed capacity - 3 4 2 00 MW peak demand – 23,000 MW, minimum demand - 15,000 MW annual demestic production – 155 TWh annual domestic consumption – 137 TWh

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Polish Energy Market

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  1. Polish Energy Market Jarek Astramowicz 10 March 2003

  2. Polish Power Sector - Overview • Generation • total installed capacity - 34200 MW • peak demand – 23,000 MW, minimum demand - 15,000 MW • annual demestic production – 155 TWh • annual domestic consumption – 137 TWh • net power exports – 7 TWh • 96% of the total power output is generated by the coal fired plants and CHPs (hard coal and lignite) • Transmission • Polish Power Grid Company (PSE SA) - owns, operates and maintains the high voltage grid (220 kV, 400 kV and 750 kV) • Distribution • 33 local distribution companies • they own and operate the medium- and low-voltagetransmission and distribution grids (110 kV and below)

  3. Regulation • Energy law of 10 April 1997 (last amendments introduced on 1 January 2003) • The President of Energy Regulatory Authority (URE) • issuing licences • approval and control of energy tariffs • control of customer service quality standards

  4. Polish Power Grid Planned line to Lithuania 500kV submerged line to Sweden, under construction Żarnowiec P.S. Russia Lithuania Baltic Sea Żydowo P.S. Gdańsk Olsztyn Dolna Odra Bydgoszcz 230 MW Ostrołęka 2 x 410 MW Szczecin Włocławek Płock Poznań Belarus Warszawa Germany Pątnów Siekierki Dychów P.S. Konin Adamów Bełchatów Kozienice 2 x 310 MW Wrocław 1400 MW Turów Opole Stalowa Wola Połaniec Łagisza 750 kV Power Transmission Lines Total Length: 114 km CHP Nowa Sarzyna 2 x 110 kV 340 MW Łaziska Katowice Siersza Kraków 1,300 MW Rzeszów 110 kV 400 kV Power Transmission Lines Total Length: 4 677 km Rybnik Kraków Łęg Czech Republic Skawina 220 kV Power Transmission Lines Total Length: 8 127 km Jaworzno III 2 x 875 MW Porąbka-Żar P.S. 110 kV Cross-border Power Transmission Lines Rożnów 2 x 290 MW Thermal Power Plants over 1000 MW Solina Thermal Power Plants from 250 to 1000 MW Ukraine Hydro Power Plants 2,000 MW Slovakia Cities

  5. Privatisation.Distribution company groupings ZE Słupsk ENERGA Gdańska Kompania Energetyczna Elbląskie ZE • Enea • G-8 • L-4 • K-4 • Other ZE Koszalin ZE Szczecin ZE Olsztyn ZE Białystok ZE Bydgoszcz ZE Toruń ZE Płock ZE Gorzów Energetyka Poznańska STOEN (Warszawa) ZE Warszawa Teren Zielonogórskie ZE ZE Łódź Energetyka Kaliska ZE Legnica ZE Łódź Teren ZE Lublin LUBZEL ZE Wrocław ZE Jelenia Góra ZEORK Skarżysko- Kamienna Zamojska Korporacja Energetyczna ZE Częstochowa ZE Opole ZE Wałbrzych Będziński ZE Rzeszowski ZE Górnośląski ZE ZE Tarnów Beskidzka Energetyka ZE Kraków

  6. Balancing Market • effective introduction in September 2001 and its continuous functioning and improvement • by its effective introduction Poland has removed the last remaining structural obstacle in creating a competitive wholesale electricity market • current high volumes will get lower as the other market segments (PX, OTC) develop and when pricing mechanism gets adjusted

  7. Contract price CRO 250 200 150 price 100 50 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 day Contract volume Real demand overcontracted 450 overcontracted 400 350 300 250 200 150 100 50 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Balancing Market till 30th June 2002 loss profit undercontracted volume day

  8. Contract price CROs CROz 250 CRO 200 150 price 100 50 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 day undercontracted Contract volume Real demand overcontracted 450 overcontracted 400 350 volume 300 250 200 150 100 50 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 day Balancing Market from 1st July 2002

  9. Balancing Market prices from 1st September 2001 till 30th June 2002

  10. Power Exchange • over-invested in systems and structure • high transaction costs • faulty PX participation agreements (all risks shifted onto participants) • attempts sophisticated products without first fully developing & mastering the basics • major failure - it has not created a reliable index

  11. Balancing Market prices from 1st July 2002 till 17th July 2002 Balancing Market and Power Exchange volume from 17th June till 17th July2002

  12. OTC Market • relatively high volumes available for trading • large number of „active” participants both current & potential • objective price index can be created • most of the action will take place in the near future

  13. „Long-term contracts” • they cover only 60% of the market with 30% or more available for trading (10% - is the forced generation) • 30% of the Polish wholesale market exeeds 35 TWh of electricity worth almost USD $1 bln • „lets learn how to trade the 35 TWh before we attempt to trade the remaining 70 TWh”

  14. Company • JAC EnTra was established in August 1998 (originally as Enron Poland) and changed its name in February 2002 as a result of an MBO • Since MBO additional investors were attracted, resulting in equity capital increase up to a total of almost 17 mln pln • 10yearpower trading license received in April 1999 • 10 years domestic gas trading license received in March 2001 and gas import license received in May 2001

  15. Commercial achievements to date • Commercial efforts for 2002/2003 • Over 1 TWh of electricity for sale contracted for 2003 • Three EFET type Master Trading Agreements signed • Several EFET Masters under active negotiations • 5 year, 50 MW„call” option concluded (valid through September 2005) with the largest Polish power generation group • 2003 physical forward power deliveries for 340 000 MWh confirmed with confirmations to be signed next week • Brokerage deals concluded and/or delivered on to date • August, September and October 2002 – total deliveries of 150,000 MWh • 6 month call option for power import through SwePol link cable concluded with PSE SA • 0,3 TWh of power exports concluded during 1999–2000 • Launching electricity trading through its newly established Kantor Energii • The first trading session took place on 29 January 2003

  16. What is Kantor Energii ? • Day ahead and two days ahead, real time, hourly electric energy continuous trading program • Internet connection allows for fast and safe (SSL protocole) „click’n trade” activity • All transactions are concluded with JAC EnTra at the fixed, listed prices for the same transaction unit (number of MW in one hour) • Our bids and offers are continously changed („active market making”) reflecting real-time demand and supply changes

  17. Kantor Energii at the Polish power market Balancing Market OTC market Power Exchange Demand Supply KANTOR ENERGII

  18. Trade sessions • Morning session – day ahead contracts concluded • Afternoon session – two days ahead contracts concluded • Confirmations of the concluded contracts – after each session 7:15 08:45 09:00 12:00 13:00 13:15

  19. Transaction example for one hour BM sells 250 PLN/MWh BM buys 09:00 – trading closed 50 PLN/MWh KE sells 250 230 250 230 KE buys 80 100 90 80 KE profit/loss 0 170 150 150 280 440 410 560

  20. Thank you for your attention

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