Transcript Slide 1

SEM Industry Forum
ESB PG: CfD Implementation Overview
April 16, 2008
Power Generation
Agenda
Introduction
Justin Johnston
Directed Contracts Overview
Eric Slattery
Directed Contracts Process
Hina Patel
Non-directed Contracts Overview
Justin Johnston
PSO Implementation Timeline
Justin Johnston
Power Generation
Overall Timeline for CfD Trading in SEM
Based on the timeline for the Directed Contracts process, ESB PG has
illustrated below the timeline for the NDC and PSO auctions.
Apr
April 14th:
DC Contract
Quantities and
Pricing Formula
Publication
May
Jun
Jul
April 28th
Initial
Supp
May 23rd
NDC Auctions
Directed Contracts
2008
May 29th
NDC Auctions
PSO Auctions
June 19th
June 23rd
PSO
Auctions
July 1st
Power Generation
Agenda
Introduction
Justin Johnston
Directed Contracts Overview
Eric Slattery
Directed Contracts Process
Hina Patel
Non-directed Contracts Overview
Justin Johnston
PSO Implementation Timeline
Justin Johnston
Power Generation
Directed Contracts (DC): Timeline and Product Offerings
Directed Contracts Timeline:

DC Market Dry Run: April 23rd

Subscription Window: April 28th – May 15th

Supplemental Subscription Window: May 19th – 23rd
DC Products for 2008/9:
1.
Baseload: for trading periods at the contract quantity arising in all hours
2.
Mid-Merit (0700 – 2300): for trading periods at the contract quantity during the
hours beginning at 0700 and ending at 2300 on business days and for trading
periods on days that are not business days at 80% of the contract quantity
3.
Peak (1700 – 2100): for trading periods arising during the hours beginning at 1700
and ending at 2100 on all days during October, November, December, January,
February, and March at the contract quantity
Power Generation
Changes to DC Process for 2008/9 (1)


Condensed subscription window

From 6 weeks in 2007 to a total of 4 weeks in 2008

3 weeks of initial window and 1 week of supplemental window

No trading on May 5th due to bank holiday
New product definitions:

Mid-merit: 0700 – 2300 for all business days and 80% of contract quantity on
weekends and bank holidays in Northern Ireland or Ireland

Peak: 1700 – 2100 for all days in Q4 2008 and Q1 2009

Product elections are now for quarterly volumes, not annual

Master Agreement Changes

Adjust monthly invoicing date to 7th business day of month

Adjust payment cycle for the additional 2 business days and move to 12th business day
of month

Adjust credit margining requirements to be 13th business day of each month; requires
alignment of 2007 margining rules to revised 2008 process

Clarification of SEM resettlement event triggered by completion of monthly resettlement
process
Power Generation
Changes to DC Process for 2008/9 (2)

Daily maximum subscription election amount now 15 MW or 15% of the
supplier’s eligibility

Daily elections can be up to 10 different percentages – based on pairing of
product and quarter elected

Suppliers can choose not to elect for a particular quarter and product

No phone transactions, fax only
Greater
complexity in 2008 process due to quarterly volume elections by product
Greater
consistency to NDC process requiring fax and email communications

Fax form transactions only via DC Daily Subscription Form, no phone
elections accepted

Secondary electronic form (email) requested of the faxed election form to
assist in legibility

First valid fax will be utilised
Power Generation
DC Credit Requirements for ESB PG

Upfront Credit Cover Requirements (unchanged)
15%
upfront requirement based on Suppliers chosen volume
Volume
Credit

is valued at the “baseline” price throughout the window
baseline prices to be published today (April 16th)
Ongoing Credit Cover Requirements
Calculation

performed on 13th business day
Separate credit cover required for 2008 contracts
ESTSEM Credit Baseline Prices (as of April 15th closing prices):
Baseload
Mid-Merit
Peak
Q4 2008
€88.57/MWh
€99.91/MWh
€148.86/MWh
Q1 2009
€92.42/MWh
€104.17/MWh
€147.71/MWh
Q2 2009
€79.18/MWh
€88.28/MWh
n/a
Q3 2009
€80.12/MWh
€90.69/MWh
n/a
Power Generation
Execution of Directed Contract Documentation
Eligible Suppliers – Requirements for ESB PG:
Any eligible supplier wishing to enter into Directed Contracts during the Subscription Window must
have provided the following documentation to ESB PG:
1. Executed the 2008/9 Master Contract for Differences Agreement. (The executed
agreement must be in the form published by the Regulatory Authorities in advance of the
Subscription Window);
2. Posted the appropriate credit cover;
3. Executed ESB’s Trading Mandate;
4. Provided PG with a list of their authorised traders and contact details.
This entire suite of documentation must be received by ESB PG at a minimum of 2 business days
prior to commencement of any trading activity between the supplier and ESB PG for either the
Subscription Window or the Supplemental Subscription Window.
Supplemental Subscription Window Eligibility:

Open to those Suppliers who have taken 100% of their eligibility in all products and quarters,
or, new entrants who were licensed in the period to mid-May and are not affiliated with any
existing market participant.

May 16th: ESB PG will notify those Suppliers who are eligible to participate in the
Supplemental Window
Power Generation
Agenda
Introduction
Justin Johnston
Directed Contracts Overview
Eric Slattery
Directed Contracts Process
Hina Patel
Non-directed Contracts Overview
Justin Johnston
PSO Implementation Timeline
Justin Johnston
Power Generation
DC Implementation Info: Subscription Window (Initial)
Daily DC Process:

Elections between 8:30am to 11:00am

Daily DC Subscription Form must be completed in full (Part 1 and Part 2) and sent via fax at
+353 (0)1 702-1164

Electronic submission of DC Subscription Form requested to assist in legibility
([email protected])

Subscription Window to run daily between April 28 th – May 15th (business days)

Note: May 5th is a bank holiday and no DC trading will occur
General Submission Rules:
1.
Daily quantity subscriptions must be expressed as whole number percentages
2.
Minimum subscription will be 1% of the eligibility for that product and quarter
3.
Maximum subscription will be 15 MW or 15% of the eligibility for that product and quarter,
whichever is greater
4.
Suppliers may choose not to elect for a particular product or quarter.
5.
Daily subscriptions are subject to the credit requirements set out in Section 8 of the ESB PG
Subscription Rules document
Power Generation
DC Daily Subscription Form
1
Fax Number: +353(0)1 702-1164
Daily DC Supplier Subscription Form
Directed Contracts 2008/9
DC Email Address: [email protected]
Part 1: Supplier Information
General Information
2
This submission form must be submitted to PG before the close of daily Subscription Window and in
accordance with the DC Subscription Rules.
Each Eligible Supplier must complete:
(a) the information required in Table 1 of Part 1 and all of Part 2, and
(b) submit the fully completed subscription form via fax,
as executed by an authorised representative of the Eligible Supplier.
Table 1: Identity of Supplier
(to be completed by Eligible Supplier)
Part 2: 2008/9 Directed Contracts Subscription Form
Supplier Name:
Trading Date:
Q4 2008
Participant Entity Name:
Q1 2009
Q2 2009
Q3 2009
Address:
Baseload
Telephone:
Mid-Merit
(0700-2300)
Facsimile:
Email address:
Peak
(1700-2100)
Authorised Representative:
Note: For the avoidance of doubt in legibility, please complete this form electronically and provide
ESB PG with the printed fax form completed.
Note: The products above are as defined in the 2008/9 Master Contract for Differences Agreement.
IMPORTANT NOTICE:
This Subscription Form is issued by ESB Power Generation in accordance with the DC Subscription Rules. Only an Eligible Supplier may submit an election in this
DC Subscription Window.
By submitting a bid in this DC Subscription Window, the Eligible Supplier shall be deemed to have unconditionally accepted:
(a) the terms and conditions of the Subscription Rules; and
(b) that successful bids will be transacted under the 2008/9 Master Contract for Differences Agreement between ESB PG and the Supplier, including the Schedules
to that Agreement.
Please return this template via FAX to 01 7021164 between 8:30am to 11:00am today.
** PLEASE DO NOT ALTER FORMAT **
Additional Info: An email of this form can be sent to ESB PG at [email protected].
Power Generation
Supplier Signature:
Date:
Name of Signatory:
Date:
DC Rejection / Scaling-back Notification
FAX MESSAGE
Key Causes for Rejection
or Scaling-back of Daily
Elections:

Illegible fax form received

Insufficient credit cover posted

Incorrect format submission of
daily election

Note: if daily volume is exceeded,
or there is insufficient credit cover
for daily elections, ESB PG will
pro rata the elections according to
the DC Subscription Rules
document.
To:
<Supplier Name>
Attention:
<Individual’s Name>
From:
ESB Power Generation
Date:
<Today’s Date>
Pages:
1
Directed Contracts Elected Subscription
Rejection Notification
Trade Date: ____________________________
Product(s): ____________________________
Quarter(s):
____________________________
Condition:
Rejected Daily Volume Election
Reason:
___
___
___
___
Daily volume eligibility exceeded
Insufficient credit cover
Incorrect submission of daily election percentage
Other:_____________________
ESB Power Generation
Power Trading & Strategy
______________________
ESB Signature
Power Generation
Key Reports to be Provided to RAs and Industry
RA and Industry Report:

ESB PG will provide a report to the industry and the RAs of the total volume of product
subscribed to daily for each quarter (by close of each business day in subscription
windows).

This report (Daily DC Total Volumes Report) will contain total cumulative MW quantity (by
product and quarter) of DC volumes subscribed to, up to and including that date.
RA Only Reports:
1.
ESB PG will provide to the RAs a report of the volumes transacted by each supplier, by
product for each quarter.
2.
This report (Daily Detailed Supplier DC Trade Status Report) will be sent to the RAs by
2:00pm on each business day.
3.
ESB PG will provide to the RAs the calculation of the ESTSEM prices per product and
quarter by 2:00pm on each business day.
Power Generation
High Level DC Process 2008/9: Trade Date (D and D+1)
Supplier (Buyer)
Setup
8:30 am
Version 2.0
11:00 am
2:00 pm
5:00 pm
Baseload DC
Election
Determine DC
Elections for Trade
Date (D+1)
Mid-Merit DC
Election
Daily DC
Supplier
Subscription
Form Trade
Date (D+1)
Notification of
Rejected DC
Trades (D+1)
Supplier DC Confirm
(D)
Peak DC
Election
End (D+1)
Given prior to
April 28th
Regulators
Fax or Email
ESTSEM Prices for
Trade Date (D)
Supplier DC
Entitlements
Daily Detailed
Supplier DC Trade
Status Report (D)
Fax Form (prevailing and binding)
Email (secondary verification only)
Notify Supplier of
Rejected DC Trades
(D+1)
Receive Supplier DC
Subscriptions (D+1)
Calculated Supplier
Daily DC Volume
Eligibilities
Daily DC Total Volumes
Report by Product/Qtr
(D+1)
Reconcile Daily
Supplier Election to
Daily Max Volumes
and Credit Margin
Process Accepted DC
Trades (D+1)
PG Internal File
ESB Power Generation (Seller)
FAX
Email to RAs
(PDF)
Email to RAs and
Eligible Suppliers
(PDF)
(1) Create the Daily Detailed
Supplier DC Trade Status Report
(vols for each Supplier by Product/
Qtr to RA’s) for Trade Date (D)
(2) Create the ESTSEM Strike Price
Document to send to RAs (PDF) for
validation
Create Report of the
Total Volume of DCs
Transacted by Product
and Quarter
Market Fuel & FX Prices
For Trade Date
(D)
Calculate Strike Price for
Trade Date (D) per
Product per Quarter
Create Trade Confirm
for Trade Date (D)
Power Generation
DC Trade
Confirms for Trade
Date (D)
Regression Formula Info for DC Strike Price Calculation
Correction to Subscription Rules:

Section 5.1.3 Gasoil of the Subscription Rules should state that 0.1% Gasoil CIF cargoes in NWE
will be used for quarterly price calculations

Removal of Coal quarterly prices from regression formula calculation
Regression Formula:
1.
Natural Gas – use the settle price (pence Sterling/therm) for the Quarterly Intercontinental
Exchange (ICE) Natural Gas Futures as reported in European Spot Gas Markets published by
Heren Energy
2.
Gasoil – use the mid point quarterly price (USD/metric tonne) for 0.1% gasoil CIF cargoes in NWE
3.
Low Sulfur Fuel Oil – use the mid point quarterly price (USD/metric tonne) for 1% free on board
fuel oil in NWE as reported by Platts Forward Curve Oil
4.
Carbon – use the daily weighted average closing price (in Euro/tonne) as reported by the London
Energy Brokers Association (LEBA)
5.
Foreign Exchange – use the daily spot Dollar-Euro foreign exchange rate and the daily spot
Sterling-Euro foreign exchange rate as quoted by the European Central Bank
Power Generation
Agenda
Introduction
Justin Johnston
Directed Contracts Overview
Eric Slattery
Directed Contracts Process
Hina Patel
Non-directed Contracts Overview
Justin Johnston
PSO Implementation Timeline
Justin Johnston
Power Generation
Non-Directed Contracts (NDC): General Info
NDC Auctions Schedule:

May 27th: Market Dry Run

6 NDC Auctions (2 business days between each):


1. May 29th (Thursday)
4. June 11th (Wednesday)
2. June 3rd (Tuesday)
5. June 16th (Monday)
3. June 6th (Friday)
6. June 19th (Thursday)
No re-signing of executed NDC Master Agreement is required

However, specific NDC schedules will be revised to reflect amendments to credit cover
and product definitions.

EB PG will issue an amendment letter for execution in order to align the 2007 and 2008
contract schedules in addition to publication of the relevant NDC schedules.

Revised documentation to be published early May
Revised NDC Auction Rules to be published early May
Power Generation
Non-Directed Contracts (NDC): General Info
NDC Products for 2008/9:
1.
Baseload: for trading periods at the contract quantity arising in all hours
2.
Mid-Merit (0700 – 2300): for trading periods at the contract quantity during
the hours beginning at 0700 and ending at 2300 on business days and for
trading periods on days that are not business days at 80% of the contract
quantity
3.
Mid-Merit 2 (0700 – 1900): for trading periods at the contract quantity during
the hours beginning at 0700 and ending at 1900 on all weekdays (i.e., Monday
– Friday)
4.
Peak (1700 – 2100): for trading periods arising during the hours beginning at
1700 and ending at 2100 on all days during October, November, December,
January, February, and March at the contract quantity
Power Generation
NDC Process Clarifications

Credit Cover

5% upfront requirement following 2007 NDC consultation

Increased to 15% requirement after completion of NDC Auction period

Credit baseline prices to be published 2 weeks in advance of NDC Auction (May 29th)

Publication of indicative volumes by May 19th

Product offerings will be both quarterly and annual strips

Invitation to Bid document to be published 5 days in advance of each NDC
auction

Indicative volumes per by product

Indicative reserve prices

Clearing prices and overall volumes will be published to all Eligible Auction
Participants (as per the NDC Auction Rules document)

Daily NDC bidding process timeline

9:30am – PG to publish Auction Notice

12:30pm – Close of NDC auction

4:00pm – PG communicates clearing prices and volumes
Power Generation
Agenda
Introduction
Justin Johnston
Directed Contracts Overview
Eric Slattery
Directed Contracts Process
Hina Patel
Non-directed Contracts Overview
Justin Johnston
PSO Implementation Timeline
Justin Johnston
Power Generation
PSO Auctions: General Info
PSO Auctions Schedule:

3 PSO Auctions:
June 23rd (Monday)
June 26th (Thursday)
July 1st ( Tuesday)

PSO Volume – 600 MW of quarterly baseload product

PSO Price – to be determined by RAs
PSO Documentation:

Revised PSO Master Agreement to be issued by June 10th

Revised PSO Auction Rules to be issued by June 10th
Power Generation