Transcript Integrating power markets – the cooperation model of EEX

Harmonisation within a merger of two spot power
exchanges - Experiences by EEX and Powernext
APEX CONFERENCE 2008 IN SYDNEY | 13 October 2008
Dr. Wolfgang von Rintelen • Director Legal & Compliance
European Energy Exchange AG
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The Situation
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EEX, created as a result of the EU liberalisation
of the European energy markets
1998
Liberalization of the European Energy Markets in 1998
2002
Merger of the former Leipzig Power Exchange LPX and
the EEX, Frankfurt, to the European Energy Exchange AG
2005
Start of Trading of Emission Allowances within the European
Emission Trading System (EU ETS)
2006
Spin-off of the EEX Clearing business into the subsidiary
European Commodity Clearing AG
2007
Launch of the German Gas Exchange:
EEX covers 60% of the German H-gas market volume
with the market areas BEB and E.ON GT
Further spin-offs within the European Growth Strategy of EEX
2007+
Spot market (Power): EEX Power Spot GmbH
Derivatives market (Power): EEX Power Derivatives GmbH
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1992: energy exchanges in Europe
- an empty landscape
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2004: EU Vision - Through regional
markets to European electricity markets
Source: Regional markets in Europe according to a strategy paper by the EU-Commission
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1993 – 2004:
History of the EU Regulation
 1993: Investment Services Directive (ISD) 93/22/EEC
 2004: Markets in Financial Instruments Directive (MiFID) 2004/39/EC
- Market Abuse Directive (MAD)
- Capital Requirement Directive (CRD)
- Capital Adequancy Directive (CAD)
 Many of this regulations are currently under review
 Comittees of regulators in charge:
- ERGEG (European Regulators' Group for electricity and gas)
- CEER (Council of European Energy Regulators)
- CESR (Committee of European Securities Regulators)
- CEBS (Committee of European Banking Supervisors)
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Today: overview of the national regulations
for power spot markets in Europe
 NordREG* recently made a assessment about the national regulations
in Europe (eight exchanges)
 Summary for the power spot markets:
 Legislation/Ministry:
energy, exchange, financial and a mix of them
 Regulator/Supervisory Authority:
energy, exchange, financial and more of one
 Market Surveillance (MS):
All exchanges monitor compliance with the rules
but only two exchanges have MS as a independent body
 If more than one authority is in charge it is not common praxis to share
information and work together on a formal basis.
*NordREG is a working group of Scandinavian Energy Regulators
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2008: Power exchanges and other market
places in Europe - a colorful landscape
Imarex Group
OMX AB /
Nord Pool ASA
Energy brokers,
mainly London-based
Intercontinental
Exchange
Nord Pool Spot AS
European Market Coupling
Company (EMCC) GmbH
Tender to build an
Power Exchange in UK
APX B.V.
European Energy
Exchange AG
ENDEX N.V.
Towarowa Gielda
Energii SA
Operátor trhu s
elektrinou a.s.
Climex
Belpex SA
Energetická
Burza Praha
Auction office
CASC-CWE
EXAA Energy
Exchange Austria
Powernext SA
Operatorul Pietei de
Energie Electrica
OPCOM SA
Operador
de Mercado
Ibérico de Energia
(Pólo Português) S.A.
Operador del Mercado
Ibérico de Energía
(Polo Español) S.A.
Borzen, organizator trga
z elektricno energijo, d.o.o.
Bolsas y Mercados
Españoles plans
CO2 spot trading
Gestore del mercato
elettrico S.p.a.
New CO2
market place
Borsa
italiana
TSO-initiative in Hungaria
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First Remarks
 In Europe there is not a common standard for energy exchanges.
 MiFID covers only Commodity Derivatives Markets, not Spot Markets.
 Commodity Derivatives Markets are not the major task of MiFID, from
its origin it is a regulation for stock exchanges.
 The Regulation for Power Spot Markets as well as its structure of
supervision/legislation is quite different within Europe.
 There are (too) many commissions of regulators or supervisors in
charge for the Energy Markets within Europe.
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The Merger of Power Spot Markets
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Early 2008: EEX and Powernext agreed
on a cooperation
 These countries represent
more than a third of European
electricity production
 Around 70% of Powernext
participants are EEX participants
 Around 30% of EEX participants
are Powernext participants
 Price correlation: over 90 percent
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Key aspects of the cooperation

Common Power Spot Exchange based in Paris

Common Power Derivatives Exchange based in Leipzig

Clearing of all spot and derivatives energy products through
European Commodity Clearing AG (ECC)
Cooperation model open to further partners
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Implementation steps

Establishment of a common spot trading company named
EPEX Spot SE with registered offices in Paris.

The partner exchanges will integrate their entire spot trading
activities in power under the umbrella of the SE by the end of the
year. Both partners hold 50 percent of the shares.

EEX has transfered its trading in power derivatives to the newly
established EEX Power Derivatives GmbH in Leipzig.

Retroactively as of 1st January 2009, Powernext will contribute the
French power futures to the new GmbH [German limited liability
company] in Leipzig and, in return, it will receive 20 percent of the
shares in the company.
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Fulfilling a big part of the European Vision
Nordic market
GB/IRL market
separate 2005
integrated 2010?
Baltic market (2008?)
Eastern European
market (2006-08?)
Western European
market (2006-08?)
Iberian market (2004)
South Eastern
European market (2006-08?)
Italian market (2004)
Source: Regional markets in Europe according to a strategy paper by the EU-Commission 14
Impacts on the Power Spot Markets




The French Power Market will continue to be traded in Paris.
The German Power Market will be traded in Paris as well as the Austrian and
Swiss Market.
Will the French Energy Authority be responsible for this “new” Power
Markets?
The German Exchange Authority will lose its responsibility for the German
Spot Market, but remains to be in charge for the Derivatives Markets.
The Task:

The Parties agreed to harmonise the Powernext Power Spot Market and the
EEX Power Spot Market Rules and organisational structure and to have
“the best of both”. That means inter alia:
- Rules for transparency and proper market behaviour
- Independent Market Surveillance Office
- Exchange Council
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Differences and its handling
EEX Spot Market
 Governed by Public Law
 Exchange bodies are:
-
Exchange Council (elected)
Exchange Board
Market Surveillance Office
 Exchange has own rules and
regulations and the opportunity
to develop it
 The Exchange Council decides
about the rules and its changes
on request of the Board
 Traders become a member of the
Exchange by admission
Powernext Spot Market
 Governed by Private Law
 No exchange specific bodies
necessary
 Everything has to be ruled by
agreements with the participants
Solution: We will „translate“ the contribution governed by German
Public Laws into agreements to be accepted by the exchange
participants under French Private Law.
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Open issues:
legislative and regulatory level
But there are still some open issues:





How long will the energy market be a annex to the stock markets or
is there a chance for tailor made regulations for the energy markets?
How will the interactions between the spot and the derivatives
markets across country borders be handled by the authorities?
How long takes it to have harmonisation or at least information
sharing of the authorities?
Who will supervise the European energy market across borders?
When will the European energy exchanges have harmonised rules
and a harmonised organisational structure?
In future the European energy market needs tailor made
pan-European regulation and supervision.
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Thank you very much for your attention!
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