Transcript Powernext: status and future developments

Powernext SA, the French Power Exchange:
Three Years Later…
Jean-François Conil-Lacoste
Chief Executive Officer
Leipzig, 11 October 2004
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Overview
Part 1. Goals and implementation of the liberalization
process
Part 2. Overview of the wholesale electricity markets
Part 3. The structure of the French power market
Part 4. Powernext SA : Products and results

Powernext organisation

Powernext Day-Ahead™

Powernext Futures™
Part 5. Major challenges for the future
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Part 1. Goals and implementation of the liberalization process
LIBERALISATION
(supplies)
SERVICE
[public]
DEREGULATION
ACCOUNTABILITY
[actors]
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REGULATION
[market]
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Part 1. Goals and implementation of the liberalization process
Key dates in France
February 2000: French electricity law, transposition of the 1996
electricity directive
April 2000: creation of CRE, Commission de Régulation de
l’Energie
July 2000: creation of RTE, the French grid operator
July 2001: creation of Powernext SA, the French power
exchange
November 2001: launch of Powernext Day-ahead
January 2003: modification of the French electricity law, last
obstacle to trading are waived
July 2004: opening to non household customers
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Part 2. Overview of the wholesale electricity markets
Deregulation introduces new economic functions and the
structuring of organized and bilateral wholesale markets
The power value chain in a deregulated environment
Wholesale market
Integrated
production
EDF
Independen
t
production
RTE
TSO
Trading
Powernext and
brokers
Final sale
retail
Domestic
clients (30
millions,
300TWh)
Distribution
EDF + 170
distributors
Final sale
industry
Eligible
customers
(3 millions)
CNR : 3000 MW
SNET : 2500 MW
VPP : 6000 MW
Shem : 770 MW
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Part 2. Overview of the wholesale electricity markets
Size of the
Switching estimates
Size of the
Legal
physical
for the calendar
wholesale market
market
market
year 2002 (large
(estimation, in
opening (%)
(TWh)
industrial users)
TWh)
Scandinavia
390
100%
More than 50%
1900
Germany
490
100%
20%
2500
France
440
68%
15%
250 to 500
UK
335
100%
15%
2000
Netherlands
105
100%
20%
300
Spain
205
100%
20%
150 to 200
Italy
300
78%
15%
na
Source : European Commission
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Part 2. Overview of the wholesale electricity markets
Organised wholesale
markets
Over the counter
intermediated
wholesale market
Brokers
…
Eligible
customers
Retail market
Suppliers
 Producers
 Traders
Over the counter direct
wholesale market
Producers
Traders
…
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Part 3. Structure of the French power market
D-1
D=delivery
Forwards, futures,
options, and swaps:
exchange and
bilateral market
« Day-ahead »: exchange
and bilateral market
Hour-ahead : Intraday
(3-hour delivery)
Powernext Futures™
Launched on
18 June 2004
Powernext Day-Ahead™
Launched on
26 Nov. 2001
D-x
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Balancing market (real
time) : exchange and
bilateral market
Delivery on RTE grid
for both Powernext Dayahead and Powernext
Futures
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Part 4. Powernext: corporate organisation and objectives
Powernext is a non obligatory exchange which results of a private
initiative
Powernext is a financial institution
7,80%
7,80%


stable and neutral
shareholding with
a capital of 10 M€
solid market model and
IT systems
5,00% 5,00%
17,00% HGRT
24,5 %
7,80%
24,5 %
51,0 %
7,80%
7,80%
34,00%
Powernext brings a price reference

Short-term: adjustment and/or volume risk management Powernext Day-AheadTM

Long-term: price risk management – Powernext FuturesTM
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Part 4. Powernext: market model
Powernext manages a market

centralized and transparent insuring liquidity and
non-discriminatory access

supervised by a structuring regulation resting on
market rules and a strong presence of regulation
authorities (AMF, CRE)
Law
Sphere of activity
Regulatory Bodies
Financial Law
• Trading
• Clearing
• Product
specifications
CECEI: Comité des Etablissements de Crédit et
des Entreprises d'Investissement
AMF: Autorité des Marchés Financiers
French
Electricity Law
(2000 and 2003)
• Membership
• Delivery
CRE: Commission de Régulation de l'Energie
DIDEME: Direction de la Demande et des
Marchés Energétiques


and insures the safety of transactions.

RTE (French TSO) insures physical engagements
LCH.Clearnet guarantees the financial commitments
and systematic risks
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Part 4. Powernext Day-AheadTM : members
Powernext® counts 47 members among producers, suppliers,
industrials, distributors and traders. However, the individual market
share of the most active member stays below 11%
55%
40
50%
45%
Market share
35%
30%
30
25%
20%
25
15%
10%
5%
31/05/04
01/05/04
01/04/04
02/03/04
01/02/04
02/01/04
03/12/03
03/11/03
04/10/03
04/09/03
05/08/03
06/07/03
06/06/03
07/05/03
07/04/03
08/03/03
06/02/03
07/01/03
20
Cumulated market share of the 5 most active members per week
Average market share of the 3 most active members per week
Number of members
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Number of members
35
40%
Part 4. Powernext Day-AheadTM: volumes
More than 9 000 000 MWh in 2004 (already higher than 2003
volumes)
Powernext Day-Ahead™ - Monthly Volume in MWh
1 400 000
1 300 000
1 200 000
1 100 000
1 000 000
900 000
800 000
700 000
600 000
500 000
400 000
300 000
200 000
100 000
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Part 4. Powernext Day-AheadTM: a reference
Outside and unpredictable factors create a need for adjustment
the following day amounting to 10% of the total consumption.
Powernext Day-Ahead™ is a tool to manage this risk.
Powernext Day-Ahead™ is considered as a short-term reference in
France with :

a strong correlation between Powernext prices and power
consumption on the French hub
1500000
40
1400000
35
MWh
25
1200000
20
1100000
€/MWh
30
1300000
15
1000000
10
900000
5
28/07/04
24/07/04
20/07/04
16/07/04
12/07/04
08/07/04
04/07/04
30/06/04
26/06/04
22/06/04
18/06/04
14/06/04
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10/06/04
06/06/04
02/06/04
29/05/04
25/05/04
21/05/04
17/05/04
13/05/04
09/05/04
05/05/04
01/05/04
Daily Consumption
Pow ernext Day-Ahead™ Baseload Price
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Part 4. Powernext Day-AheadTM : prices

a strong correlation between Powernext prices and the weather
NextWeather France indice and average prices on Powernext
(moving average 7 days)
6
38
5
36
4
34
3
°C
30
1
28
0
26
-1
€ / MWh
32
2
24
-2
-3
22
-4
20
-5
18
29/08/04
19/08/04
09/08/04
30/07/04
20/07/04
10/07/04
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30/06/04
20/06/04
10/06/04
31/05/04
21/05/04
11/05/04
01/05/04
21/04/04
11/04/04
01/04/04
22/03/04
12/03/04
02/03/04
21/02/04
11/02/04
01/02/04
Spread betw een the daily NextWeather France average and its 25-year average
Average price on Pow ernext Day-Ahead™
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Part 4. Powernext Day-AheadTM: market resilience
Powernext Day Ahead™ strongly improved market resilience
since the beginning
Price variations resulting from additionnal purchase and sale orders
0,9
0,8
0,7
€/MWh
0,6
0,5
0,4
0,3
0,2
0,1
0,0
21
22
23
24
25
26
27
Aditionnal 100 MW purchase and sale order
28
Week
29
30
31
32
33
34
35
Aditionnal 50 MW purchase and sale order
NB : The resiliency index is defined as the average of absolute market clearing price
variations caused by an additional price-inelastic bid on each of the hours of the
period. The resiliency index is calculated on the aggregated bid & ask curves
composed of single bids and accepted block orders.
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Part 4. Powernext FuturesTM: overview
A future contract is a standardized agreement to sell or buy on an
exchange a specific amount of electricity at a particular price on a
stipulated period
The aims of Powernext Futures™ are the following :

Proposing to members the appropriate contracts to manage
their risk exposure to French electricity price fluctuations.

Creating indisputable reference prices on the forward curve
Powernext offers the following futures with physical delivery :
3 monthly contracts
4 quarterly contracts
2 yearly contracts
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Part 4. Powernext FuturesTM : dynamic management of the
consumption
Daily balancing
Consumption
Visibility:
purchase
Calendar
2004
600
500
400
300
200
100
J
F
M
Flexibility:
purchase
monthly and
quarterly
contracts
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M
J
J
A
S
O
N
D
Time
Consumption forecast
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Part 4. Powernext FuturesTM : market model
Continuous trading
TRADING
Internet access:
Trayport system
TRADING
MEMBER
NOVATION
TRANSFORMATION
POSTING

CLEARER
POSITION
MANAGEMENT
LCH.Clearnet is the
CCP (central counterparty) of all trades
Secures the market
through a system of
margins and deposits

DELIVERY
NOMINATION
Delivery in compliance
with RTE requirements
BALANCE
RESPONSIBLE
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Part 5. Major challenges for the future
Consolidate the launch of Powernext Futures™ market with
physical delivery (potential transition towards a cash settlement
market)
Contribute to the market opening to all professionals in July 2004
making them more price-sensitive will make Powernext’s role as
generator of short, medium and long term reference indexes even
more crucial
Interconnections: a crucial first step towards a single market

Feasibility study for the implementation of market-based
mechanisms in order to manage congestions on the Belgian,
Spanish and Italian borders in close coordination with national
TSOs and regulators
Other energies and products are considered such as natural gas,
greenhouse gas emissions and weather derivatives
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Contacts
Website : www.powernext.fr
Telephone : +33 1 73 03 96 00
Fax : +33 1 73 03 96 01
E-mail : [email protected]
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