Transcript Document

Jacob Pedersen, CEO
Nord Pool Gas A/S
Does the gas exchange help improve
competition in the retail market?
Dansk Energi, 5th December 2012
Introducing Nord Pool Gas
Company Background
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Established in 2008, first trade March 4th
Strong ownership split between:
- 50% Energinet.dk - Danish system operator
- 50% Nord Pool Spot - Nordic Power exchange
The exchange
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Provide continues trading via the electronic trading system Trayport Global Vision
Physical trade in: Within day, Day ahead, Weekend, BOM, Month ahead and SWAP
Aim to promote further competition and deliver a market price reference
Significant development
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Strong growth journey. Now has a market share at 15-20% of the domestic demand
Latest achievements
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Improved clearing and settlement: Reduce the cost of trading
New products: Attract more liquidity and provide a market based balancing price
More trading opportunities: trading on 365 days, 24/7 trading in case of declared system
crisis
Danish gas market and the competitive situation
History of the Danish gas market
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Early 1970’ties: First North Sea gas fields discovered
Early 1980’ties: Maersk sell all it’s gas production to state owned DONG via
oil/coal indexed long term GSAs
1980’ties and 90’ties: Gas substitutes oil and coal for power and heat
production. DONG on sell to customers on oil index in a monopoly regime
2004: Full market liberalization
- Only one exit zone
- Daily balancing
- Low barriers to entry
- Old GSAs still dominate
- One supply source
- System bottleneck
Traded volume at Nord Pool Gas
Close to 5.9 TWh traded
year on year 56% higher
than same period 2011.
Number of trades at Nord Pool Gas
More than 6,000 trades
year on year – up 23%
compared to the whole
of 2011.
Number of trades at Nord Pool Gas
The Day Ahead contract dominate the picture but Withinday and Weekend products attract ever more liquidity
Exchange volumes share of domestic market
The average market
share year on year 2012
amounts to 18%.
Trading at Nord Pool Gas
Continues daily trading
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Trading takes place from 09.00 to 15.00 every weekday and 11.30 to 12.30 on weekends
and on holydays
Participants place orders (bids and asks) via the Trayport screen in a total of six different
products.
Trading is anonymous. The Clearing House acts as the central counterparty on all deals
to ensure physical delivery and payment.
Pricing
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By the end of each trading day Nord Pool Gas quotes closing prices for each product
The Closing prices are based on volume weighed average deal prices. In case no deals
are conducted the closing price equals the mid price between the closing bid and ask
Transparency
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Closing prices and volume data are published on the Nord Pool Gas webpage
Closing prices offer a Nordic market price reference that can be used as a price index in
wholesale and retail gas supply agreements
Since October 1st 2011 Energinet.dk has used Nord Pool Gas prices to establish the
system neutral price. From October 1st 2012 the system neutral price will be established
on a daily basis.
Market price development at Nord Pool Gas
Nord Pool Gas pricing (virtual point: NPTF) is highly correlated to pricing at adjacent markets
Market price development at Nord Pool Gas
Trend line indicates that the price spread towards Germany is gradually closing in
2008 – 2010:
An immature and less competitive Danish market used
to trade 1-2 EUR/MWh above the German markets
2011-2012:
The spread has vanished the last 18 month and
now tends to be negative
Market consentration at Nord Pool Gas
Herfindahl index
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Measure the level of concentration/competition by adding the squared market shares of
individual participants
According to US antitrust: >18% concentrated / <18% moderate concentration / <10%
non concentrated
Herfindahl ave:
2009:
2010:
2011:
2012:
28
18
15
13
Retail supply prices and Nord Pool Gas
Customers urge for transparency
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Customer often view oil indexation is a bit of a blackbox. Complicated oil
indexed price formulas and volume restrictions hampers competition.
A Typical industrial
customer is small/midsized. And a typical purchase manager covers multiple
product categories
Improve competition:
… enables you to
compare supplier prices
Validation and transparency:
… outlines all payment details,
even the suppliers mark-up
Relevant regional impact:
… makes you less dependent
on global market events in
the e.g. USA or China
independent on the US dollar
exchange rate
Insight and symmetry:
… gives you a unique
opportunity to follow the
gas market closely without
having to know all market
details
Competitive market price:
… ensures that you are
always paying market
reflective prices for your gas
Follow Nord Pool Gas at www.nordpoolgas.com
More and frequently updated information can be found on:
www.nordpoolgas.com
Here you will be able to:
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Observe daily prices and volume data
Download trade history in simple excel format
Subscribe to news and RSS feeds
Calculate prices based on Nord Pool Gas index