Power & Emissions @
Nord Pool
Tanja Ilic
Senior Vice President
Sales & Marketing
Nord Pool
Nord Pool
How to succeed in the new
market environment?
The European Power Scene
European consumption 2005
Numbers are in TWh
0
Germany
France
Nordic area
UK
Italy
Spain
Sweden
Poland
Norway
Netherlands
Belgium
Finland
Austria
Switerland
Greece
Denmark
Luxembourg
100
200
300
400
500
600
Highest total consumption
in the history for the Nordic
countries
Source: UTCE and Nordel
The Nord Pool group
Physical
voluntary dayahead market
”Elspot”
Adjustment
market ”Elbas”
Financialdelivery
contracts based
on Elspot price
First exchange to
trade contracts
for European
Allowances
Futures,
EUA forward and
forwards, options spot market
Published system and Cfd s with
price reference
maturities of up
CER forward
for the financial
to 3-4 years
market
Direct exchange
in competition
with brokers
Clearing of
exchange traded
and bilateral
derivative
contracts
Clearing for both
electricity and
green markets
Specialist
consulting firm
providing
strategic and
management
consulting
services within
the electricity
business world
wide.
Power exchanges in Europe
Nord Pool
ECX
APX
Endex
Belpex
PWX
Mercado
Mercado
Towarowa
Borzen
EEX
EXAA
Gestore
ITL
THRU
Opcom
Sa
Gielda
Present situation
Nord Pool
Largest exchange for power in Europe both physical
and financial. Market coupling between the Nordic
area working since 1996
Working to increase volume and members through
market and sales activities and product/market
development – Introduced CER contracts 1st June as
the first exchange
Growing more and more customer joining even after
10 years of business and experience
The model for an open
and deregulated market
Nordic
Free Trade Area
400 TWh
consumption
The exchange
Physically
traded
>420
Members
physical and
financial market
Nord
Pool
60 %
Financial trade
is 7 times the
consumption
OTC
40 %
Emissions – 112
members
Efficient wholesale market with adequate products and services for
companies competing in the market
Our reach – Some of our
participants
Norway
• Energipartner
• Statkraft
• Norsk Hydro
• Elkem
• Nordea
• DnB Nor
Denmark
• Dong
• Energi Danmark
• Danske Commodities
• Nordjysk Elhandel
• ScaenEnergi
Sweden
• Vattenfall
• EON
• Sheperd
• Alfa Kraft
• Öresundskraft
UK
• UBS Ltd
• Barclays Bank
• Morgan Stanley
• Merill Lynch
• Shell
More than 400
members from
21 countries
Finland
• Fortum
• Sampo Bank
• Helsingfors Energi
Other
• Fortis
• Tudor
• J Aron
• BHF Bank
• Cargill
• NUON
• RWE
• Essent, Eneco and many more
More then 80 active players..
Number of Active Players
Weekly 2004-2007
100
80
60
40
20
0
2004
2005
2006
2007
Market share exchange
Market Share Nord Pool Financial Market
100%
80%
July > 50%
August > 50%
September: 50%
60%
40%
20%
32,0 %
33,8 %
2003
2004
38,2 %
36,1
2005
2006
42,8 %
0%
Nord Pool Exchange
Nord Pool OTC
2007
What is important?
Experience and knowledge




Liquidity
Product range and product development
Competitive terms
Netting and cross margining possibilities
Development in an competitive
environment
Liquidity is key to success

Comprehensive product range for hedging and
trading needs.

Satisfied customers that choose to do their
hedging and trading at Nord Pool - Fundamental
customer base attract financial players .

Strong sales drive to recruit new customers into
the market.

Market Makers

Distribution channels-easy access to Market Place
Product range emissions
at Nord Pool
 European Union Allowances (EUA)
 Introducing CER as the first exchange from 1st
June
 Physical Forward contracts for 2006-2012,
covering the whole Kyoto period
 Spot contract EUA (Day-ahead)
 Clearing services includes Over-The-Counter
 Guarantees physical delivery and financial
settlement
 Netting between commodities
Netting and cross margining
A future need …
 Change in customer needs
 Multi markets and multi commodities
 Minimum capital requirement
 Risk management
 Customers require netting of positions
and cross margining over products and
markets
What are the general drivers?
 Globalisation
 Market coverage
 Product range
 Falling borders
 Economy of scale
 Cost pr. transaction
 Harmonisation of regulatory framework
 From national champions to global competitors
 Financial strength
 Completing acquisitions
 Stand up in competition
Challanges
Exchange and market place consolidation
Tougher competition. Exchanges with net loss today will
get it even harder tomorrow
Trading energy
Trading in larger markets with high liquidity tight
spreads
Environmental focus
Nord Pool is ready and will take the next step to be part
of a Global energy market.
Trimming the organisation to be dynamic and fast mover.
Infrastructure ready to include new markets and
products.
Nord Pool will seek strong strategic partners to stay on
top of the business.
www.nordpool.com
Merci !
Tanja.ilic@nordpool.com
Stock exchanges ten years ago
Stock exchanges today
A global market of emission
instruments
EUA/CER
JI Host
CDM Host
CER
CER
CDM Host
Nord Pool
Monitoring and legislation
of Nord Pool.
National
Competiti
on
authoriti
es in
Finland,
Sweden,
Denmark
and
Norway
Monitoring the market place and
the market participants
The concept

Physical market:


Adjustment market:


6 Years
24 Hours
Reference price
Financial market
Physical market
Operated by Transmission System
Operators (TSO)
Adjustment market
Financial market:


Continuous hourly market.
Handled by Nord Pool Spot – Elbas
Balance Service:


Auction - supply and demand
cross (system price). Mechanism
for handling of constraints.
Handled by Nord Pool Spot Elspot
Time
Cash settled Futures, Forwards
and Options. Handled by Nord
Pool ASA
Balance Service
Clearing (financial):

Exchange trade

OTC Trade

Handled by Nord Pool Clearing
ASA
Cash settled
Physical delivery
0
Competitive terms
1200
0,12
1000
0,10
800
0,08
600
0,06
400
0,04
200
0,02
0
0,00
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Volume financial market TWh
Average fee trading+clearing (financial market)
EUR/MWh
TWh
Volume and fee development at Nord Pool
Financial Market
( yearly 1993-2006)







Liquidity
Price
Products
Market coverage
Service level
 Reporting
 Customer relation
 Risk m. services
Solidity
Company risk profile
Group operational
structure
Nord Pool Group
Nord Pool Spot



Nord Pool Financial Markets
A regulated physical
marketplace
Clearing
counterparty for
physical electricity
contracts
Separate subsidiary,
owned 20% each by
Nord Pool ASA and
the Nordic TSOs
A regulated

financial market
place
Providing trade in

standardised
derivative
contracts
Electricity
futures/forwards
/options
EUA spot and

forwards, CER
forwards
Wholly-owned by
Nord Pool ASA
Nord Pool Clearing
A licensed and
regulated
clearinghouse
Clearing
counterparty for
derivative
contracts
 Exchangetraded
 OTC-traded
Wholly-owned
subsidiary of
Nord Pool ASA