apex conference – 11-13 oct. 2004 1 powernext sa, the french power exchange: three years later…...

APEx Conference – 11-13 Oct. 2004 1

Powernext SA, the French Power Exchange: Three Years Later…

Jean-François Conil-LacosteChief Executive Officer

Leipzig, 11 October 2004


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



ACCOUNTABILITYACCOUNTABILITY[[actors]actors]

REGULATION REGULATION [[marketmarket]]

LIBERALISATIONLIBERALISATION(supplies)(supplies)

DEREGULATIONDEREGULATION

SERVICESERVICE[public][public]


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




The power value chain in a deregulated environment

Wholesale market

TSO

RTEDistributionEDF + 170

distributors

Final saleretail

Powernext and brokers

TradingTrading

Domesticclients (30 millions, 300TWh)

Eligiblecustomers (3 millions)

Eligiblecustomers (3 millions)

Final saleindustryFinal saleindustry

Integratedproduction

EDF

IndependentproductionIndependentproduction

Deregulation introduces new economic functions and the structuring of organized and bilateral wholesale markets

CNR : 3000 MWSNET : 2500 MWVPP : 6000 MWShem : 770 MW



Size of the

physical market (TWh)

Legal market opening

(%)

Switching estimates for the calendar

year 2002 (large industrial users)

Size of the wholesale

market (estimation, in

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


Over the counter direct wholesale market

ProducersTraders

…


Organised wholesale markets

Eligible customers

Retail market

Suppliers Producers Traders

Over the counter intermediated wholesale market

Brokers

…


Part 3. Structure of the French power market

D-x D-1 D=delivery

« Day-ahead »: exchange and bilateral market

Powernext Day-Ahead™ Launched on 26 Nov. 2001

Forwards, futures, options, and swaps:exchange and bilateral market

Powernext Futures™ Launched on 18 June 2004

Hour-ahead : Intraday (3-hour delivery)

Balancing market (real time) : exchange and bilateral market

Delivery on RTE gridfor both Powernext Day-ahead and Powernext Futures


Powernext is a non obligatory exchange which results of a private initiative

Powernext is a financial institution

stable and neutral shareholding with a capital of 10 M€

solid market model and IT systems

Powernext brings a price reference

Short-term: adjustment and/or volume risk management - Powernext Day-AheadTM

Long-term: price risk management – Powernext FuturesTM

Part 4. Powernext: corporate organisation and objectives

7,80%

7,80%

7,80%

7,80%

5,00% 5,00%

17,00%

34,00%

7,80%

51,0 %

24,5 %

24,5 %

HGRT


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)

and insures the safety of transactions.

LCH.Clearnet guarantees the financial commitments and systematic risks

RTE (French TSO) insures physical engagements

Part 4. Powernext: market model

Law Sphere of activity

Regulatory Bodies

Financial Law

• Trading• Clearing• Product specifications

CECEI: Comité des Etablissements de Crédit et des Entreprises d'InvestissementAMF: 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


Powernext® counts 47 members among producers, suppliers, industrials, distributors and traders. However, the individual market share of the most active member stays below 11%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

07/0

1/03

06/0

2/03

08/0

3/03

07/0

4/03

07/0

5/03

06/0

6/03

06/0

7/03

05/0

8/03

04/0

9/03

04/1

0/03

03/1

1/0

3

03/1

2/03

02/0

1/04

01/0

2/04

02/0

3/04

01/0

4/04

01/0

5/04

31/0

5/04

Mar

ket s

hare

20

25

30

35

40

Num

ber

of m

embe

rs

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

Part 4. Powernext Day-AheadTM : members


More than 9 000 000 MWh in 2004 (already higher than 2003 volumes)

Part 4. Powernext Day-AheadTM: volumes

Powernext Day-Ahead™ - Monthly Volume in MWh

0

100 000

200 000

300 000

400 000

500 000

600 000

700 000

800 000

900 000

1 000 000

1 100 000

1 200 000

1 300 000

1 400 000


900000

1000000

1100000

1200000

1300000

1400000

1500000

01/05/04

05/05/04

09/05/04

13/05/04

17/05/04

21/05/04

25/05/04

29/05/04

02/06/04

06/06/04

10/06/04

14/06/04

18/06/04

22/06/04

26/06/04

30/06/04

04/07/04

08/07/04

12/07/04

16/07/04

20/07/04

24/07/04

28/07/04

MW

h

5

10

15

20

25

30

35

40

€/M

Wh

Daily Consumption Pow ernext Day-Ahead™ Baseload Price

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


a strong correlation between Powernext prices and the weather

NextWeather France indice and average prices on Powernext(moving average 7 days)

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

01/02/04

11/02/04

21/02/04

02/03/04

12/03/04

22/03/04

01/04/04

11/04/04

21/04/04

01/05/04

11/05/04

21/05/04

31/05/04

10/06/04

20/06/04

30/06/04

10/07/04

20/07/04

30/07/04

09/08/04

19/08/04

29/08/04

° C

18

20

22

24

26

28

30

32

34

36

38

€ / M

Wh

Spread betw een the daily NextWeather France average and its 25-year average Average price on Pow ernext Day-Ahead™

Part 4. Powernext Day-AheadTM : prices


Part 4. Powernext Day-AheadTM: market resilience

Price variations resulting from additionnal purchase and sale orders

0,0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

21 22 23 24 25 26 27 28 29 30 31 32 33 34 35Week

€/M

Wh

Aditionnal 100 MW purchase and sale order Aditionnal 50 MW purchase and sale order


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

Part 4. Powernext FuturesTM: overview

Powernext offers the following futures with physical delivery :

3 monthly contracts

4 quarterly contracts

2 yearly contracts


300

400

500

200

100

Time

Consumption

600

Consumption forecast

J F M A M J J A S O N D

Visibility:purchaseCalendar

2004

Flexibility:purchase

monthly and quarterly contracts

Daily balancing

Part 4. Powernext FuturesTM : dynamic management of the consumption


Part 4. Powernext FuturesTM : market model

NOMINATION

TRADING

NOVATIONTRANSFORMATION

POSTING

POSITION MANAGEMENT

CLEARER

BALANCE RESPONSIBLE

TRADING MEMBER

DELIVERY

Continuous trading

Internet access: Trayport system

LCH.Clearnet is the CCP (central counter-party) of all trades

Secures the market through a system of margins and deposits

Delivery in compliance with RTE requirements


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


Contacts

Website : www.powernext.fr

Telephone : +33 1 73 03 96 00

Fax : +33 1 73 03 96 01

E-mail : [email protected]

apex conference – 11-13 oct. 2004 1 powernext sa, the french power exchange: three years later…...

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