TGE OBJECTIVES FOR DOMESTIC AND EUROPEAN MARKET AND GROWTH PROSPECTS. At the heart of Central European power and gas trading

Transcription

1 TGE OBJECTIVES FOR DOMESTIC AND EUROPEAN MARKET AND GROWTH PROSPECTS At the heart of Central European power and gas trading

2 TGE - a reliable partner on electricity, gas and property rights markets Facts about TGE The only licensed commodity exchange in Poland (licence since 2003) Year by year TGE strengthens its position in Poland and in the region Strong and stable shareholder Warsaw Stock Exchange Member of the European Multi-Regional Coupling (MRC) Fastest-growing commodity exchange in the region Member of EUROPEX the European Association of Energy Exchanges, Association of Power Exchanges an international organisation gathering power exchanges from all around the world and the Association of Futures Markets an international association of commodity and futures exchanges The only one institution to aggregate a full range of products related to the domestic energy market (electricity, natural gas, certificates of origin, guarantees of origin, CO2 allowances) The subsidiary company responsible for the implementation of commodity-based financial instruments market within the WSE Group TWh in 2014 Featured on the ACER's list of platforms for reporting transaction information according to REMIT requirements Relationship with an experienced NASDAQ technology partner X-stream Trading Technology growth by 5.8 per cent YoY per cent of electricity volume generated in Poland per cent of domestic consumption The Exchange's activity has always been transparency-driven and market-oriented 2

3 Growing share of the commodity market in the revenue pool of the WSE Group Other revenues of the WSE Group Revenues commodity market 58% 42% Commodity Market Group TGE in PLN thousand Revenues growth drivers High share of the revenues from the commodity market in the overall revenue of the WSE Group (42.4% vs. 36% in the entire 2014) driven by: Continued development of TGE's markets including growing liquidity on the gas market Record volume of certificates issued Sustained growth dynamics on the electricity market 3

4 Role of power exchanges creation of optimum electricity market model Market functions power exchange Systemic functions transmission system operator (TSO) Market operator / Nominated Electricity Market Operator (NEMO) Transaction settlement Creation of transparent competitive pricing mechanisms Creation of relevant pricing signals Providing risk management instruments Physical balancing of demand and supply Maintaining adequate network frequency in the power supply system Ensuring system stability Congestion management ECONOMIC TECHNICAL The resultant power market model is the outcome of these functions mutually influencing and complementing each other 4

5 Role of power exchanges building competitive markets Organised markets are a key to the development of power industry they enable real competition Generation Transmission Wholesale Retail Distribution Ensures easily accessible marketplace for independent generators Provides hedging against price volatility through financial instruments Alternative sales channel Ensures anonymous access to commodities Creates arbitrage between electricity / gas / fuels Provides access to electricity / gas for independent retailers Encourages price disclosure Provides hedging against price volatility Alternative source of supply Function of power exchange for each step of the value chain 5

6 Role of power exchanges important element of EU policy and regulatory framework The role of exchanges as organised markets is growing and their importance stems directly from EU regulations. In Poland, the chosen direction for the liberalisation of electricity and gas markets is consistent with EU requirements MiFID II - regulations to be implemented by the Member States by July 2016 the Directive promotes trade on organised platforms as a more secure and transparent option. REMIT Regulation - advantage of the exchange as an organised trading platform means the guarantee of equal and transparent access to transaction information. According to the REMIT Regulation, OTC market means exclusively bilateral transactions concluded outside of any platform. EMIR Regulation Contracts concluded on organised markets are settled centrally according to EMIR Regulation No. 648/2012 the collateral level required for contracts settled by CCP will be much lower. These regulations are currently at consultation stage and are due to come into force in

7 TGE Mission and Vision We ensure the operation of a commodity market with transparent transaction procedures and pricing mechanisms, as well as the functioning of a financial market based on pricing signals from the commodity market in the European Union The vision of the TGE Group is to maintain a leading position in the Region and in Europe in terms of liquidity and commercial offering, building on its knowledge, competence, technology and high quality of services We provide non-discriminatory market access and security of trading for our members and participants through supervision consistent with EU standards, publication of transaction information and settlement services Together with transmission system operators we are one of the animators and creators of the internal market for electricity, gas, liquid fuels, commodities and derivative products We are the first choice market 7

8 TGE's strategy Strengthen the position of TGE as the largest trading platform on the electricity and energy commodities market in Poland - accelerate the growth of volumes traded and market liquidity Build a broad portfolio of transaction and information products offered on commodity and financial markets in Poland and in other countries of the region Develop new trading platforms Strengthen the position of a preferred partner for regional TSOs, regulators and public administration as regards the development of national and regional markets for electricity and gas Build strong and diversified relations with stakeholders on Central and Eastern European markets 8

9 TGE Group three business areas FINANCIAL MARKET Futures contracts based on commodity price changes COMMODITY MARKET Market for power and gas, derivatives and related products DIVERSIFIED COMMODITY MARKET Non-energy commodity market, e.g. agrifood market 9

10 TGE plays a crucial role in the liberalisation of the electricity market Legislator's role in setting market development directions The obligation of public sale¹ of electricity was reduced over the years TGE has been active in the market for 15 years; the introduction of the exchange trade obligation introduced in 2010 and affecting 15 per cent of electricity volume and 100 per cent of long-term contracts (Article 49 b of the Energy Law) marked a turning point for the sector The obligation was a clear signal from the lawmakers to the market as to the development direction to follow Today, the volume of trade on electricity markets significantly exceeds the minimum requirements resulting from the Act. In 2014, it corresponded to as much as per cent of the electricity generated in Poland and per cent of the domestic consumption. TGE is a public trust institution for the market, as well as the principal electricity trading platform and a source of transparent data Trade volume at TGE Public trade obligation (estimated), excluding LTC 1. Estimates based on ERO results, electricity generation mix, projected developments in generation and volume excluded from the public trade obligation. Source: PSE, power supply companies, ERO, MoE, own calculations. 10

11 TGE proactively supports the process of gas market liberalisation Volumes on natural gas markets since their inception at TGE, Gas market the obligation was a stimulus for the growth of the entire industry Since 11 September 2013 obligation to sell gas through the exchange gradually stepping up starting from 30% in 2013, 40% in 2014, to 55% in 2015 ERO: Q out of 145 energy companies, holding licences for gas supply participated in natural gas trading at the exchange ERO: In the years only 429 customers decided to switch the supplier, as at over 13.5 thousand customers changed their supplier, which is an evidence of a huge progress of gas market liberalisation 2012 Forward and spot market 2013 Exchange trade obligation H active participants of gas markets at TGE, 17 direct TGE members, including 4 brokerage houses Continuous development of product offering For comparison, in the first half of 2013, 15 companies participated in the gas market through brokerage houses 11

12 Gas market achievements and challenges Trade in natural gas in 2015 (TWh) Achievements The introduction of a flexible product offer on the gas market (i.a. new instruments, new IDMg market, changes to the session schedule, single price system) Ongoing consultations with the market the Gas Market Committee at the TGE Management Board level Implementation of market education programme Challenges Deregulation of gas tariffs Abolishment of storage obligation with respect to gas imports exceeding 100 million m 3 Amendment of regulation on the diversification of supply, which provides that in the years TWh in 2014 approximately billion cu. m 48 active participants of gas markets at TGE in 2014 the amount of gas imported from a single country must not exceed 59 per cent Further stimulation of the demand side 55.8 TWh in H active participants of gas markets at TGE in H

13 Certificate of Origin Register transparency of support mechanisms for RES and cogeneration TGE is involved in certificates trade (TWh) Growth in the number of COR members There are over 2200 entities in the COR. This year, the record number of companies admitted to the Register is expected 13

14 Exchange Information Platform instrumental role in building a transparent electricity market SCOPE OF INFORMATION: Information on TGE s electricity markets Planned and actual generation System demand International trade Current information on planned and current outages Generation capacity by source COOPERATION WITH MARKET PARTICIPANTS: Exchange Information Platform (GPI) was developed in close cooperation with: URE, PSE, Tauron PE, PKP Energetyka, Vattenfall, PGE, Zespół Elektrowni Pątnów Adamów Konin S.A., TOE, Towarzystwo Gospodarcze Polskie Elektrownie, FOEiG Information provided in TGE's news services is updated on ongoing basis to increase transparency and market participants' activity 14

15 TGE members Currently, 67 entities have the status of a TGE member, including: PGE Polska Grupa Energetyczna S.A., PGNiG S.A., GAZ-SYSTEM S.A., TAURON Polska Energia S.A., ENEA S.A., ENERGA Obrót S.A., PKP Energetyka S.A., RWE Polska S.A., EDF Polska S.A., Vattenfall Energy Trading Sp. z o.o., Zespół Elektrowni PAK S.A., Noble Securities S.A., CEZ Towarowy Dom Maklerski Sp. z o.o., PGE Dom Maklerski S.A. Full list: Gas market 21 companies operating directly, 58 companies in total, including i.a.: Polskie Górnictwo Naftowe i Gazownictwo SA, RWE Polska S.A., Enea Trading Sp. z o.o., PGE Polska Grupa Energetyczna SA, VATTENFALL ENERGY TRADING GmbH, TAURON Polska Energia S.A., Fortum Power and Heat Polska Sp. z o.o., PKP Energetyka S.A., Polenergia Obrót S.A., PGNiG Obrót Detaliczny Sp. z o.o., and 4 brokerage houses: Dom Maklerski BOŚ S.A., NOBLE Securities S.A., PGE Dom Maklerski S.A., CONSUS Dom Maklerski S.A. Certificate of Origin Register currently 2325 entities are members of the COR 15

16 TGE vs European markets position of the exchange in the region

17 Power exchanges in Europe 17

18 Poland is one of the largest power markets in the European Union Electricity consumption in 2013 (TWh) Among largest electricity consumers Average annual growth of electricity consumption in EU Source: BP Statistical Review, Eurostat, own calculations 18

19 High level of liquidity on a sizeable market makes TGE an important partner for major EU exchanges Electricity market Exchange liquidity ratios for electricity markets in 2014¹ - indicator: (spot market + CFIM market)/consumption Natural gas market Exchange liquidity ratios for natural gas markets in 2014¹ indicator: (spot market + CFIM market)/consumption % 49.3 % 17.8 % 41.7 % 26.8 % 35.0 % 25.1 % 15.3 % 3.7% n/a 18.6 % 21.0 % 13.5 % 0.8% n/a 1. Liquidity ratios defined as the market volume divided by domestic electricity consumption. Consumption figures for Volume figures do not include the registration of bilateral contracts. 2. Denmark, Estonia, Latvia, Norway, Sweden Source: TGE, Enerdata, Eurostat, Hungarian Central Statistical Office, Energienet.dk (accessed on ) 19

20 Trading options available at TGE Comparison of TGE's offer against other European exchanges 20

21 Development directions

22 Milestones FIM Development of Financial Instruments Market on a mature electricity market Increase attractiveness of Polish market and new opportunities for its participants. HUB Build a regional gas hub in cooperation with Partners Concentrate gas trade in the region through a stable and transparent trading platform for market participants. NEMO Playing the role of NEMO (Nominated Electricity Market Operator domestic market operator), in the European electricity market Improved transparency and stability of electricity trade Financial instruments market will be introduced at the end of September or beginning of October

23 Financial Instruments Market Trade volume electricity futures contracts in TWh 2014 The market for electricity-based financial instruments trades from 4 to 6 times the consumption volume in the Nordic countries Financial Instruments Market (FIM) at TGE Initially electricity futures will be traded, to be followed by gas Market oversight by PFSA and cleared by WCCH Diversified participants, including brokerage houses Power industry companies Customers eligible to access to transmission services Brokerage houses Foreign brokerage houses Commercial companies engaged in activity in respect of the purchase and sale of commodities Financial institutions, both Polish and foreign Reasons behind the decision to launch Natural complement to TGE's offering creation of a competitive financial market Responding to the expectations of TGE members and financial institutions Strengthening TGE's position in the region TGE's CFIM is the second largest market with physical delivery in Europe Attracting new domestic and foreign members financial institutions Futures as a tool for electricity price hedging Futures are a more flexible product to manage than forwards 23

24 Co-creating a regional gas hub Growth prospects Market potential of V4 group countries bcm/yr (+ Austria and Ukraine) Competencies of the regional exchange gas hub should be developed in parallel with the expansion of the transmission system Poland is the largest market in the region and is developing transmission infrastructure to enable gas sourcing from directions alternative to Russia, i.e. a LNG terminal and interconnections A regional gas market among the V4 countries could be an equal partner in the gas supply negotiations undertaken by Western European players Major import capacity thanks to the investments undertaken by Gaz-System in 2015 at the level of 23 bcm/yr (country's demand for imports at approx. 13 bcm) in 2023 at the level of 38 bcm/yr (country's demand for imports at approx. 15 bcm/yr and approx. 20 bcm of annual gas consumption) Annual demand for transmission capacity. Source: Eurostat, ENTSOG 24

25 Role of North South Corridor Poland as the regional gas hub The Corridor, running through southern Poland, the Czech Republic, Slovakia and Hungary, will connect the LNG Terminal in Świnoujście and the Baltic Pipe with the planned LNG terminal in Croatian and other sources of supply in the region The corridor consists of a series of cross-border interconnections and domestic gas pipelines, either already existing or at different stages of planning or construction Importance for the market in Poland Development and increased integration of regional gas markets Development of a liquid transparent exchange market for gas Enhanced security of supply Enabled access to new sources of gas supply (LNG, Norway) for Eastern Europe. Coordination of regional infrastructure projects. Alignment of market standards Conditions for the implementation of regional procedures in case of contingency situations Map: source Gaz-System S.A. 25

26 TGE: Playing the role of NEMO on the European electricity market Role of NEMO - Nominated Electricity Market Operator TGE declared to ERO its intention to apply for the so-called NEMO function for and on behalf of the Polish electricity market, and the rotary function of Market Coupling Operator The operatorship will place TGE among the most prominent exchanges in the European electricity market According to CACM Regulation (August 2015), each Member State must nominate at least one electricity exchange to play the role of NEMO for each pricing zone of the domestic electricity market with respect to the Day Ahead Market and the Intraday Market TGE fulfils all the requirements for the nomination as a NEMO 26

27 TGE in the European Multi Regional Coupling Market In July, TGE became a full member of the European Multi Regional Coupling market TGE signed an Agreement on the Accession to the Multi-Regional Market Coupling Day Ahead Operations Agreement (DAOA) which provides for the cooperation of 10 power exchanges and 21 transmission system operators The Accession Agreement is a prerequisite for the TGE's participation in the creation of the European market based on the model developed in the course of the Price Coupling of Regions (PCR) Project For TGE, the status of a MRC market member and the participation in the PCR Project mean the opportunity for proactive and full involvement in regional market projects and the implementation of EU electricity market mechanisms in cooperation with Western European exchanges MRC is an area with electricity demand currently estimated at 2800 TWh which accounts for 85% of the European volume Each day, around 4 TWh of electricity worth approx. 150 million Euro is traded 27

28 Contact: Towarowa Giełda Energii S.A. (TGE) 23 Poleczki St, Building H Warsaw, Poland T: (+48) , F: (+48) E: tge@tge.pl