EEX Review of 2011 – EEX asserts itself in a difficult market environment – Boom in short-term trading – Natural Gas Market reaches record level2012/01/12
In the past business year, the European Energy Exchange AG (EEX) succeeded in expanding its position as major energy exchange in Europe and increasing the liquidity of its trading markets for power, natural gas and emission allowances. In spite of the uncertainty on the market and a wait-and-see attitude of the market participants because of the financial crisis and the turnaround in energy policy adopted by the government in Germany, EEX managed to keep its trade volume stable and even increase it in some segments. The further expansion of the product and service range and the continuous improvement of the infrastructure for the customers were decisive for this positive development. However, there were different developments in the various business fields of EEX. Overall, a shift in trading activities towards shorter terms was observed in the fields of power and natural gas. This is a trend which will continue with the increase in the share of renewable energies in the energy mix.
“Without anticipating the final figures at the current point in time we can state that 2011 was yet another record year for EEX in terms of sales and profit“, says Peter Reitz, Chief Executive Officer of EEX. “This is a good basis for continuing the growth of EEX Group this year. For this reason, we are convinced that we will achieve our strategic aims by 2015.”
Development of the individual markets
As in the past, trading in power is the mainstay of revenue of EEX Group. The volume traded on the Power Derivatives Market in 2011 reduced from 1,208 TWh traded in 2010 to 1,075 TWh and, as a result, by 11 percent since the participants’ willingness to establish long-term positions declined in the uncertain energy trading environment. In terms of the number of trades concluded on the Power Derivatives Market the sales generated in 2011 were stable as against 2010 with the lower volume being due to a shift in trading activities towards shorter terms. For example, year futures were trade significantly less. Short-term trading in power, on the other hand, experienced a boom. In 2011, a volume of in total 314 TWh was traded on the Spots Markets of EPEX SPOT (2010: 279 TWh).
EEX once again reached a record level in natural gas trading in 2011. At a volume of in total 58.6 TWh, a considerable increase of 25 percent was achieved in 2011 compared with the previous year (2010: 46.9 TWh). Trading on the Spot Market increased to 23.1 TWh by approximately 54 percent (2010: 15.0 TWh). At 35.5 TWh, the volume on the Natural Gas Derivatives Market is also 11 percent higher than in the previous year. A number of activities of EEX contributed to this positive development: With the introduction of 24/7 gas trading and the expansion to the Dutch TTF market area, EEX strengthened its importance in European gas trading. The launch of the European Gas Index (EGIX), the acquisition of new market makers on the Spot and Derivatives Market and the introduction of an incentive model for the Derivatives Market, which will be continued this year, also contributed to the volume growth. EEX sees a high growth potential, in particular, in natural gas trading.
Driven by the primary market auctions the volume in trading in emission allowances on the Spot Market increased slightly to 25.6 million tonnes in 2011 (previous year: 25.2 million tonnes), while a decline in volume was recorded on the Derivatives Market (2011: 81.0 million tonnes as against 127.2 million tonnes in 2010). The extension of the contract between EEX and the German Federal Ministry for the Environment regarding the 2012 primary market auction for EU emission allowances (EUA) issued in Germany constituted an important mark of confidence for the work of EEX and a good basis for the future auctions from 2013. At the European level, EEX was awarded the contract for the Dutch primary market auction in 2011 (with two auctions executed so far) and the contract for the primary market auction in Lithuania in November. EEX‘s most recent successes in the field of the primary market auctions testify to the capacity of EEX to provide the platform for future auctions from 2013.
Coal trading on EEX is still a “niche market”. In 2011, 420,000 tonnes were traded as against 1,350,000 tonnes in the previous year. EEX is planning to strengthen its focus on this market in the future. So far, coal is primarily traded in the OTC segment. However, because of cross-margining effects which European Commodity Clearing AG (ECC) offers in clearing the coal market becomes increasingly attractive for trading participants that are already active in trading in power, natural gas and emission allowances on EEX.
In 2012, EEX will continue its strategy and generate growth by expanding its existing fields of business. The natural gas market, which is still fairly young, will be expanded further. Moreover, EEX will submit bids for the execution of auctions of emission allowances not only for Germany but also for other EU countries as in the cases of the Dutch and Lithuanian primary market auctions. Every successful asset class automatically strengthens the business of ECC which has firmly established a position for itself in the field of commodity clearing not least because of its cooperation with other European energy exchanges and has evolved into the leading clearing house for energy and related products in Europe.
The European Energy Exchange (EEX) is the leading European energy exchange. It develops, operates and connects secure, liquid and transparent markets for energy and related products on which power, natural gas, CO2 emission allowances and coal are traded. Clearing and settlement of all trading transactions are provided by the clearing house European Commodity Clearing AG (ECC).
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