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Evolution of EEX and EEX markets Dr. Dr. Tobias Paulun Director Strategy and Market Development European Energy Exchan

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Evolution of EEX and EEX markets Dr. Dr. Tobias Paulun Director Strategy and Market Development European Energy Exchan

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    1. Evolution of EEX and EEX markets Dr. Dr. Tobias Paulun Director Strategy and Market Development European Energy Exchange AG Ankara, 29 April 2011

    2. Agenda Introduction to EEX EEX power derivatives market Transparency platform of EEX

    3. EEX Group and associated companies

    4. Currently EEX has 207 trading participants from 21 countries

    5. What EEX group covers

    6. Agenda Introduction to EEX EEX power derivatives market Transparency platform of EEX

    7. Derivatives Market Fundamentals – Futures and Options Futures transaction: Conclusion and fulfilment of transaction at different times. Futures trading on an exchange is based on standardized derivatives contracts.

    8. Financial Power Futures – Maturities

    9. Derivatives Market Fundamentals – Rationale for Trading Hedging Hedging against price risks (e.g. from volatile spot prices for power) Using an exchange also widely eliminates counterparty risks Arbitrage Generating risk-free returns from mispriced instruments Regional arbitrage: Trading between different marketplaces and market areas Time arbitrage: Trading of instruments with different delivery periods within a single area Speculation Generating profits from anticipation of market price movements Speculators take risks and provide liquidity for the market and other trading participants

    10. Hedging of price risks using Futures (1)

    11. Hedging of price risks using Futures (2)

    12. Hedging of price risks using Options (1)

    13. Hedging of price risks using Options (2)

    14. Use and interplay of the Spot and Derivatives Market for Power (1) Rote Linie = Angenommener Bedarf (von z.B. Strom, Gas) aus Erfahrungswerten (mit Band von Toleranzabweichung) (2) Vertragsportfolio (z.B. OTC-Vollversorgungsvertrag und Terminkontrakten für Jahr, Quartal, Monat, KW) -> Rolle von Terminmarkt (3) Blau = Tatsächlicher Bedarf weicht von Annahme ab und erfordert ein Nachkaufen oder eine Überversorgung -> Rolle des Spotmarktes(1) Rote Linie = Angenommener Bedarf (von z.B. Strom, Gas) aus Erfahrungswerten (mit Band von Toleranzabweichung) (2) Vertragsportfolio (z.B. OTC-Vollversorgungsvertrag und Terminkontrakten für Jahr, Quartal, Monat, KW) -> Rolle von Terminmarkt (3) Blau = Tatsächlicher Bedarf weicht von Annahme ab und erfordert ein Nachkaufen oder eine Überversorgung -> Rolle des Spotmarktes

    15. OTC Trading and Clearing Comparison OTC and Exchange (Counterparty)-Limits EFET-contracts Netting Collaterals Bank Guarantees Credit Derivatives (CDS)

    16. Trading volume on the Power Spot and Derivatives Market

    17. Comparison of Power Derivatives Prices within Europe

    18. Agenda Introduction to EEX EEX power derivatives market Transparency platform of EEX

    19. EEX Transparency Platform

    20. Transparency helps to understand the market – one example

    21. Summary and Conclusion Aus: Sammelmappe zum Energiehandel Autor: Dr. Hans-Wilhelm Schiffer, RWEAus: Sammelmappe zum Energiehandel Autor: Dr. Hans-Wilhelm Schiffer, RWE

    22. Thank you for your attention.

    23. EEX, created as a result of the EU liberalization of energy markets

    24. Phelix – Truly a reference price Phelix means Physical Electricity Index. Calculated on a daily basis, Phelix is the average price for base load (Phelix Day Base) and peak load (Phelix Day Peak) electricity traded on the EPEX power spot market for Germany and Austria. Exemplary application of Phelix: VIK-Index CHP-Index Market price calculation by E-Control ÖSPI: Austrian power price index Bank certificates i.e. - Barclays Capital „WGZ Rohstoff Garant Zertifikat“ - Bank Vontobel Electricity Mini-Futures

    25. Power Derivatives volumes and average open interest

    26. Prices on the EEX Power Derivatives Market: Baseload Year Future

    27. Summary and Conclusion Exchanges provide important services for the market: Trusted, reliable reference prices, Transparency, Bundling of liquidity in standardized products, Equal access to the market for heterogeneous participants. The existence of those services is a prerequisite for growing liquidity. Growing liquidity and availability of products for long-term risk-mitigation attract investors and new market participants. EEX and EPEX Spot have long-time experience in providing market services as exchanges. Together with the associated clearinghouse ECC, they guarantee the highest standards for trading and delivery of products in electricity markets. Supporting growing energy markets is a core task of EEX and EPEX Spot.

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