Energy stock exchange helps clean up market

The spectacular progress of the Romanian power market operator (OPCOM) from last year boosted the energy transactions made, both in terms of value and volumes. On the spot market the level of deals grew from 7.74 percent in 2006, to 9.33 percent last year, at an average price of EUR 47.89 per MW/h. Also, on the market for bilateral contracts the transaction rose from 2.41 percent in 2006 to 12.19 percent last year, EUR 48.35 per MW/h on average.
The outlook for this year seems promising, according to OPCOM officials. “We expect the positive trend will continue by raising transactions on the market for bilateral contracts and spot. The attractiveness of our products is determined by the coherent price signals and the volume, which reached 22 percent of the country's total consumption last year,” Victor Ionescu, general manager of OPCOM, told Business Review.
Another argument for the increase of OPCOM energy transactions is that energy representing 14 percent of total local consumption was already sold on the market for bilateral contracts.
Analysts believe the Romanian energy market is mature. Now regulated by strict laws, dubious players from the energy sector will have to start looking for fast gains elsewhere. “‘Smart guys' will have fewer and fewer opportunities to arrange financial ‘understandings' by avoiding market rules. I believe that the ‘smart guys' [the term used by the president Traian Basescu to describe operators who use sharp practice to make a quick buck on the energy market, e.n.] will compensate for the lack of opportunities in Romania with consistent gains south of the Danube, by taking advantage of the confusion of the law and the energy deficit on some of these markets,” said Jean Constantin, president of the Romanian National Institute for Using Energy Sources (IRE).
Market players have also expressed manifold serious complains about the disorder on the energy acquisition market. “There are traders, like Energy Holding and Petprod, which control energy acquisitions and the Romanian authorities do nothing to stop it. The problem is generated by the long-term contracts active until 2011,” said Jan Veskrna, president of CEZ Romania. Energy Holding reported for last year a turnover of some EUR 270 million and a profit between EUR 8.8 and 10.1 million. There are real chances that the energy contracted by “smart guys” will drop this year, but only if it is made mandatory that all transactions be made through the energy stock exchange. At the end of the year some contracts will expire allowing crafty players to pick up cheap energy.

New traders on site
Analysts believe that we should expect a few more unpredictable attempts from wily players to change the regulation in the energy sector to their favor and to kick OPCOM below the belt. “We will escape from the damaging convulsions of the local energy market when it becomes attractive to intelligent operators, who are efficient in real competitive markets. At the same time, we have to get rid of incompetent clerks who will try once more to make us believe that transactions and arrangements is what the energy market is all about,” said Constantin.
At the end of last year, the Romanian Energy Regulatory Authority (ANRE) proposed that the bilateral contracts closed outside the operator should not be made public. The idea angered important players on the Romanian energy market. “Such a decision, if implemented, would have had a negative influence. Compared to the results from 2007, in January this year, transactions for bilateral contracts surpass 18 percent and the spot market reaches 11 percent. This means that more than a third of all energy transactions are constantly monitored,” said Ionescu.
More and more energy traders are expressing their wish to enter the local market in order to get a comfortable market share. The German energy giant RWE will this year start trading activities, according to Klaus Buhl, senior manager for mergers and acquisitions for Eastern Europe at RWE. And Merrill Lynch, one of the biggest investment banks in the world, has announced that it will start energy transaction in Romania through Merrill Lynch Commodities. “The company is interested in buying and selling energy from the whole of Central and South East Europe,” said lawyer Petru Buzescu, legal representative for Merrill Lynch Commodities. Last month, Swiss energy group Atel bought a local energy trader, Buzmann Industries.
The growing interest of foreign energy companies in entering the local market and the success of OPCOM have created the premises for a regional energy stock exchange, a long discussed project. “Bulgarian and Hungarian authorities are finally talking about establishing spot markets and are even considering using our IT platform. It is a sign of trust. I can say that at mid-year we could host regional energy transactions. Until then we have to keep negotiating agreements, contracts and working with our partners from Nord Pool Consulting and OMX Technology,” said Ionescu.
He says there is a big discussion in Europe regarding the approval of principles and market rules. “At the most recent Athens Energy Forum, the World Bank representatives recommended the member countries make energy transactions on OPCOM platform rather than developing national energy operators,” added the OPCOM GM.
A strong regulatory system and a powerful energy operator could shortcut the overnight gains of the ‘smart guys' from the energy sector.

By Dana Ciuraru