Prague, Warsaw, Wien to Create CEE Electricity Exchange

TGE, EXAA and PXE signed today The Memorandum of Understanding concerning strategic cooperation and creating a regional electricity market in Central and Eastern Europe based on Market Coupling.

EXAA Abwicklungsstelle für Energieprodukte AG is power spot market operator in Austria and Germany, and also has a carbon emissions market. EXAA was founded in 2001 and it currently has 82 market participants. EXAA is 34.56%-owned by APCS Power Clearing and Settlement AG, 25.12% belongs to Vienna Stock Exchange, 8.06% is owned by “smart technologies“ Management-Beratungs- u. Beteiligungsgesellschaft m.b.H., 8.06% possesses Oesterreichische Kontrollbank Aktiengesellschaft and the remaining 24.2% stake is shared by eight Austrian Power Trading companies.

POWER EXCHANGE CENTRAL EUROPE, (PXE) an established trading platform for electricity trading in the Czech Republic with relative large trading volumes in Slovakia and a new, albeit yet tiny Hungarian market. PXE was established in 2007 and it currently has 34 market participants. The company is 100% controlled by Prague Stock Exchange (PSE), which is in turn PSE is 93% owned by Vienna Stock Exchange.

Towarowa Gielda Energii SA (TGE) is an established spot electricity, emission allowances, energy certificates and energy derivatives exchange in Poland. The exchange was established in 1999 and since then it has gained 47 market participants. TGE has 17 shareholders the most important one being State Treasury with 22.3% stake. TGE is the sole owner of commodity exchange license in Poland.

Now the interesting question is what will happen with the Slovak and Hungarian market. The PXE has a relatively strong position in Slovakia, however, the Slovak market is not easy to penetrate either as a speculator or as a hedging tool. Slovakia forecloses its border-crossing capacities that makes physical delivery very complicated. The PXE presence in Hungary is rather symbolic with 80 MWs traded in the previous months. Hungary's TSO, Mavir, has its own plans.

The news is very welcome for either companies who want to hedge their electricity price risks or for investors who want to speculate and are looking for an alternative asset class. Although speculating, trading and hedging energy prices is becoming more and more available even for private investors and SMEs, the assessment of possible trading strategies, transaction cost, counterparty, delivery and credit risks is still a formidable task in the V4. Do not hesitate to comment or ask questions on this topic.