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WHY DO WE NEED WELL FUNCTIONING

EXCHANGE AND BILATERAL MARKETS?

Piotr Wąsik

Financial Managing Director, Member of the Board

VATTENFALL ENERGY TRADING POLAND

„The Power of the Market” Congress

Warsaw, 8 October 2010

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Agenda

1. Proper market – how should it look like?

2. Costs and risks

3. Exchange and OTC markets shape in Poland

4. What are there still missing?

5. What are the benefits of a properly functioning market?

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Wholesale energy market

Exchange market

OTC market

• Organization and Standardization

• Transparency and Anonymity

• Access

• Reference price

• Market security • Bilateral nature

• Flexibility and matching

• Equal and market rules

• Delayed cash flows

• Brokers’ role

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Costs and risks on the exchange and OTC markets

EXCHANGE MARKET OTC MARKET

RISK

S

• Liquidity risk

• Exchange and clearing fees

• Financing costs

• Counterparty risk

• Credit risk management

• Brokerage feesCOST

S

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Share of PPX spot market in domestic consumption

0%

1%

2%

3%

4%

5%

6%

7%

8%20

09

01-2

010

02-2

010

03-2

010

04-2

010

05-2

010

06-2

010

07-2

010

08-2

010

09-2

010

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Wholesale energy market structure in 2007-2009

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2007 2008 2009

Brokers

POEE

PPX

© Vattenfall AB

Wholesale energy market structure in 2007-2009

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2007 2008 2009

Other OTC

Brokers

POEE

PPX

© Vattenfall AB

… and in 2010

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q1 2010 Q2 2010 Q3 2010

Other OTC

Brokers

POEE

PPX

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What are the weak points of the wholesale energy market in Poland?

EXCHANGE MARKET OTC MARKET

Size and liquidity Master agreement standard

Tradable horizon Transparency and availability

Available products Risk management rules

Exchange obligation Trading techniques

>1 spot exchange? Role of brokers

Entry and operation barriers

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What are the benefits of the properly functioning wholesale energy market?

PROPER

WHOLESAL

E MARKET

PROPER

WHOLESAL

E MARKET

COMPETITIVENESS

RETAIL MARKET

DEREGULATION

REFERENCE PRICEPREPARATION FOR

MARKETS INTEGRATION

EFFECTIVE MARKET RISK

MANAGEMENT

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THANK YOU FOR YOUR ATTENTION

Piotr WąsikFinancial Managing Director, Member of the Board

VATTENFALL ENERGY TRADING Sp. z o.o.ul. Złota 5900-120 WarsawPoland

tel. +48 22 587 50 34e-mail: piotr.wasik@vattenfall.plwww.vattenfall.com/trading