ETRM Software –The Market Moves on
The long awaited shake-out of the European energy trading and risk management (ETRM) sector has begun in earnest and is set to continue. It comes as no surprise that the European energy market is not big enough to financially support over fifteen electronic trading platforms and a similar number of major trading and risk management solutions vendors. Despite this simple truth, substantial numbers of companies are digging in for a battle of attrition that they hope will see them emerge victorious.
By Michael Hepburn, Prospex Research Ltd.

Governing by the New Rules
Energy industry auditors, Chief Financial Officers and Chief Executives are scrambling to meet the requirements of new sweeping internal control reporting rules that affect – and are affected by – corporate governance. As Linda Rader reports, the hairpulling, nail-biting frustration shared by many at KPMG’s 2003 Global Energy Conference during May 2003 in Houston, was that part of the rules were not yet final.
By Linda K. Rader.

Europe: Independent or United?
As a geopolitical region Europe will enlarge next year. In energy, European companies are now becoming major global players, largely assisted by the retrenchment of US utilities to their domestic market in the post-Enron era.
By Jeremy Wilcox.

Eleven Months & Counting ....
Membership of the European Union (EU) is due to expand from 15 to 25 member countries, as the accession of Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovak Republic, Hungary, Slovenia, Cyprus and Malta comes into effect (1st May, 2004). Membership of the Union will entail significant economic changes for these countries, as EU directives on, for example, deregulation, competition and market structures must be incorporated into domestic legislation in order to achieve full membership.
By David Bucknall, CEO, KWI.

Consolidating UK Gas Exchanges Call for Faster Reform of the European Energy
Markets– How Can the Two be Reconciled?
The energy industry, and gas in particular, is a European-wide business. Pipelines run between the UK and Belgium, and pretty soon – Norway. UK Gas is currently supplied from North Sea sources as outlined below, but this source is slowly running down and current predictions indicate that the UK will, for the first time in over 30 years, become a net importer of natural gas by 2005/2006. So where will this gas come from?
By Les Male, Director, Commercial Operations, EnMO.

Gas Marketplaces
A gas marketplace can be defined as a venue (physical or virtual) at which the price of gas is determined by participants in accordance with supply and demand (real or otherwise) – as opposed to the indexation system currently found in traditional longterm contracts – where the price of gas is set according to the price of competing oil products. The definition and conditions required for the emergence of a gas marketplace: - the example of the North West Europe zone.
By Evariste Nyouki, Gaselys.

Commodity Currencies
Developing countries reliant on commodity exports see the fate of their exchange rates tied to fickle commodity markets. For decades, Economists have tried, with little success, to model long-run movements in real — that is, adjusted for inflation — exchange rates. Almost all of the studies have focused on industrial countries, trying to pinpoint whether fundamentals such as government spending, current account imbalances, and differences in productivity and interest rates hold the key to explaining exchange rate movements.
By Paul Cashin, Luis Cespedes & Ratna Sahay.

Aluminium – The China Syndrome
China’s transformation over the past few years from net importer to net exporter of primary aluminium to the West has raised the spectre that supply and demand will be in large surplus for the foreseeable future. Growth in primary capacity continues to set records but evidence has emerged recently that constraints, both market and government-imposed, will act to moderate future growth. Robin Bhar of Standard Bank London Limited discusses the background to the rapid growth in primary aluminium capacity in China and what conclusions can be drawn.
Robin Bhar, Standard Bank London Limited.

Precious Metal Markets
The conflicting health of markets in platinum and palladium look sets to continue, as evidenced by Platinum 2003, Johnson Matthey’s latest market review of supply and demand for the platinum group metals (PGMs). Gold, meanwhile, continues to mystify.
By Guy Isherwood, Editor, Commodities Now.

Managing the Whims of Nature
Some people are weather wise, some are otherwise.” (Benjamin Franklin, 1706 – 1790) Mr. Franklin would be happy to know that today’s weather risk management industry is very weather wise, especially when it comes to finding solutions that help businesses manage the risks that non-catastrophic weather poses to their finances.
By Michael Corbally, Executive Vice President, XL Weather & Energy Inc..

Banks See Potential in Tarnished Energy Trading Sector
While energy business continues to face significant, challenging issues such as re-regulation, credit collapses, and liquidity squeezes, its nascent recovery is presaged by the increased involvement of financial firms and existing ‘pipe and wire’ companies. The fresh focus of these newer energy merchants is dictating different infrastructure and software solutions, particularly those that combine logistics and comprehensive risk management in a single platform.
By Matthew Frye, Director, OpenLink.

Wasting Money on Information Services?
Information services have become a critical element of an energy firm’s operations. Industry expenditures on these various services are considerable – over USD1 billion per year. However, a significant portion of this expenditure is wasted on unneeded and under utilised products. In an era of increased competition and cost cutting there is a considerable opportunity for organisations to review these information purchases and realise substantial savings and operating efficiencies.
By Alan M. Herbst, Utilis Energy, LLC.

Negative Prices in Electricity Markets
In this paper we describe how liberalisation has lead to the segmentation of trading opportunities for electricity with different periods to delivery. We clarify the price characteristics in each segment, including the extreme volatility in short-term prices and the phenomenon that electricity prices can become negative close to the time of delivery. With the Dutch market as an example, we show the implications for risk management and the valuation of derivatives. We argue that a distinct price model is required for risk management and derivative valuation in each market segment. Derivative valuation goes beyond the financial contract itself and can be very useful for taking strategic decisions on flexible generation assets.
By Michael Sewalt & Cyriel De Jong.

50 Key IT Players in Energy, 2002
Energy based information technology requires great leaders, but also demands scientifically based technology providers. 33 individuals and a total of 52 companies were recognised in RaderEnergy’s 2nd annual ’50 Key Information Technology Players in Energy’ 2002 global honours programme. The mission was to identify, recognise and honour the best and brightest individual technologies and technology-focused companies in the world, positioned at the forefront of information technology (IT) applications used throughout the global energy marketing chain – upstream, midstream, downstream and retail.
By Linda K. Rader.