EEX backs proposals for Powernext tie-up

Business Materials 22 October 2007 04:07

The supervisory board of the German-based European Energy Exchange has welcomed a co-operation proposal with a French rival as the start of consolidation in what is one of the most fragmented corners of Europe's energy market.

There are scores of power exchanges dotted across Europe. This has created a wide disparity in pricing for energy across the continent.

EEX, which is based in Leipzig, is looking to co-operate with Powernext, a French rival, in several areas. EEX's supervisory board on Friday night unanimously supported its European strategy but delayed a final decision on the details until December.

A merger of the two groups had been welcomed by Eon and RWE, Germany's two largest power groups which are under pressure because of rising energy bills. Industry associations have blamed the rising cost of energy on higher prices at EEX because, although only a small percentage of energy is traded through EEX, companies base their bills on EEX prices.

EEX's plan would be to move the two group's spot market activities to Paris and their derivatives business to Leipzig.

A senior RWE executive and other German officials have raised the alarm over moving too much power to France, which is widely seen in Germany as having one of the least competitive and liberalised energy markets in Europe.

The European Commission has indicated that of the other large EU countries, Germany has also one of the least competitive energy markets.

Experts argue consolidation of power exchanges should lead to more transparency and lower prices over time.

But they stress that other steps are necessary, too, including better interconnection between European countries to break down national borders that hamper the sale and distribution of energy.

The Commission is pushing for a plan to liberalise markets further. ( FT )