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NZX and OMX to launch new carbon trading markets in 2008

21 December 2007  |  7258 views  |  0 Chimneys

OMX is forming a European energy derivatives unit after a $412 million acquisition of Nord Pool ASA's clearing and consulting operations and international derivatives products. Meanwhile, New Zealand Exchange (NZX) has appointed Mark Franklin as CEO of TZ1, the new carbon market it intends to launch in June 2008.

NZX announced in May its intention to corner the Asia Pacific carbon trading market with the launch of TZ1, which is named after New Zealand's time zone. It has now appointed Mark Frankin, formerly of energy infrastrcuture firm Vector, as CEO, and has said in press interviews that it intends to launch in June 2008.

"The opportunity to lead TZ1 was one I couldn't pass up," says Franklin. "New Zealand has a real opportunity to act quickly, position itself and fill the gaps that exist in markets both here and overseas. In New Zealand we have Kyoto status and an all-sector, all-gases emissions trading scheme in place which really puts us on the map. We have supply of and demand for carbon units ahead of other players."

The company has made two further appointments to its leadership team - Helen Robinson, formerly managing director of Microsoft New Zealand, and Joanna Silver, who helped establish and coordinate the Carbon Market Working Group.

NZX says it will remain a cornerstone shareholder as TZ1 forms the strategic international alliances and partnerships that it requires.

OMX acquisition
In separate news, Scandinavian exchange operator OMX says it intends to acquire Nord Pool ASA's clearing and consulting operations and international derivatives products and establish a business unit for international energy derivatives headquartered in Oslo. Nord Pool expects the final price to amount to around Nok2.3 billion (US$412 million).

OMX says its ambition is to build a leading European market for CO2 products, based at first on Nord Pool's current products, including CO2 products (EUAs, CERs) and the international power contracts. "In addition, there are many opportunities for expanding the existing proposition to include trading and clearing in commodity derivatives such as gas, oil and freight derivatives," says Magnus Bocker, CEO of OMX.

The new Energy and Commodity Business Unit within OMX will be headquartered in Oslo and led by Torger Lien. Nord Pool Clearing will be combined with the OMX clearing organisation in order to realise the potential for economies of scale in a joint clearing capital solution.

Under the terms of the deal OMX will pay NOK 2.15 billion at completion of which NOK 1.7 billion in cash and NOK 450 million in a vendor note due to current owners of Nord Pool within 18 months after completion. Furthermore, OMX has agreed to potential further earn-out payments of maximum NOK 800 million based on volume over a five year period.

Nord Pool Spot AS, which operates the Nordic physical market, is not included in this transaction. The spot market, which sets the daily physical electricity prices in the Nordic market, will therefore still be the responsibility of the Nordic transmission system operators.

OMX estimates that the acquisition will lead to pre-tax synergies of approximately NOK 60 million per year, of which half is revenue synergies and half is cost synergies. Furthermore, OMX expects to release approximately NOK 500 million in clearing capital over time.

The transaction is estimated to be completed by mid-year 2008, subject to due diligence, signing of the formal agreement, and approval by the regulatory authorities.

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