31. 7. 2019

ČEZ Trading celebrates successes and expands into new markets

ČEZ traders now trade electricity products on the wholesale market in almost all European countries. They are also currently expanding to markets trading in natural gas, environmental certificates and related financial products.

ČEZ traders now trade electricity products on the wholesale market in almost all European countries. They are also currently expanding to markets trading in natural gas, environmental certificates and related financial products. Through this expansion, the trading department is building on its recent achievements, such as last year’s record CZK 3 billion from speculative trading—a billion more than in 2017.

Apart from some exceptions, ČEZ Trading has no branches or staff in the various countries, but entering new markets is nevertheless always preceded by detailed preparation and comprehensive analysis. Before entering a new market, it is essential to become familiar in detail with the regulatory rules, products traded in the given country, cross-border flow of commodities with neighbouring countries and any specific commercial characteristics of a particular country.

“Markets in Europe are becoming increasingly interdependent and keep providing new opportunities. Our strategy is to organically grow the number of markets and products and expand into new territories. Entering a new market is usually a very natural process. To ensure success when we start trading in a particular country, it is essential to get to know how the market functions in neighbouring areas. Once we are thoroughly familiar with those neighbouring countries, we can start considering further expansion,” says Member of the ČEZ Board of Directors and Director of the Strategy and Trade Departments Pavel Cyrani.

The trading department began by trading on its own account (proprietary trading), recently investing in, for example, gas with physical settlement in France, Italy, Belgium, Hungary and Denmark. It also has news concerning the electricity sector. Trading electricity with financial settlement initially began in the Nordic markets. Physical settlement means the delivery of commodities (gas, for example) in a given period, whereas financial settlement means instead a transfer of the associated cash position.

“Another market we would like to join for products with physical settlement is Scandinavia, which we are currently quickly studying. Last year, we established an office in Lithuania and began trading in the Baltic region, which is our fertile ground for full entry into Scandinavia,” says Director of ČEZ Trading Department Luděk Horn.

As well as trading energy commodities, ČEZ Trading also engages in trading environmental certificates for guarantees of origin (which demonstrate clearly the origin of electricity, heat and gas from renewable sources to a customer), CO2 emissions certificates and white certificates for energy efficiency. With growing customer interest in the EU’s environmental goals and reducing the energy sector’s impact on the environment, these products play an ever-increasingly important role. The trading division has become one of the most important traders in Central and Eastern Europe in this area.

ČEZ engages in proprietary trading, investing in electricity, gas, coal, oil, emissions trading, environmental certificates and an extensive range of financial assets. The purpose of this type of trading is to create additional profit. All trading and commercial activities involve specific risks that define the authorised products, time horizons, counterparties and especially market and credit limits and restrictions. Compliance with these limits is checked daily.

Trading achieves several purposes for the ČEZ Group. It makeselectricity produced by ČEZ available on the market and trades on its own account in order to achieve profit (proprietary trading). It also carries out active dispatch (optimised deployment of ČEZ resources shortly before delivery). In a unit of nearly 130 employees, forecasters and supporting staff work in the back office (confirmation and settlement of closed trades, contract management), middle office (reporting and monitoring of market and credit risk), IT (administration and development of trading systems) and scheduling (reporting deliveries to transmission system operators) alongside traders and analysts. Although the majority of trades are conducted during usual business hours, part of the team operates 24/7. 

In addition to Czech and Slovak nationals, the trading division is an international team consisting of French, Italian, Latvian, Lithuanian, Hungarian, Norwegian, Polish, Romanian, Russian and Ukrainian citizens. Last year, our traders effected more than 450,000 transactions and traded over 800 TWh of electricity and 600 TWh of gas.

Electricity and gas with physical delivery is carried out by ČEZ in Belgium, Bulgaria, Czech Republic, France, Italy, Hungary, Germany, Netherlands, Poland, Austria, Romania and Slovakia. Electricity with physical delivery is supplied in Croatia, Greece, Slovenia, Serbia and Switzerland. Electricity with financial settlement is done in Denmark, Estonia, Finland, Latvia, Lithuania, Norway, Spain and Sweden. In Denmark and the United Kingdom, ČEZ trades gas with physical delivery.