Minister Donmez, “With the Futures Market, we eliminate all the risks that may arise from transactions that we call over-the-counter markets, which are not organized, unregulated, that is, not made through an exchange.”
Energy and Natural Resources Minister Fatih Donmez, in his speech at the opening ceremony of the Energy Markets Operations Inc. (EPIAS) Futures Electricity Market (VEP), stated that the market depth has increased compared to previous years due to the confidence in Turkey’s energy markets.
Noting that the electricity market in Turkey now means a marketplace where everyone manages their own trading risk, Donmez said, “Therefore, there will be all kinds of products in this marketplace. Today, we are finalizing a 3-year process. With VEP, we are opening a new page that will take us one step further in our journey of the last 20 years. With VEP, we enable the purchase and sale of electricity in a more transparent, stable and competitive environment with future transactions that create physical delivery obligations. Thus, we will protect the participants from price risk by increasing the transparency of the market even more.”
Donmez said that the participants can see their future price expectations and position themselves.
Donmez stated that since the contracts to be processed are standard, market participants will be provided with ease of position netting and efficiency in collateral calculations.
“With VEP, we eliminate all risks that may arise from unorganized, unregulated, transactions that are not made through an exchange, which we call over-the-counter markets. In such cases, there is a counterparty risk and price expectations for the future are not fully realized due to the lack of transparency. The most important feature that distinguishes VEP from over-the-counter markets is the central counterparty role undertaken by EPIAS. With this model, EPIAS is perhaps one of the few energy exchanges in the world. EPIAS has offered a platform that brings together the demand side and supply side without meeting them face to face and offers assurance to both parties. In this way, we eliminate the counterparty risk in over-the-counter markets. Thanks to the transparent market conditions, we will protect the participants from the market risk.”
Participants will be able to fix their costs in future transactions
Donmez pointed out that this way, investors will have the opportunity to see their future price expectations.
Donmez said that the prices to be formed in the VEP will also be a reference in over-the-counter market transactions, and that the predictability will increase at the same rate with the reference prices to be formed for the future.
Pointing out that market participants can make long-term purchases and sales, the price of which is determined as of today, Donmez said, “Our investors will have the opportunity to find finance under more comfortable conditions. With the increase in predictability, our investors will get rid of financial uncertainty and this will contribute to the development of a sustainable investment environment. In fact, with this vehicle, we have provided market participants with the opportunity to make high beams.”
Stating that they will fix the costs of the participants with forward-looking transactions, Donmez stated that they will also be protected from price fluctuations in the spot market and that arbitrage can be made if the market conditions are suitable.
Emphasizing that EPIAS will share the daily indicator prices at the end of each session, thus creating a price signal for the participants for the next pricing, Donmez said, “This situation will increase the predictability, reliability and transparency of the reference prices to be formed for the future. We expect VEP to reach high volume and liquidity in the medium and long term.”
Noting that EPIAS is the fourth largest electricity market in Europe with its current volume, Donmez stated that they wish EPIAS to be in a better position with the transaction volume to be formed in VEP.
He stated that this year, when the market will be opened, market participants will not be charged for VEP transactions.
Noting that as of June 1, six-monthly and two quarterly freight contracts have been put into operation, Donmez said, “In line with the demands of the market, peak and non-peak contracts will be put into use along with annual contracts in VEP. With VEP, one of the instruments in the developed energy markets, we can say that our energy market has entered a maturity period as of today.”
Donmez stated that the Futures Gas Market will also be commissioned this year.
After his speech, Donmez opened the market by pressing the transparent button of EPIAS with Abdullah Tancan, Deputy Minister of Energy and Natural Resources and Chairman of the Board of EPIAS, and Mustafa Yilmaz, Chairman of the Energy Market Regulatory Authority.
Donmezlater said regarding the first transaction on the market, “Our first match in VEP was 1 lot at ₺405 per megawatt-hour for the October 2021 base contract on June 1, 2021, at 13:12.”
Source: AA / Translated by Irem Yildiz