On Friday (21.06.2019) on the Bulgarian power exchange were announced auctions for purchase for dates 24.06 and 25.06 under disputable conditions and prices. ATEB has informed the institutions and the state-owned companies in the sector on 22.06, two days prior to the conducting of the auctions:
The Association of traders with electricity in Bulgaria (ATEB) supports the establishment of a transparent and liquid electricity market, as well as the facilitation of trading. The Association stands for the principles of equality between market participants and supports the improvement of the market framework. We are addressing you because once again we are witnessing an attempt from certain market players to purchase large volumes at sub-market prices.
In order to eliminate this bad practice, we propose that the power generators part of BEH to be restricted from participating in auctions initiated by buyers.
As problematic, we refer to the 12 Auction for dates 24.06.2019 and 25.06.2019. They were announced on short notice on Friday (June 21, 1919), just before the weekend:
It is suspicious that the auctions were published by different market participants, with very similar terms and parameters:
- Announced at the last moment;
- Auctions for purchase;
- The delivery period of the product excludes the planned annual overhaul of NPP Kozloduy, implying that the potential seller is the plant;
- Similar individual conditions;
- All auctions, require the entire amount to be offered in a single bid, which means there can be only one winner of the auction;
- Same prices. The announced prices are significantly lower than the reference market price determined by the EWRC. For December the asking price of 85.00 BGN/MWh is significantly lower than the market expectations which are for prices above 100 BGN/MWh. Regional futures at the moment for December are traded for 112.1 BGN/MWh. The same is valid for the baseload product for 2020, where the asked price is 86 BGN/MWh. For comparison, in Germany the same product is traded at 99.74 BGN/MWh and in Hungary at 113.2 BGN/MWh. If these deals are concluded, they will inflict a loss for the seller of about 68 million BGN.
In view of the above facts and the negative effect on the market, if such transactions are realized at prices well below market rates, we urge the aforementioned auctions to be postponed until the circumstances leading to their initiation are clarified. For price reference, on the same day 24.06.2019 TPP Maritsa East 2 has announced an auction for the sale of similar product at a price of 134.52 BGN/MWh, which is 53.52 BGN more than the announced maximum prices of the auctions for purchase. The volumes at these auctions are significant and would have a significant impact on the market.
Similar auctions were organized on 14.03.2019 and on 30.04.2019 by the same companies for similar products and again at questionable prices. We informed you about that with letters No. 240 /14.03.2019 and No 245 /25.04.2019 and as a result no deals were concluded. We now call again for timely action from your side to prevent deals that do not correspond to the market situation.
Once again, since the launch of the Independent Bulgarian Energy Exchange (IBEX), there is a possibility to witness transactions that raise serious doubts about market abuse and sales of electricity to certain companies at sub-market prices. In such cases, it is clear that the power exchange is not a guarantor of transparency and a fair market price, but on the contrary it is used as a tool for verifying questionable deals. The purchase and sale of electricity through the platforms of the exchange must ensure the stability of the sector and prevent the use of non-market mechanisms in electricity trading. The power market should not be a place for undermining market principles resulting in speculations with electricity prices.
Please note that the liberalized market constitutes 62% of the country’s electricity market and guarantees the financial stability of the sector. Such transactions, if executed, undermine its principles and foundations and favor only few companies instead of all market participants.