Power Exchanges in other countries
Is there any company with similar business model as iex in other countries which has created wealth for it’s shareholders
Most of the time the same kind of stocks that performed in other countries perform in India too
Just thinking out loud here, so that the members can collaborate on this. I see another revenue line building with data sharing fee about the spot market to the F&O exchanges.
A few obvious questions I do not have the answer to yet,
- How are the data sharing feed priced?
- What is the size of the F&O in other countries relative to the Spot?
Ans. 4-13x in Europe. - MOSL RR.
- Will market coupling just take it away?
- Similar data fees for gas markets possible?
PS: EPEX Spot - Largest spot exchange in Europe. 535 TwH in DAM and intraday. Revenue Euro 80m in 2017. Transaction revenue was 52m. Translates to .007 INR/KWH.
This is a good read about how NYSE benefited from Data fees after loosing its monopoly due to a rule similar to that of Market coupling.
1: Revenue from data sharing is ~ 1.3% for an european exchange (EEX)
2: F&O volumes are at least 7-8x times spot volumes in european exchanges
3: Unlikely because european exchanges continue to have an income from data sharing
4: Yes, French Powernext provides this service for gas exchanges in europe
Constantly referring to European exchanges and not American because India’s trying to replicate the european model
What kind of revenue do European exchanges earn?
This will help us in predicting the revenue potential from this business
Has anyone here had access to an energy trading platform?
Is the platform easy to use or does it require considerable training? IEX has conducted training and seminars on multiple occasions and if it requires significant time and effort on behalf of Genco and DISCOMs to retrain their employees to use a competitors platform, this could be a significant and durable competitive advantage for IEX.
@amey153 @ashwinidamani or anyone else, do you have any information in this regard? Would be quite helpful if this information can be sourced
Its a piece of software.
How difficult is it to operate Microsoft Word?
Apparently very difficult for a 60 year old, but my 5 year kid is excited to write numbers on the Word Processor.
With introduction of derivatives, real-time markets, capacity contracts (in future the process of procurement of electricity will become like a complex algorithm which may have the stickiness
The operation of the software per se does not have any “competitive edge”
Q1FY21 investor presentation
Edelweiss hosted IEX’s management for a roadshow. Notes from that below. Interesting views on market coupling.
We hosted Indian Energy Exchange’s (IEX) top management for a road show. Management reiterated that expanding coverage and market is the top priority, apart from retaining technological niche.
- Market coupling and MBED are new concepts, which require detailed discussions before implementation.
- Gas exchange is a huge opportunity, which will see substantial reforms over next 12-18 months, boosting liquidity.
- IEX to launch new products–LDC, Green DAM and Cross Border–over next six months.
- PTC’s new exchange (H2FY22) unlikely to impact IEX’s volumes materially. IEX is key beneficiary of exchange market’s deepening and remains a structural play across the energy basket.
Market deepening via new products to drive growth
IEX’s top priority is to expand coverage and market, which is being addressed via launch of new products–RTM, Green TAM/DAM, LDC, Cross Border, etc. Management is confident of launching LDC product (35-40BU opportunity) by Q3FY21 and gaining a strong foothold led by the value proposition it offers to buyers as well as sellers. Green TAM/DAM (3-5BU opportunity) will take some time to mature as there are enough sell flows, but limited buy flows. Further, with introduction of the derivatives market, management expects a spurt in the spot market as these contracts will be settled on exchanges. All these efforts, we believe, will double IEX’s target market opportunity to 120BU.
Market coupling and MBED: More of concept papers
Management believes the time is not ripe for market coupling in India. The concept faced significant opposition in the public hearing given that mere 4% volumes are traded on the exchange. IEX believes coupling is just an enabling provision to support growth of the power market and is likely to be just a concept paper, which requires detailed discussion. On the MBED front, management indicated issues in implementing this reform at short notice. However, it believes, once implemented IEX’s volumes (10-15x) will sky rocket, but market share will dip.
Gas market: Set for significant reforms over next 12-18 months
The government aims to deepen the short-term gas market and has lined up a few reforms and policies to significantly boost liquidity on IGX: a) rationalisation of tariffs & bringing gas under GST ambit (currently different rates); b) independent system operator (like POSOCO in power) for gas supply; and c) setting up of a national gas transmission corridor. IEX anticipates these reforms, when implemented, to trigger exponential growth.
Outlook and valuation: Strong growth on cards; mainain `BUY’
With significant market deepening (power and gas) on cards, IEX’s volume is set to clock 15% CAGR over the next two-three years. We await clarity on implementation of market coupling–a key monitorable. We maintain ‘BUY’ with TP of INR220. We are yet to factor derivative volumes and gas valuations in our estimates.
unless there is government support in promoting gas based economy esp for gas based power plants, this will be a non-starter as the electricity tariff at IEX is Rs 2.70 per unit and the current variable cost of gas based power plants other than guj are all Rs 3 or above. so this will not work. Govt needs to have integrated energy policy and promote gas by bringing it under GST and reducing the pipeline tariff. then only it survive or bring in electricity products along with carbon emission whereby for every 1 ton of CO2 an equivalent certificate needs to be purchased. then Gas can compete with Coal otherwise its beaten down and IGX is anyway struggling and will further struggle.
Govt’s lack of reforms in coal, Gas and electricity sector is staring for further fall in the economy.
IEX is a platform and not just software. It has the competitive advantage -believe me making. software is easy , making a stable platform being in production at this scale is not easy. The moat would come from being innovative in products and scaling up. Just to save some bps , power co would not move to xyz from iex .The one biggest difference between iex and mcx (both being platform bases solution having mainly fee based income ) is that IEX needs some luck in form of govt action .MCX has crossed that bridge. also the opportunity size is very large for mcx compare to iex. That is why i am still skeptical in increasing the allocation to the iex in pf.
couple of good research report
Yes. Government needs to come out with a mechanism to couple renewable based power with gas based. Solves multiple problems like grid balancing, usage of clean energy, lower carbon footprint, meeting the 15% gas usage target, etc etc. But the govt has been very slow in its approach.
Latest interview (link)
- September power demand is 2% higher than last year, realized power price in exchange is still very low (at 2.5/unit)
- Resolving starting issues for gas exchange (such as bringing all states under GST for common taxation, regulatory setup), ramp up going well
Disclosure: invested (position size here)
The volumes traded on the exchange this quarter has been abysmally low.
It has been a massive drop of 82% .
The data has been given on the exchange Volume.
Anybody has any clue as to why it has dropped so massive!
I think its not comparable with last yr value because of Pandemic but can compare with Q1 value .Most of the states and industries lack of business activities and slowly unlock India started.
Data doesnt look correct
check here - https://www.iexindia.com/marketdata/market_snapshot.aspx