2nd UPDATE:Brazil Batista,ICE To Launch BRIX Electricity Exchange
April 12 2011 - 3:31PM
Dow Jones News
Brazilian billionaire Eike Batista and other local investors
said Tuesday that they will team with IntercontinentalExchange Inc.
(ICE) to launch a trading exchange for electric power, saying the
existing system for negotiating contracts is inefficient.
Uncontracted electric power in Brazil is currently sold under
private contracts between producers and large consumers, which
makes it hard or even impossible to determine a spot market price.
The exchange aims to bring those negotiations under one roof, and
make the pricing public, which will also allow for derivatives such
as futures contracts to be developed down the line.
The energy trading platform, to be called BRIX, aims to triple
trading of contracts in Brazil's free energy market over the next
three to five years to about 75 billion Brazilian reais ($47.5
billion), up from an estimated BRL25 billion in 2010, the investors
said in a press release to announce the deal.
"I'm an efficiency warrior," Batista told reporters in Rio de
Janeiro. "I'm seeking to bring efficiency to the sector. This is
the Facebook of the Brazilian electrical sector."
BRIX expects to serve the more than 1,400 companies allowed to
trade in the free market, where consumers can negotiate directly
with suppliers to purchase any amount of energy. This market
accounts for 25% of the country's energy consumption, according to
BRIX.
BRIX "will help form prices in a transparent way, and through
that it will enable the launch of derivative products," said Paulo
Pedrosa, president of Abrace, the country's association of large
industrial energy consumers. The new exchange will provide an
additional measure of security for electric power investors, said
Pedrosa, whose group had been in talks with BRIX.
During its first phase, to begin in June, the BRIX platform will
provide daily pricing via a spot index, and contracts would still
be registered with the CCEE.
In the second phase, for which executives didn't give a
timeframe for launch, futures contracts would be traded in which
electricity would be bought for delivery in three months, six
months, or annually.
The platform may be extended to other countries in Latin
America, BRIX Chief Executive Marcelo Mello said in Rio de Janeiro.
Moreover, BRIX may also move into contracts for oil, ethanol,
biodiesel and "any other kind of energy," Batista told
reporters.
Batista, who made his fortune in mining but has moved
aggressively into the energy sector in recent years, said he hopes
to eventually sell oil produced by his OGX Petroleo & Gas
Participacoes (OGXP3.BR) on the exchange, where he expects to get
better prices.
The company may partner with BM&FBovespa (BVMF3.BR), Latin
America's biggest exchange, or Brazil clearinghouse Cetip SA -
Balcao Organizado de Ativos & Derivativos (CTIP3.BR) to provide
clearinghouse services, or BRIX may set up its own clearinghouse,
using ICE's experience, said Roberto Teixeira da Costa, a BRIX
partner and former president of Brazil's securities regulator
CVM.
BM&FBovespa has a partnership with the CME Group (CME), in
which each holds a stake in the other company. The CME provides
electricity futures contracts in the U.S. The agreement between the
CME and BM&FBovespa didn't mention plans to bring electricity
trading to Brazil, though it allows the Sao Paulo exchange to
negotiate all CME contracts.
According to Costa, a possible partnership in the clearinghouse
business with the BM&FBovespa exchange poses no conflict with
the bourse's partnership with CME.
-By Diana Kinch, Dow Jones Newswires;
diana.kinch@dowjones.com
--Jeff Fick contributed to this article.
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