2018
Introduction to IUK
IUK is key infrastructure in physically connecting pipeline systems and markets
First Gas 1 st October 1998
System Capacity GB to BE: 20bcm/yr BE to GB: 25.5bcm/yr
IUK Flows: April 2017 March 2018 800 ~100% throughout July Volatile flows through Sep & Oct, often correlated with wind levels (CCGT demand) 600 400 200 More erratic, weather driven UK imports this winter 0-200 -400-600 -800 Apr-17 Jul-17 Oct-17 Jan-18 Apr '17 - Current Record December flows during Forties outage Previous Year Highly responsive IUK supports increased volatility and trading opportunities 1 March 2018 Rapid reaction to UK gas deficit warning
IUK over the past few months Q1-18 has seen the highest imports in GB via IUK since operations began, with a total of 33,644GWh Previous record: Q1-13 which saw imports of 27,558GWh Last month, IUK saw one day of exports to BE, before returning back to Imports to GB
Implicit Allocation Overview
Capacity Available from 1 October 2018 113 GWh/d BE-UK capacity already sold for the next 10 years IUK will be offering Shippers two methods of buying our capacity this year: CAM NC Auctions on PRISMA All Capacity offered Annual, Quarterly, Monthly, Day-Ahead, Within Day Fixed Auction Calendar Bundled with our adjacent TSOs Ascending Clock Auctions for A,Q,M Uniform Price Auctions for DA & WD Implicit Allocation Max of 50% of technical capacity offered Annual, Seasonal, Quarterly, Monthly Can be offered anytime Unbundled Capacity Purchase with Matching Quantity of Gas First Come First Serve
Implicit Allocation - Concept implicit allocation method means a capacity allocation method where, possibly by means of an auction, both transmission capacity and a corresponding quantity of gas are allocated at the same time Implicit Allocation Partner (HPC SA)/ Platform (PleXHub) IAA Shipper and Seller of Natural Gas Gas Contract Offer of Natural Gas Bid of Natural Gas Option to match with IUK Capacity Confirm purchases: Gas + Capacity IAA Shipper and IUK Capacity Contract (IAA)
Introductions HPC SA will take on the role of our Implicit Allocation Partner IUK capacity available for purchase through HPC SA will be advertised on the PleXHub platform, to provide transparency to the market.
Why Implicit Allocation? Advantages for IUK Complies with the CAM NC Second method of selling capacity Can offer unbundled capacity Can offer capacity any time Not restricted to standard products Visible on a new platform Advantages for Shippers Buy capacity when there is a market opportunity Align capacity and commodity trades Optimise portfolio with each TSO React to an opportunity that arises outside of the auction timetable Buy capacity that meets requirements Hold capacity for longer to gain extrinsic value
Implicit Allocation Rules
1. Standard Implicit Allocation Capacity Products For any Gas Day, a cumulative total of up to 50% of IUK s Technical Capacity may be sold through Implicit Allocation. Product Length When will capacity be offered? What will be offered? Annual 5 years out Any Gas Year 6 months 3 years out Any 2 Quarters Quarterly Any of the next 4 Quarters Any Quarter Monthly 3 months out Any calendar month IUK will not offer DA & WD capacity via IAM but may offer BOM, WDNW etc in the future
2. Gas at a NWE Hub or Delivery Point IUK Capacity must be allocated at the same time as a matching quantity of Natural Gas. NBP Bacton This is can be at a NWE Gas Hub or Delivery Point, such as Bacton. Will depend on the gas products advertised on the PleXHub Platform. ZEE PEG N TTF ZTP Gaspool NCG
What is being offered?
Matched Products Suitable Gas Products: ToP = Take or Pay TCQ = Total Contract Quantity Forward Profile: based on average volume across tenor Fixed Price Swing: based on minimum take (ToP x TCQ) across tenor Index Price Swing: based on minimum take (ToP x TCQ) across tenor Beach Entry: based on minimum take (ToP x TCQ) across tenor To be matched with IUK Capacity: BE to GB direction or GB to BE direction Annual (gas year) for 5 years out 6 monthly for 3 years out Quarterly for next 4 quarters Monthly for next 3 months (only after the PRISMA Quarterly Auction)
Matched Product Example: Forward Profile Reminder: Implicit Allocation requires both transmission capacity and a corresponding quantity of gas are allocated at the same time Gas Product: Hub: Tenor: Cal 19 Volume: 239.67 Forward Profile TTF Example Forward Profile Hub: TTF Tenor: Cal 19 Volume: 239.67 Profile Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 360MW 360MW 360MW 120MW 120MW 120MW 120MW 120MW 120MW 360MW 360MW 360MW 12.76% 11.52% 12.74% 4.12% 4.25% 4.12% 4.25% 4.25% 4.12% 12.77% 12.35% 12.76% Matched with: 239.67 MW of IUK Capacity for Cal 19 Delivered as: 5.76GWh/day
Matched Product example: Swing Gas Product Reminder: Implicit Allocation requires both transmission capacity and a corresponding quantity of gas are allocated at the same time Example 1: Flex gas product GY18 120d 100% ToP TCQ=1440GWh DCQ=0-500MWh/h TCQ of 1440GWh allocated to be taken during Gas Year 2018-19 Capacity Purchased = 3.945GWh/day Example 2: Flex gas product Cal19, 180/240d 75% ToP with av(q1,q4) strike and cross Max TCQ = 2880GWh, Min TCQ = 2160GWh Capacity aligned with min TCQ, 2160GWh Capacity Purchased = 5.92GWh/day
Matched Product Example a) Gas Capacity 1 Year TCQ 1440 GWh From any NWE Hub 1 Year 4 GWh/d IBT Entry 1 Year 4 GWh/d IZT Exit GB BE IUK Capacity Price = Annual Reference Price One direction, Annual 4GWh/d at 1.1 p/th = 548K per year
Matched Product Example b) Gas Capacity 1 Year TCQ 1440 GWh Months 1-6 4 GWh/d IBT Exit Months 7-12 4 GWh/d IBT Entry GB GB BE BE Months 1-6 4 GWh/d IZT Entry Months 7-12 4 GWh/d IZT Exit IUK Capacity Price = Two 6 Month Products Seasonal, 4GWh/d at 1.4 p/th = 697K per year
Matched Product Example c) Gas Capacity 1 Year TCQ 1440 GWh Months 1-12 2 GWh/d IBT Exit GB BE Months 1-12 2 GWh/d IZT Entry Months 1-12 2 GWh/d IBT Entry GB BE Months 1-12 2 GWh/d IZT Exit IUK Capacity Price = Two Annual Products Bidirectional, Annual 4GWh/d at 1.1 p/th = 548K per year
Matched Product Example d) BE GB Both directions for Q4 2018 GB import for Q1 2019 GB BE GB export for Summer 2019 IUK Capacity Price = combination of Quarterly and Seasonal Products = 697K per year
Transaction Walk Through PleXHub Demo
Visibility via PleXHub (1)
Visibility via PleXHub (2)
Start to Finish
1. Publication Requirements IUK publishes Implicit Allocation Tariff in Charging Statement one week before capacity offering 12 April IUK publishes the amount of capacity to be sold one day in advance of offer 18 April This capacity is advertised on the PleXHub Platform 18 April
IAM and PRISMA auctions IAM sales suspended while capacity is advertised on PRISMA for auction, but otherwise can be offered anytime Key Dates Start offering capacity through Implicit Allocation: Suspend for PRISMA Annual Auction: 19 April 2018 29 May 2018
Capacity Download Capacity will be shown at monthly granularity for the next 5 gas years File will remain valid until otherwise notified
2. Allocation Process Shipper goes onto PleXHub to see or start a live market for IAM qualifying gas products 19 April Shipper investigates which IUK Capacity products can be matched to the gas product 19 April Shipper communicates this interest to HPC via Eikon, email or telephone 19 April HPC will, on a first come first serve basis allocate the gas and the capacity at the same time 19 April
3. Confirmation of Purchase Shipper will receive confirmation via email from HPC that both transactions are complete 19 April IUK will receive confirmation via email that capacity has been sold 19 April HPC reports Gas transaction to ACER 19 April IUK logs transaction in ISIS against IAA Shipper Account and then reports Capacity transaction to ACER 20 April
4. Reflection of Sales PleXHub reflects capacity sales and updates availability 19 April IUK website updated to show sold capacity and capacity to be offered the next day 19 April Shipper can trade around capacity or sell on the secondary market From purchase
5. Shipper Nominations As IUK Capacity is sold unbundled, Shipper arranges portfolio with adjacent TSOs NGG and Fluxys BE Before gas flows Shipper will begin to utilise capacity using ISIS 1 October 2018 onwards The IAA Contract applies as it would for capacity purchased through PRISMA, i.e. 2 hour lead time for nominations Ability to trade capacity on the Secondary Market
To be able to take part
1. Become an IAA Shipper
2. Be registered with HPC SA To register with HPC SA you will need to have a Broker Agreement in place Same legal entity that has signed the IAA HPC SA will arrange for an account to be created for individuals within your company on PleXHub. To begin the registration process with HPC SA please contact andy.mason@otcexgroup.com
DISCLAIMER The information in this presentation has been prepared by Interconnector (UK) Limited (IUK) in connection with the offer of capacity products and/ or services described within and is current at the time of preparation. It does not relate to the offer of capacity products and/or services by another interconnector operator or transmission system operator. The purpose of this presentation is to assist interested persons to decide whether they wish to apply for capacity products and/or services where offered by IUK and does not constitute an offer, invitation or commitment by IUK in respect of such capacity products and/or services. No representation, warranty or undertaking (express or implied) is or will be made and no responsibility or liability is or will be accepted by IUK in relation to the adequacy, accuracy or completeness of this presentation or any other information (written or oral) supplied or made available in connection with the subject matter of this presentation. This exclusion extends to liability in relation to any statement, opinion or conclusion contained in or any omission from this presentation. Any interested person intending to contract for the capacity products and/or services outlined in this presentation where offered by IUK must rely on its own enquiries and must obtain its own advice on and review the final contractual documentation issued by IUK in respect of such capacity products and /or services.