EIB update – NER300 sales
4th Annual European Emissions Markets Conference
Martin Berg
Brussels • September 27, 2012
European Investment Bank
NER300 sales – overview
3. Payment and AM
EC
2. Dec-13
EUA sales
(futures/
forwards)
1. Delivery of
300m EUAs
OTC
EIB
Market
Member
States
4.
Payments
(upfront &
annually)
Auctions
5. Return
excess funds
(if any)
Screen
Trades
OTC
Cleared
Exchange
3. Payment and AM
→ EIB roles: appraisal of projects and monetisation
Projects
→ Presentation is only covering NER300 sales from
December 2011 to August 2012
→ NER300 sales programme is divided into two
tranches; EIB is currently completing sales of 200m
EUAs from the first tranche
→ Unlike most other governmental carbon allowance
sales programmes, NER300 sales are structured on
a forward and futures basis
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NER300 sales instruments
Availability of NER300 sales instruments
OTC (ISDA)
Exchange
(OTC & Direct Trades)
Auctions
EIB consulted leading market participants and industry groups on
what instruments to use
The vast majority recommended a combination of the three available
instruments
EIB followed the advice and used a staged approach to implement
the sales programme
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First nine months of NER300 sales (1)
NE300 sales Dec 11- Aug 12 by instrument
25
(in million EUAs)
Total: 181.15
200
20
160
15
120
10
80
5
40
-
Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12
Cumulative NER300 sales - right
OTC (Cleared) - left
Auction - left
Jul-12 Aug-12
OTC (ISDA) - left
Total Direct Screen - left
EIB sells on average 20m per month using all available instruments
Sales volume is adjusted to reflect available trading days and liquidity
The first tranche of 200m will be sold by the end of this month
(September 2012)
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First nine months of NER300 sales (2)
NE300 sales Dec 11- Aug 12:
Average NER300 sales prices vs ICE VWAP*
10.00
High: 9.42
9.00
• Average NER300 sales price: EUR 8.03
• Average ICE VWAP: EUR 8.02
EUR
8.00
7.00
Low: 7.19
6.00
Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12
Avg Monthly NER300 Sales Price
Avg ICE VWAP
*Volume Weighted Average Price as quoted on ICE
EIB uses the Volume Weighted Average Price as quoted on ICE as
a benchmark for the NER300 sales
EIB was able to replicate the ICE VWAP during the first nine month
of the NER300 sales for the entire sales volume
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NER300 Auctions
EIB auctions were splits in two
blocks
Block 1 on EEX (June/July):
Number of EU ETS auction 2011-12
(held and planned excluding early auctions)
Germany
179
→ 4 times/week
EIB
→ 32 auctions
→ 625k/auctions, 20m EUAs in total
Block 2 on ICE & EEX (Aug/Sep):
→ 5 times/week
75
UK
15
Dutch
5
Lithuania
3
Czech Republic
1
→ 43 auction, 3x ICE / 2xEEX
→ 500k/auctions, 21.5m EUAs in total
EIB will be the auctioneer of 75
auctions by the end of the first
tranche
European Investment Bank
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50
100
150
200
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What can be learnt ?
Did the NER300 sales negatively impact the market?
→ Given its size, NER300 sales had an impact when sales were announced
→ However, part of early phase 3 volume  in absence of the NER300 the volume
would have most likely been sold through other channels (e.g. early auctions)
→ Steady rise in open interest suggest that volume is absorbed for hedging activities
Did certain market participants have an information advantage?
→ No OTC counterparty was aware of the total volume sold at any trading day. Most
OTC volume was sold against VWAP, which minimized any information advantage
and incentivized even placement during the trading day
Were certain market participants excluded from sales?
→ EIB had no intention to exclude anyone however committed to use same risk
criteria as for its own business
→ EIB is using exchanges which cover over 90% of the exchange traded EUA
volume and provide access to over 400 market participants
→ Since June, EIB is holding auctions, which allows additional market participants to
directly or indirectly purchase EUAs from the NER300
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Conclusion & Outlook
EIB is on track to finalise the first tranche of 200m by the end of
September
NER300 sales appear to be positively received by the market
given their steady and predictable sales pattern, high degree of
post-sales transparency and contribution to supply for hedging
activities by compliance buyers
As for the timing of the second tranche of 100 million allowances,
the Commission and the EIB agreed that decisions on timing will
be based on a review of experience in selling the first 200 million
allowances. Further information on the timing of the second
tranche will be provided once a decision has been taken.
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Further resources
For more information on the NER300 sales, please visit:
http://www.eib.org/ner300
The EIB auction calendar can be downloaded at
http://www.eib.org/products/ner-300/auctions/index.htm
NER300 Monetisation reports can be downloaded at
http://www.eib.org/products/ner-300/reports/index.htm
The September 2012 sales report will be published on Wednesday
10 October 2012 shortly after 6 p.m. CET on
http://www.eib.org/products/ner-300/reports/index.htm
For an NER300 sales or trading inquiries, please contact
[email protected]
For press inquiries, please contact Richard Willis at [email protected]
European Investment Bank
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