The IntercontinentalExchange Wednesday said six natural gas and power companies have agreed in principle to take equity positions in its new web-based system for trading metals and energy products.
The Atlanta-based exchange, formed earlier this year by some of the world's biggest oil companies and banks, will begin trading over-the-counter (OTC) precious metals in August and trading in oil, power, and natural gas this fall.
The six new IntercontinentalExchange partners include American Electric Power Co. Inc.; Aquila Energy, a unit of UtiliCorp United Inc.; Duke Energy Corp.; El Paso Energy Corp.; Reliant Energy Inc.; and Southern Company Energy Marketing, a unit of Southern Co.
In April, these companies formed a corporation, the Energy Trading Platform Holding Company Inc. (ETPHCo) to create an independent power and natural gas trading exchange.
Together, in 1999, they accounted for trading in some 1 billion Mw-hr of electricity and 42 bcfd of natural gas in North America.
The IntercontinentalExchange was founded in March as an internet-based trading platform by BP , Deutsche Bank AG, Goldman Sachs, Morgan Stanley Dean Witter & Co., Royal Dutch/Shell Group, SG Investment Banking, a unit of Soci� G�rale Group; TotalfinaElf SA; and Continental Power Exchange�which is providing the trading technology and management team.
�The expanded IntercontinentalExchange will enable users of our system to trade virtually the entire OTC energy complex�oil, power, and natural gas�across a single platform and on a global basis,� said Jeffrey Sprecher, CEO of IntercontinentalExchange.
In addition to holding an equity position in the Exchange, each of the partners has committed to a significant level of annual participation to provide liquidity. Performance incentives based on the level of business each partner brings to the exchange will also affect ownership, says Joe Bob Perkins, president and chief operating officer of Reliant Energy Wholesale Group.
While participants will not be able to settle and clear trades in the beginning, Perkins says, the plan is to develop the ability in the future. Participants will pay a transaction fee to use the system. Perkins says the bulk of the equity partners' trades will take place on the new exchange.
But, he says, Reliant will continue to trade on other exchanges as well. Expectations are that Internet OTC activity will permit cheaper and quicker trades challenging traditional, telephone-based trade.
Enron Corp. reported earlier this week that its internet-based EnronOnline energy and commodities trading platform has conducted more than 200,000 transactions with a gross value of $100 billion since its launch last November and now accounts for almost 60% of Enron's wholesale deals.
Of the nearly 2.7 billion Mw-hr and 154 bcf of natural gas traded in 1999, Forrester Research reports that only 0.2% of electricity trades and 2% of natural gas trades were conducted online. Forrester predicts these figures will increase up to 25% and 11% respectively, by 2004.