Energy firms, Nasdaq to prop up power market after trader default
* Power trader's bet on Nordic-German spreads failed
* Contingency fund depleted by more than 100 million euros
* Default was true 'Black Swan' event, Nasdaq says
* Nasdaq to "increase our own skin in the game"
* Graphic: https://tmsnrt.rs/2p8x8sc
(Adds further Nasdaq comment)
By Lefteris Karagiannopoulos and Terje Solsvik
OSLO, Sept 14 (Reuters) - Nordic energy firms pledged on
Friday to help replenish a contingency fund after a private
Norwegian trader defaulted and exchange operator Nasdaq said it
would provide additional capital to maintain trust in the
Finland's Fortum will contribute some 20 million
euros ($23 million), while Norway's Statkraft will
pay 5 million euros, the two firms said, part of the 107 million
euros that members must provide to remain in the market.
Nasdaq Clearing will separately deposit capital of 200
million Swedish crowns ($22 million), as an additional safeguard
for an interim period of 90 days, the exchange operator said.
"We want to show our commitment to the market. To increase
our own skin in the game. To reinforce the market's confidence
in this situation," Nasdaq Clearing Chief Executive Officer
Julia Haglind told Reuters.
"Nasdaq data analysis concluded that the market movement was
17 times larger than the normal observed daily spread changes,
which was confirmed by two external parties, and could be
characterized as a true 'Black Swan' event," the exchange said
in a statement.
Clearing houses like the one operated by Nasdaq are vital
for the stability of markets, acting as an intermediary in
stock, bond or derivatives transactions and ensuring completion
if one side goes bust.
Einar Aas, a veteran derivatives trader who made large bets
on the power market, left a 114 million euro hole in the fund
that Nasdaq and commodities companies who are part of the Nasdaq
clearing house are obliged to cover.
"It's a big position and a big loss that clearly affected
the default fund," Fortum investor relations manager Maans
Holmberg told Reuters.
"It's important to look at processes. It is very important
that Nasdaq carries this responsibility," he added.
Aas failed to meet required payments -- known as margin
calls -- to Nasdaq to insure against losses on Tuesday.
On Thursday, Nasdaq said the default had eaten up its own 7
million euro contingency fund and also two thirds or 107 million
euros of the members' shared contingency fund.
Nasdaq liquidated the trades, then offered Aas' portfolio to
several potential buyers on Wednesday. Fortum said it bid
The Nasdaq clearing house was not expecting additional
defaults, its CEO said, while adding it would hire an external
party to review its handling of the case.
It will also raise margin levels for its members, Nasdaq
Fortum and other members, which include Norwegian
state-owned power giant Statkraft and oil and gas giant Equinor
were told to pay their share into the contingency fund
within two business days or risk being declared in default.
Finnish utility Fortum said its original participation in
the contingency fund was approximately 30 million euros so it
will book approximately 20 million euros in its third quarter
results as a financing cost.
The trader's bet backfired with unusually strong
fluctuations in regional power market spreads, as heavy rain
pushed down prices in the hydroelectric-dependant Nordic region,
while a spike in the cost of carbon drove up German prices,
"My position was too big in relation to the market's
liquidity," Aas said in a statement on Thursday, adding that he
risks bankruptcy. He will automatically be barred from trading.
Aas, who keeps a low public profile, in 2016 had an
estimated net worth of 2 billion Norwegian crowns ($244 million)
according to business magazine Kapital.
($1 = 0.8548 euros)
($1 = 8.2109 Norwegian crowns)
($1 = 9.0155 Swedish crowns)
(Additional reporting by Ole Petter Skonnord and Nerijus
Editing by Elaine Hardcastle and Keith Weir)
First Published: 2018-09-14 09:19:34
Updated 2018-09-14 21:12:23
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