Traders Look for Greek Aid Payout to Kick-Start Power Market

A possible relaxation of capital controls in Greece would be welcome relief for the region’s energy traders.

After Greece agreed measures with creditors that may eventually ease the yearlong curbs, Europe’s most indebted state has the potential to emulate the ascent of Italian power trading, according to Arax Commodities Ltd., a London-based broker. Since the European Energy Exchange AG started to guarantee deals in Italy in 2014, trade has more than tripled, according to data from the London Energy Brokers’ Association.

The controls, introduced last June to halt transfers of money abroad without prior approval and documentation, mean it can take more than a week to send money from a Greek bank out of the nation, according to Watt & Volt SA, a utility in Athens. Public Power Corp., the state-owned utility, is still the dominant supplier of electricity as Greece has made little progress toward liberalizing its market in the past 15 years, despite it being a European Union goal.

“Foreign companies don’t trust the Greek market,” George Oikonomou, an energy trader at Watt & Volt, said by e-mail. “The market is at a starting level. I think it has a great potential.”

There are 39 companies registered for Greek electricity on EEX. Even so, it’s hard to find people to actually do business with because there isn’t a liquid forward market, according to Vito Kekec, an energy trader at Slovenian utility Gen-i d.o.o.

In most of Europe you can trade from 15 minutes before delivery to six years ahead, both on exchanges and in the over-the-counter markets. Activity in Greece is still limited to a physical market where generators have to offer power the day before.

Rare Trades

EEX guarantees Greek monthly, quarterly and yearly financial contracts. Trades are rare - the first month-ahead deal since February was cleared on May 24 with just one more reported on June 9.

“Financial power trading in Greece is still illiquid because the whole economy is illiquid due to the existing fiscal problem,” said Andreas Mitafidis, a director of energy management and trading at PPC. The regulator has announced a road map for the reform of the market according to the EU model, he said.

Greek bonds will soon become eligible for the European Central Bank’s asset-purchase program, paving the way for an easing of capital controls, and the gradual recovery of investor confidence, Finance Minister Euclid Tsakalotos said in an interview last week.

This will be made possible after an agreement on economic overhauls required by creditors for the approval of its next 7.5 billion-euro ($8.4 billion) bailout tranche by euro area finance ministers this week. The deal could help the European Central Bank to restore some access for the country’s banks to regular refinancing operations.

More Interconnectors

With its position in the center of southeast Europe and existing and future connections to Italy, Bulgaria, Turkey and the Western Balkans, Greece could become a regional hub, according to the European Commission.

“If Greece could reinforce the interconnectors to some countries, for instance second lines to the Bulgarian and Albanian market, or connect some of the islands to the mainland, I think it would increase the volume,” said Plamen Popov, head of trading for southeast Europe at Statkraft Markets GmbH. “It could be of interest to us to do bigger volumes but we need to have positive development of the market rules and the increase in interconnections.”

The nation also needs to show more progress by introducing forward, intraday and balancing markets, the Commission said in a report last year. Such markets will be developed, PPC’s Mitafidis said.

“There is no OTC market and not many traders feel comfortable when they only have one option to buy or sell,” Popov said.

The Greek market could be attractive because of the volatility coming from potential spikes in demand during the summer season, Kekec said from Ljubljana.

“The economic situation in Greece needs to get better to attract big companies that can help the power market to improve,” he said.   

To contact the reporter on this story: Rachel Morison in London at rmorison@bloomberg.net. To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net, Andrew Reierson