Greek Financial Innovation: Forward Market without the exact spot Underlying

It’s a attempt by the regulator to “create a forward regulated” market BUT without the exact underlying since the product on the spot is completely different. Actually is a swap OTC auctioned contract among producer and supplier of a peculiar combination of a base load (lignite) and a peak (hydro) energy with an ultimate purpose to provide access of supplier on the base load (under the expectation of tariffs decrease). Very difficult to be used for hedging purposes since the spot price is set by the marginal station (ccgt) and is not correlated with this product’s price which is heavily affected by lignite and not correlated (not even negatively) with the oil indexed gas prize of CCGT’s. Similar European products at least distinguish the peak from the base load price. Enjoy your reading:
 
Public Consultation for creating a Forward Regulated Market for Suppliers assessment on Lignite&Hydro’s
 
http://www.rae.gr/site/categories_new/about_rae/factsheets/2014/major/07052014.csp

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