Gas Trading Platform Pegas Developing Temperature Products to Hedge Weather Risks

February 15, 2018

European gas trading platform Pegas said it is developing temperature products, which if approved could go live next year and help energy operators hedge weather risks.

“A final plan will be presented to the exchange’s top management in the third quarter,” Sirko Beidatsch, a natural gas expert at Pegas, said. “There is a lot of interest from traders and utilities.”

Utilities and their customers were seeking more standardization and transparency in a market so far dominated by reinsurers, Beidatsch said.

Pegas, operated by French energy bourse Powernext which is a subsidiary of Deutsche Boerse’s EEX Group, presented plans during an energy trade fair in Essen last week for two purely temperature-based futures contracts and for two tailored to gas buyers and consumers, he said.

The latter entail one physically delivered volume hedge, which tracks the difference between temperatures and standardized gas consumer contracts, and a financial swap contract that would reflect the difference between temperatures and gas prices.

Pegas offers spot and futures for major European gas hubs as well as trading location spread and time spread products for much of continental Europe and Britain.

Weather conditions influence gas prices heavily and hence the likely income and losses for, for example, municipalities delivering heat to households and industry.

Details are available at: https://www.powernext.com/sites/default/files/download_center_files/temperature-workshop-eworld-eng-data.pdf

(Reporting by Vera Eckert, editing by Susan Fenton)

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