What is an elcert?
El-certificates (elcerts) are introduced in the market in order to support production of renewable energy. The legal background for the development of the elcert market is the EU’s Renewable Energy Directive from 2008 that embraces consumption of energy in industry, household and transport in Nordic countries. The Directive promotes the use of renewable sources of energy for electricity production and sets mandatory targets on the use of renewable energy to 20% of the energy consumption in 2020.
Why does my company have to trade elcert?
Norway has signed an agreement to establish a joint Swedish-Norwegian elcert market from January 1st 2012. According to the program, producers of energy receive elcert from the government for each MWh produced from renewable sources and will have to sell the elcerts in the market in order to realise the gain. Consumers of energy have an obligation to acquire a number of elcerts in proportion to their consumption and present them for annulation by April 1st every year.
For more information about the elcert market, please check the NVE’s webpage (the section is in Norwegian only).
What does a clearing house do?
NOS as a clearing house acts as a central counterparty between the contract parties, and acts as seller to the buyer and as buyer to the seller. This means that even when you trade with several counterparties, NOS will be your counterparty in all trades. You will therefore only have obligations to NOS, and NOS will ensure that all contractual obligations will be fulfilled.
Why should I clear?
NOS’ clearing services give market participants several benefits:
- Guaranteed settlement and delivery of the contracts
- Elimination of credit assessment of counterparties and valuation of receivables
- Handling of physical deliveries in Cesar / NECS
- Use of certificates as collaterals
- Effective book-keeping, single counterparty, single account, single cash flow, all
reports and risk management control through systems offered by NOS
What if another clearing member walks away, goes bankrupt or cannot deliver? How can NOS guarantee that my contracts will be fulfilled?
In a case of a default NOS will close the defaulting member’s positions and use their individual Base Collateral and Margin Requirement to cover the obligations. Any remaining obligations will be covered by NOS own capital.
Do I have to become a member of NOS to be able to clear elcert?
To clear elcert you have two options. Either clear through a General Clearing Member (porteføljeforvalter) or become a direct member of NOS. The direct membership is free of charge.
How can I become a direct member?
To become a member the applicant company must fulfil the following criteria:
- Have net capital of at least EUR 1 million
- Be based in an approved jurisdiction.
Please see more information about the required membership agreements and supplementary documents in the Membership section.
Are there any membership costs, or any other fixed costs associated with the NOS membership?
Being a member of NOS is free of charge. The only costs are transaction based clearing and delivery fees (if applicable) and monthly bank account related fees. Detailed fee schedule can be found in the El-Certificates section.
Which contracts can I trade?
Both spot and forward contracts are available. The settlement period is T+3 days for the spot contracts and March 18th for the forwards.
Do I have to trade via a broker?
You may trade via one of the OTC brokers or submit a bilateral trade directly to NOS for clearing.
How much collateral do I have to post?
Prior to the start of trading you have to cover an Individual Base Collateral which is set by the NOS credit risk department in accordance to the member’s financial strength. This amount (minimum EUR 100.000) can be covered by either cash on the account, Letter of Credit or physical elcerts (10.000). In addition you have to cover the Margin Requirement for your portfolio.
What is margin? How much do I have to post, for example if I buy 10.000 elcert?
Margin is a percentage of the market value of your portfolio. Clearing houses collect margins in order to make sure all contract obligations are fulfilled at any time. For elcert the margin requirement is around 10-12%. For example, if you buy/sell 10.000 elcert of March-13 and the closing price for this contract is SEK 180, a margin of SEK 20.720 is required.
Which types of collateral can I use to cover my obligations?
The margin requirement can be covered by either cash on the account, Letter of Credit or physical elcerts (up to 85% of market value).
Is there daily settlement for profit/loss?
No, there is no daily settlement, but margin requirement is recalculated daily in order to reflect the market value of the portfolio.
Which currency can I trade elcert in? Can the contracts be settled in a different currency?
From December 2011 NOS will offer clearing of elcert in EUR, NOK and SEK enabling you to choose a preferred currency for the settlement of your contracts.
But then I also get currency exposure, can you help with that?
Yes, NOS has recently launched clearing of FX products that will help you to hedge the currency exposure. Please contact Imarex Financial Services (email@example.com) for more information about the service.
How much does it cost to clear elcert?
Spot contracts: no clearing fee, delivery fee 0,25 SEK per elcert.
Forward contracts: clearing fee 0,25 SEK per elcert, delivery fee 0,25 SEK per elcert.
What happens on the delivery day?
On the delivery day NOS will net both the elcert positions and settlements for each member. The buyer receives elcerts on the NOS client account in Cesar/NECS and the seller receives the payment on the NOS client account in DNB.
What about VAT if I clear elcert? When do I have to pay it and how do I do this?
All Norwegian companies have to pay VAT on the delivered contracts. NOS will charge VAT accordingly and send a confirmation statement.
Can I clear other power products via NOS?
Yes, NOS offers clearing of Nordic and German derivatives contracts, both futures and options. For more information about the products please contact NOS (firstname.lastname@example.org).