US firm enlists first ‘forward market’ customers from PH power industry

American firm Green Tiger Markets (GTM) which is operating its forward market trading platform in Singapore, has enlisted its first customers from the Philippine power industry to aid them in their hedging strategy on capacity procurements.

As announced by the company, “this trade marks the first time that commercial parties in the Philippines have financially secured the price for electricity in the future using an independent marketplace.”

A financial transaction can be entered into via a forward market and the deal entails future delivery of the contracted capacity based on the agreed price and timeframe of the relevant parties.

“Green Tiger Markets facilitated the pivotal transaction between two commercial market participants in the Luzon electricity grid at a price of P6,800 per megawatt hour for a round-the-clock wholesale electricity for the months of August through December,” the company emphasized.

As of this writing, the company had not given yet the name of the power companies involved in the transaction as well as the power facilities covered by the hedging arrangement. But it hinted that the contract is between a large power generator and a retail electricity supplier.

GTM CEO John Knorring said the transaction via their platform had been anchored on the “power of transparency, price discovery, and liquidity to create a sustainable and efficient energy market.”

He further indicated “this milestone supports our bold vision to implement proven tactics from established markets in underserved markets.”

In the restructured Philippine power sector, there is still no “forward market” that the industry players can lean on, hence, power firms have been exploring options on how they can best manage their pricing strategies.

As GTM specified, “before today, commercial buyers and sellers of wholesale electricity were accustomed to entering into long-term physical sales agreements to contract the forward delivery of electricity.”

In the company’s assessment though, “that process is laborious and can take many months to complete, with no certainty of finding a commercial partner.”

GTM further noted “without long-term contracts, electricity generators, distributors, and bulk consumers were obligated to buy and sell wholesale electricity through the volatile WESM (Wholesale Electricity Spot Market) spot market operated by IEMOP (Independent Electricity Market Operator of the Philippines).”

Due to the complexity of processes in the current market structure, GTM stated that it is providing an alternative to the power firms – primarily those that have been aiming to enter into hedging arrangements with other parties.

“For these commercial participants, Green Tiger Markets provides the alternative: a way to quickly and easily contract forward electricity prices with qualified counterparties,” the company stressed.