LONDON (Reuters) - Europe should reduce the number of power and gas exchanges to a handful of competing bourses, the chief executive of German energy exchange EEX, Hans-Bernd Menzel, said on Wednesday.
The European Commission has said it would eventually like to see a single energy market for the 27-nation bloc, arguing it should increase transparency and lower prices for consumers.
Menzel said at the Reuters Energy Summit in London that although it would be healthy to have a handful of exchanges rather than more than 20 at the moment, one alone may not be able to handle trade across such a wide area.
"I'm not so sure it is good to have only one energy exchange in Europe," he said.
"I'm very much in favor of competition. If we can come down from 25 to five, or something like that, it would be big progress for Europe."
EEX, which is to merge its trading businesses with French energy bourse Powernext this year, hopes neighboring exchanges -- like Nord Pool in the Nordic countries and Belgium's Belpex -- could join the Franco-German joint venture soon.
Menzel said that the tie-up with the Belgian partner might be in sight by year-end but that he would not be drawn any further on the timing.
"It is so logical that we would cooperate with Nord Pool (Spot)," he also said, adding that EEX preferred cooperation agreements with other bourses to takeovers.
He said the new entity, which has yet to be renamed, would not be floated.
The EEX is bound by an agreement with 54 shareholders that shares coming up for sale have to be offered preferentially to existing shareholders, of which Swiss-German Eurex (DB1Gn.DE: Quote, Profile, Research, Stock Buzz) leads with a 26.7 percent share.
Eurex is due to add a 17.4 percent share to be abandoned by Nord Pool, which has split into the Nord Pool ASA for the futures business, and Nord Pool Spot owned by grid operators.
"And unless we change that agreement we can't think of an IPO, it will be very hard to realize," Menzel said.
Parallel to the financial alignments and price convergence that bourses' mergers can bring, a process called power market coupling has also started, which encourages regional markets to better share their transmission systems.
A deal signed a year ago commits five western European countries to pool power capacity from 2009, which will make better use of existing capacities and harmonize the flow of information, aiding the long-term trading of transport rights.
Menzel said that this was another stepping stone towards greater unity in the market.
However, in his view, it would not solve all the inefficiencies currently preventing harmonized prices, as this was the task of the emerging virtual marketplaces. Continued...
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