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Nasdaq to Offer First U.K. Sparks Power Contract by June

Feb. 29 (Bloomberg) -- Nasdaq OMX Group Inc. and Nord Pool Spot AS’s N2EX exchange plans to offer the U.K.’s first futures contract based on the profitability of natural gas-fed power stations by the end of June.

The futures, known as sparks, are based on a calculation of prices for power and gas and will be made available once the exchange develops an index trusted by the market, Geir Reigstad, head of Nasdaq OMX Commodities Europe, said in an interview in London today. The platform currently publishes a benchmark based on natural-gas prices submitted by its members and the power price achieved in its daily auction.

PCE Investors Ltd., a hedge fund manager, may trade the contracts for its Cumulus Energy fund, Peter Brewer, chief investment officer at the company in London, said by telephone.

“Anything that gives flexibility to trade is a good thing,” he said. “Whether it increases liquidity in the market remains to be seen.”

Ofgem, the regulator of Britain’s power market, said Feb. 22 it may force the nation’s six biggest energy companies to auction power to be generated as far as three years into the future. The measure, aimed at boosting competition, would affect EON AG, Iberdrola SA, SSE Plc, Electricite de France SA, Centrica Plc and RWE AG. EON, Iberdrola and SSE have said they will increase power sales on N2EX’s auction. No commitments have been made for forward sales.

Power Prices

N2EX handled 196 gigawatt-hours in its auction for next-day power today. That’s about 19 percent of average daily power use in the U.K. Baseload power rose 0.2 percent to 46.84 pounds a megawatt-hour in the sale, which ends at about 10 a.m. in London. Electricity traded at 46.20 pounds in the over-the-counter markets before the auction cleared, broker data on Bloomberg show.

N2EX is in talks with energy price-reporting companies including Reed Business Information Ltd.’s ICIS Heren, Argus Media Ltd. and Platts, a unit of McGraw Hill Cos., about gathering data to help create a sparks index, Reigstad said.

Nordic banks are among members of Nasdaq that will have access to the U.K. power market from March 5, after the exchange starts its new trading platform, Reigstad said.

To contact the reporter on this story: Catherine Airlie in London at cairlie@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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