About outstanding contracts, a financially settled Derivate transaction ending the month of March 2016, for example a Fix-for-Floating API2 Swap, has an outstanding financial flow due to be invoiced on the 5th working day of April (7 October 2015 – Reporting Start Date). However, as the financial settlement amount is fixed on the final pricing day in September it does not count as an outstanding contract to be back-loaded under REMIT.
Yet the same contract for a different Commodity would indeed have an outstanding financial flow, as there is a time lag in the publishing of the fixing prices meaning the settlement fixing price for March 2016 would not be published until the end of April 2016, and would therefore fall under the back-loading rule.
Regardless of the fact that we would be reporting these derivative contracts under EMIR and will not be double reporting under REMIT are these assumptions correct in ACERs view?
About outstanding contracts, we have an EFET General Agreement Gas with a Counterparty and have concluded an individual contract under the General Agreement with that counterparty for the delivery of Natural Gas in Gas Year 2014/2015 via an Energy Broker OMP (physical delivery from 01.10.2014 06:00 to 01.10.2015 06:00).
The payment terms are contractually agreed in the General Agreement according to § 13.1 Invoice and § 13.2 Payment (20th of the month following delivery), and are also confirmed on the individual contracts.
Therefore, the wholesale energy contract does not have an outstanding physical flow. However, the “financial flow” (Settlement) is contractually agreed and due on 20 October 2015 and hence outstanding.
Nonetheless, as I understand your answer in the FAQs, this would not count as an outstanding financial flow but merely as the settlement of the invoice date (despite the fact that it has been contractually agreed in advance) and is not relevant for REMIT Backloading.
The same rule should apply for Spot delivery contracts with a physical delivery ending 07.10.2015 00:00. Also correct?
In the above question, a Fix-for-Floating API2 Swap seems to mean a swap on coal, which falls outside the scope of REMIT.
However, any contract related to the supply of gas or electricity, irrespective if it is a physical forward, a future or an option, has a reference to a delivery period. Also financial derivatives related to EU gas or electricity have a reference price which relates to a delivery period of the commodity.
For physical trades, the gas or electricity delivery period of the commodity is the one that should be observed. Any contract that considers a delivery of EU gas or electricity after 7 October 2015 (Phase 1) or 7 April 2016 (Phase 2) should be considered an outstanding contract and would fall under the back loading rules.
For example a physical forward that delivers electricity from 1 April to 30 Aril 2016 would be considered an outstanding contract on 7 April 2016. The same applies to any contract for the delivery of the energy commodity after 7 April 2016 irrespective of the financial settlement of the invoice. A contract for the delivery from 1 March to 31 March 2016 with a financial settlement of the invoice after 7 April, should not be considered subject to back loading.
The same applies to financial derivatives related to EU gas and electricity. A monthly future on gas or electricity that settles in cash (a financial derivative) does so against a cash flow/a series of cash flows in a particular month. That month, or any other period of time covered by the instrument, is the one that has to be taken into consideration for the calculation of the exchange of cash flows.
On the contrary, the point of time when the payment between the two parties really takes place, e.g. 20 days after the delivery period that the contract refers to, is not taken into consideration for the purpose of considering a contract subject to the back loading rules.