September 20, 2007

Financial Technologies India

Financial Technologies India Ltd has informed that the Company has received an approval from the Central Electricity Regulatory Commission (CERC) to set up India's first national level power exchange — Indian Energy Exchange Ltd (IEX) for trading electricity. IEX, promoted by the Company, will be a pan India neutral and transparent electronic demutualized exchange for efficient price discovery in the electricity market. PTC India Ltd has consented to take 26% stake in IEX. Other corporates who have consented to take a stake are Tata Power (TPC), Reliance Energy (REL) Rural Electrification Corporation (REC), Adani Enterprises (AEL) and IDEC in the consortium. The Company will continue to Invite strategic partners to join the power exchange. Taking into account the nascent stage of exchange traded power market in India, the Company has designed a very innovative solution for the power sector by deploying the best fit global technology solution for the Indian market to encourage larger participation by large and small players.

Commenting on this launch, Mr. Dewang Neralla, Co-founder of the Company said, "A pan India neutral and transparent energy exchange is the need of the hour for strengthening of the power sector by providing them efficient short term and long term price signals. IEX is a reflection of Financial Technologies’ vision to create world class market driven economy which empowers the entire supply chain equalizing the smallest and the largest. IEX's endeavor will be to create a platform that can eradicate the gap between buyers and sellers by taking the supply where the demand exists at most efficient equilibrium price."

In India the scope of trading power is huge even with its current power shortage scenario. There is an imbalanced disposition of resources within the country. On the one hand, there is the eastern region, which is rich in coal sources and so a lot of pit head based load plants have been set up there. The north eastern region also holds a lot of hydro power potential, whereas on the other hand, the western and northern regions of the country suffer from a heavy deficit of such power due to their immense industrial and agricultural load. IEX will be the key change agent for distributing power for bridging the gap between demand and supply by uniting all the buyers and sellers on a single platform to trade at a common national price without any risk of counterparty, which will be guaranteed in the Exchange Mechanism.

The need for a power exchange has been felt for quite some time to meet the demand and supply of power on time and to provide a common platform to both buyers and sellers and to assist them in price discovery. IEX promises multi-fold benefits for the Indian electricity supply industry by creating a non-discriminatory marketplace with a pan-India access to all buyers and sellers. IEX will ensure a transparent price discovery mechanism along with providing various other services such as settlement, payment security and technology for trading and risk management. It will enable participants to trade electricity the subsequent day through standard hourly contracts and block contracts that permit them to draw power from the grid at a given hour.

Going forward, IEX has many products ready to meet the requirements of the power sector based on the feedback received from the trade during the last one and a half years. The power exchange will benefit market participants such as the generators, distribution licensees, open access users, trading licensees, industrial consumers, system operators and bankers in many ways.

Having a power exchange will also be advantageous to the regulators because it will act as a single point self-regulatory organization (SRO), supervising its users and ensuring neutral and transparent national level pricing for all.

Currently, short term trading constitutes only 3% of the total energy market as against over 15% globally. Power markets generally operate with power purchase agreements (PPAs) for long term trading and bilateral contracts for the short term. For very short term requirements there is the unscheduled interchange (UI). In future, these markets will be complemented by the exchange, which will have standard contracts, nationwide choice, better price and payment security.

Apart from the known benefits of a power exchange, IEX brings to the table the benefits of a globally benchmarked exchange, owing to the Company in-depth domain expertise and best of breed exchange solutions. With the Company as a promoter, IEX will be able to provide services at significantly lower capital expenditure, operating expenditure and with globally benchmarked speed of execution.

Benefits IEX will bring to the Indian electricity market:

- Trade transparency:

All prices and quantities will be displayed on IEX trading terminals across India, and all trades will be anonymous and guaranteed by IEX. This will encourage participants to use the exchange mechanism, which will be neutral and transparent.

- Cost-efficiency:

Participants will have the flexibility to trade in the desired quantity at the desired price and desired time, without additional overheads. Cost of transactions will be lower, whereas safety and equality will be much higher.

- Price-risk management:

Trades on IEX will provide long-term and short price signals to enable participants to make suitable sell/buy decisions.

- Unlocking value:

IEX will unlock a deep and liquid market that will promote competition among stakeholders and lead to better capacity utilisation and smoothening of prices for consumers. It will attract additional capacity by providing a readymade market to interested parties.

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