Seven companies profit from selling electricity to France at a skyrocketing price after the Iberian derogation

Seven independent energy traders, among which stand out names such as Gesternova, Eleia (Vinci) or Holaluz obtained millionaire profits in the second half of 2022 and the winter of 2023 thanks to a network of sales operations to France in the intraday market.

The lucrative business, which generated extraordinary profits close to 60 million euros to companies whose usual business figures are much more modest, was possible thanks to a legal crack they found in the system, and which turned into a cataract of profits thanks to the price difference that was generated from June last year, when the Government of Spain capped the prices of the wholesale electricity market with the so-called Iberian exception, which subsequently the President of the Executive Pedro Sánchez has called the Iberian solution.

This is reflected in an internal report prepared by the Iberian electricity market operator (OMIE) to which El Confidencial has had access. This report was sent to the CNMC after detecting anomalous practices with "uneconomic" movements in the electricity trading markets.

This document describes how these SMEs maneuvered to put themselves in a privileged position thanks to the collapse of the bidding system and buy electricity in Spain at prices of around 100 euros to subsequently place it in France - specifically, at 15:10, when the market opened - via interconnection, at levels close to 400 euros, although the price operation varied every day. That is to say, buying kilowatts at one price and selling them, on occasions, more than three times more expensive.

Based on the same report and in view of its conclusions, the energy market supervisor decided to initiate disciplinary proceedings against 35 electricity companies, as reported by El Confidencial on April 26. In the investigation documentation, names such as Cox, belonging to the group led by Enrique Riquelme, who has just taken over Abengoa and its 9,000 workers, by taking over the assets that were auctioned in the insolvency proceedings, which for now has saved the company from bankruptcy.

The report sent to the CNMC starts its explanations by putting in context why these extraordinary profits have been generated: "Since the application of RDL 10/2022 establishing an adjustment mechanism, the price difference between the Spanish and Portuguese electricity market (Mibel) and the French electricity market and the rest of the coupled markets has increased". In fact, he later relates that the high gains were moderated by the fall in the price of gas, which strongly reduced the difference in electricity prices on either side of the Pyrenees.

"The Spain-France interconnection, in this situation, regularly collapses after the daily market in the export direction, scheduling a flow of energy from Spain to France, the latter having a higher price in the vast majority of hours. The maximum interconnection capacity, in the export direction, available in the daily market, limits sales to France and causes the separation of prices between the two zones", the market manager explained to the supervisor.

OMIE had already sent a report to the CNMC on December 16 with its findings. Subsequently, on March 10, it extended this investigation when it found that the operations of the agents under its scrutiny had not ceased and that profits continued to be made thanks to the sale at high prices to France.

"Since the implementation of RDL 10/2022, the price difference with the French electricity market and the rest of the coupled markets has risen."

However, the market operator chaired by Carmen Becerril describes the highest profits between July, August and September 2022, when the difference in electricity prices between the two markets was more bulky. In short, the companies investigated and others that have been left out of the file opened by the CNMC launched offers "without economic sense", offering light at negative prices that could reach -400 euros per MWh at very specific times of the session.

The objective was not to sell at a loss, according to OMIE's checks, but to put themselves in pole position for the opening of the intraday market for export to France the following day, which was held at 15:10, already knowing the differential that the daily market had marked between the two countries.

Traders found a glitch in the market that was golden after the Iberian exception. With these preliminary offers, without, a priori, economic logic, they managed to collapse the export market and be the first to sell their energy, which the French paid at very high prices, given their difficult situation, because a good part of their nuclear fleet was unable to produce during the last summer period.

With this operation identified, OMIE's own document, to which this newspaper has had access, makes an economic analysis and focuses on the seven companies that achieved the greatest economic benefit.

In first place, unlike the previous ones, is Gesternova. OMIE describes and reflects offers that were offered for around 200% of the average daily price in the Iberian market. In this way, Gesternova obtained profits of close to 30 million euros between June and February, according to figures provided to the CNMC's Directorate General for Energy, headed by Rocío Prieto.

Despite including Gesternova's operations in the report, the company is above suspicion by the CNMC, since, unlike others, the firm has not been prosecuted by the electricity market supervisor. It is considered that the operations were carried out individually, without any reason to think that in its case there was any price concertation, as suspected by the 35 companies under investigation.

Among the seven companies that obtained the highest economic performance from this stratagem, there are also companies that appeared in the CNMC's file, such as Eleia (the trading company that the ACS Group sold to the French Vinci) or Holaluz.

In short, among the seven operators highlighted by OMIE, between June 2022 and February 2023, profits on the daily market price of close to 60 million euros were obtained, which saved the results of some of these companies, which have been badly hit by the energy crisis in their usual business of selling electricity to end customers, and which are being overwhelmed by the commercial and financial muscle of the large companies.

Profits from trading operations taking advantage of a flaw in the trading system reached such an extreme that OMIE decided to reformulate it to try to avoid exploitation by some agents who had identified a legal way of profiting, buying and selling electricity at very specific moments in time.

Market sources point out that the sanctioning file will be shelved and they believe that it has no further course, as they assure that in reality there was no such price concertation between 35 marketers. They consider that the CNMC will not be able to demonstrate hidden pacts or evidence where sensitive information was shared because it simply did not take place, they say.

To understand the alleged manipulation, they point out that these companies, unlike Gesternova and others, were not able to take advantage of the purchase and sale of electricity between Spain and France and subcontracted it to a third party. The consulted sources point out that all the investigated companies hired the services of Neuroenergía, who had the knowledge and the tools to take advantage of the export to France with the operation described by OMIE, which became a business after the Iberian exception.

The companies, in exchange for paying a high commission to Neuroenergía, managed to shore up their profit and loss account every month. But they emphasize that at no time was there a concentration of prices and shadow pacts between them. Rather, Neuroenergía operated for all of them at the same time, without them knowing that there were other clients or who they were. Alarm bells went off in OMIE when they saw that the purchase and sale orders, in some cases, as has been reported, with no economic sense, started from the same two computer IP addresses. The allegations provided by the companies are along these lines, according to industry sources, who are now awaiting the results of the CNMC, which has until September 2024 to develop this investigation (18 months).

The commission itself is already warning that they are being investigated for a serious offense against the market and that, if their suspicions are confirmed, they will face fines ranging from 600,000 euros to six million euros.

Seven independent energy marketers, among which stand out names such as Gesternova, Eleia (Vinci) or Holaluz obtained millionaire profits in the second half of 2022 and the winter of 2023 thanks to a network of sales operations to France in the intraday market.