More power for energy exchange

Zanders supports APX-ENDEX in Belpex merger

More power for energy exchange

The European Union is well on its way to becoming a single integrated energy market. More and more gas and electricity markets are being interconnected. The energy exchanges are joining in this trend. Thus the Dutch-British APX-ENDEX merged with the Belgian Belpex in 2010. The exchanges themselves organized the merger structure, while Zanders helped with the implementation.

“No matter how well thought out your plans, during the merger process you will always have to be prepared for unexpected problems. A fresh, expert perspective will help in that situation”, says Lucas Schmeddes, CFO at APX-ENDEX.

As little as 15 years ago the supply of gas and electricity was still in the hands of national utility companies; this changed when the European Union decided to deregulate the energy market. To make the pricing of electricity transparent, the Amsterdam Power Exchange (APX) was established in the Netherlands in 1999 and in the years that followed platforms were added for trading in natural gas and energy-related services, such as CO2 emissions. In December 2008 APX acquired the European Energy Derivatives Exchange (ENDEX), which specialized in futures.

Since then APX-ENDEX has been a pivotal player in both the spot and futures markets in the Netherlands, Belgium and the United Kingdom. APX-ENDEX acts as the central counter party in all transactions. It then carries out the clearing and settlement process for its members. These can thus trade actual or expected surpluses or shortfalls in electricity anonymously. “After all, you can’t store electricity. Nor can energy producers simply switch on a power station when the market requires. So above all it’s the ‘imbalances’ in energy which are traded on our exchange”, explains Schmeddes.

“As soon as you start thinking about help, you actually already need it.”

connecting networks and markets The watchword in today’s energy sector is ‘market coupling’. Europe’s network administrators and energy exchanges are working together to join evenmore national energy networks to each other. The coupling between the Netherlands, Belgium and France has existed for several years and in late 2010 Germany and Luxembourg also joined. Currently integration with the Nordic markets is seen as a top priority.

Schmeddes notes: “Our area of activity is growing accordingly. Thanks to the integration, a temporary electricity surplus in France, for example, can now simply be sold to a Dutch player. Or vice versa. At first APX-ENDEX throws all the supply and demand in a “big heap”, as it were, and then ensures the right matches between buyers and sellers. Regardless of which local market they operate in. With the creation of a larger market area, consumers benefit from the same reliable electricity supply, but at a more competitive price. Another benefit is that the market becomes more stable, because more countries can cushion each other’s peaks and troughs in production and consumption.”

The progress towards a single integrated Western European energy market may be evident enough, but behind the scenes there are still many different national suppliers, network administrators, energy exchanges and regulators involved. This sometimes makes promoting and protecting interests particularly complicated. Many players therefore feel the need to join forces.

APX-ENDEX and its Belgian “little brother” Belpex are a case in point. Schmeddes explains: “We already had a 10 per cent stake in Belpex. We operated their trading platform, we provided clearing services and we knew their customers’ behavior. We also had the same view of market coupling. However to the outside world, Belpex had its own brand and image and its own sales channels. But precisely because we share so much, a merger could make us more efficient.” The first discussions started in early 2009 and the whole merger plan was negotiated within a year.


APX-ENDEX itself did not have enough resources to lead the merger process in addition to running their daily business. “But to call in an investment bank would have been overkill”, says Schmeddes. “After all, we’d already done all the important preliminary work. No, we simply wanted a partner who could manage the implementation and offer some input.” He heard of Zanders’ M&A Advisory Services through one of APX-ENDEX’s major shareholders.

Zanders has extensive experience in all phases of the merger and acquisition process. For instance, Zanders is often asked for a second opinion on a valuation, to conduct negotiations, or to organize the necessary funding. In some cases Zanders supports the process from beginning to end. Zanders is ideally placed to integrate all these various disciplines from a funding perspective.


APX-ENDEX operates several exchange platforms for both spot and futures trading in natural gas and electricity in central Western Europe. The exchange also provides services in the areas of trading, clearing and settlements, and data distribution. In 2010 APX-ENDEX traded around 475 terawatt hours (TWh) of energy. In that year the exchange had nearly 400 members from 15 countries; most of them were energy producers, utility companies or financial institutions. In addition to its head office in Amsterdam, APX-ENDEX has offices in Brussels, London and Nottingham. It employs around 150 people.

Meeting the consultants

In late December 2009 APX-ENDEX met two of our consultants, Richard Roering and Sybren Bitter. Two weeks later, Bitter was “absorbed” by APX-ENDEX and Roering was working on quality control in the background. “It’s good that Zanders had people and knowledge available immediately. Because as soon as you start thinking about help, you actually already need it”, Schmeddes confides.

Although Sybren Bitter was presented with a detailed merger plan, its implementation was still quite complicated. This was mainly because of the large number of players involved. Firstly, an agreement had to be reached internally between the finance and legal departments, the various external advisers and the auditorsand of course APX-ENDEX’s shareholders and supervisory board had to approve the plans. “And the same was true for Belpex”, explains Bitter.

Moreover, as a result of the merger, Elia, the Belgian network administrator and Belpex’s majority shareholder, would acquire a stake in APX-ENDEX. This meant that the merger process involved many shareholder agreements, sale and purchase agreements and several notarial deeds. Bitter says: “To prepare and test the drafts, I had to have a lot of contact with the legal and financial professionals at APX-ENDEX.” Schmeddes nods: “It makes a huge difference when a consultant can speak both ‘languages’ in these situations. Sybren quickly saw the financial impact of a legal opinion and vice versa. When he brought his findings to me, all I had to do was make a decision.”

Onwards without borders

After four months the required signatures were on all the contracts, all that remained was approval from the European Commission. In the meantime, Sybren Bitter was given a follow-up job: project management of an internal legal restructuring. When the European authorities gave the go-ahead on 14 October 2010, the merger between APX-ENDEX and Belpex became a fact. “By now the two organizations are fully integrated”, Schmeddes says in conclusion. “We gain a lot from each other’s expertise and we’re acting together in Europe. Market coupling is a success, also within our own organization.”