Financial contracts are used for price hedging and risk management. The contracts have a time horizon up to six years, covering daily, weekly, monthly, quarterly and annual contracts. The system price calculated by Nord Pool is used as the reference price for the financial market in the Nordic region.
There is no physical delivery for financial power market contracts. Cash settlement takes place throughout trading – and/or the delivery period, starting at the due date of each contract, depending on whether the product is a futures or a forward.
Technical conditions such as grid congestion and access to capacity are not taken into consideration when entering financial contracts. However, buyers and sellers can with the help of the financial (forward) power market manage the risks associated to the physical market prices.