Just in case you’re worried about competition in the area of electronic trading services and financial products — don’t.

Last week marked the latest flare-up in the supremacy battle between two household names in the energy trading business, the New York Mercantile Exchange (Nymex) and the Intercontinental Exchange (ICE). It started with an unsolicited offer from Nymex to pay about $150 million, plus about $73 million still owed by ICE for its purchase of the International Petroleum Exchange (IPE) in London.

Not the fact, but the size of the offer was a “joke,” according to ICE CEO Jeffrey Sprecher, whose colorful comments made the front page of the trade publication Megawatt Daily last week. Another heard-on-the-street backhand was that the price didn’t “reflect what ICE is worth, but what Nymex can afford to pay.”

Officially, both companies refused substantive comment although neither disputed the published report. And, needless to say, that’s not the end of the story.

The interaction of the over 100-year-old Nymex and four-year-old ICE has included various rumblings over the last few years about potential mergers or joint operations. It also includes pending legal action between the two with charges of copyright infringement by Nymex and abuse of monopoly power by ICE over the use of Nymex settlement prices (see NGI, Jan. 13).

Some market watchers speculate that by making sure the fuss ‘n feathers over the bid for ICE and a recent $980 million bid for a majority stake in Nymex by Boston-based equity firm Parthenon Capital LLC garnered some public attention (see NGI, April 12), both companies were letting it be known they are in play.

A Nymex board battle over the Parthenon Capital offer was rumored to be at the heart of the decision by Nymex President J. Robert “Bo” Collins to turn down a new contract with the exchange (see NGI, June 7).

Meanwhile, the two firms’ annual reports, issued by ICE on March 4 and Nymex on March 5, show earnings declines for 2003 from 2002, much of it ascribed to the demise of energy trading companies and declines in natural gas and power trading.

On a consolidated basis, IntercontinentalExchange reported 2003 revenues of $93.7 million with pre-tax profits of $19.9 million. Net income for 2003 was $13.0 million and cash flow from operations was $27.1 million. In 2002, its second full year of operations, pre-tax profit was $52.3 million on revenues of $125.5 million.

ICE’s capital expenditures, software and licenses in 2003 totaled $8.8 million, which primarily included technology provided to the newly-acquired IPE. Intercontinental ended the year with no debt and with $93.7 million in cash, of which $24.0 million is reserved for potential shareholder redemption obligations and $12.8 million is restricted under regulation.

Sprecher said, “The continued contraction among energy merchants resulted in significantly less participation in the OTC gas and power markets” during 2003. Intercontinental currently offers 20 cleared OTC products, including electronically traded U.S. natural gas options and seven cleared financial power products launched in the fourth quarter of 2003.

Besides IPE, which Sprecher said, set volume records, Intercontinental’s electronic trade confirmation business, eConfirm, is gaining ground and averaged over 7,250 trades matched per month in the fourth quarter of 2003.

Nymex Holdings, Inc. reported net income of $8.9 million for 2003 compared to net income of $12.3 million in 2002. Earnings per share were $10,882 in 2003 and $15,072 in 2002. Operating revenue decreased to $184.2 million in 2003 from $189.2 million during the prior year.

The Nymex report said clearing and transaction fees decreased 0.7% during 2003, despite higher trading and clearing volume, which was offset by an increase in fees refunded to members under a proprietary fee reduction program which was discontinued at the end of the year.

During 2003, futures and options trading and clearing volume on the Nymex was a record 139.2 million, a 4% increase over the 133.7 million contracts traded and cleared in 2002. Volume submitted for clearing only through the Nymex ClearPort clearing platform was 6 million contracts, an increase from 0.5 million in 2002.

Nymex operating expenses totaled $165.5 million in 2003 compared with $162.4 million in 2002. Nymex Holdings paid total dividends of $9,191 per share during 2003, and declared its third dividend, $3,064 per share, to shareholders of record as of Dec. 31, 2003.

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