EXCLUSIVE-Hungarian ethanol firm says it alerted EU over Platts pricing

LONDON Wed May 15, 2013 8:12pm BST

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LONDON May 15 (Reuters) - A Hungarian ethanol producer said it alerted the European Commission over the role of price agency Platts in setting prices, feeding into an investigation of three major oil companies.

Pannonia Ethanol, a recent entrant to Europe's ethanol market, on Wednesday became the first company to identify itself as having complained to Brussels.

The Commission said on Tuesday it was concerned that the three companies - Royal Dutch Shell, BP and Statoil - may have colluded in reporting distorted prices to Platts to manipulate published assessments for oil and biofuel products.

The European Union executive, responsible for anti-trust regulation, also said companies may have prevented others from participating in the price assessment process.

Pannonia Ethanol said it approached Platts last spring to gain access to the publisher's market-on-close (MOC) system - a daily half-hour window during which it determines prices on the basis of bids, offers and trades by participating companies.

The pricing agency has a stringent process for letting new companies become contributors to price assessments.

"We kept getting list after list of more things we had to do to get into the window. Platts kept saying they were exercising 'editorial discretion' and never gave us a definitive reason why they weren't letting us in on the window," said Eric Sievers, CEO of Ethanol Europe, the holding company of Pannonia Ethanol.

"Platts' behaviour was very strange and certainly unprofessional and so we finally went to the Commission. They listened and asked a lot of questions."

Sievers said Pannonia Ethanol told the European authorities that the company would often sell ethanol for less than the price that was traded in the Platts window.

The nature of the company's complaint was that the actual impact of Platts on the market was to reduce liquidity and that it had an adverse impact on the ethanol market in Europe, Sievers said.

He said the company was probably only a small part of the European Commission's overall investigation, but its experience might be representative of the way Platts operates.

Europe's ethanol market is illiquid. Big players include BP, Shell, Abengoa and Cargill.

Sievers said Platts - a unit of McGraw Hill - should clearly spell out objective admissions criteria for its window as well as an objective methodology for how it determines prices.

"We need to be able to hold Platts accountable," he said.

Pannonia, based in Dunafoldvar in Hungary, has a 220-million-litre a year plant making fuel ethanol.

Thomson Reuters, parent of Reuters news, competes with Platts in providing news and information to the oil market. (Additional reporting by Simon Falush; Editing by Anthony Barker and Richard Mably)