The move comes as several other lenders have expanded their commodity trading desks in an effort to replace revenues from more conventional areas of investment banking such as equity underwriting and M&A advisory.
According to industry estimates, the global commodities market will expand by 5 to 10% in 2010 with power and gas accounting for almost 45% of the global commodities revenue pool.
Reportedly, JP Morgan, Deutsche Bank, Bank of America Merrill Lynch, Credit Agricole Corporate and Investment Bank and Barclays Capital are all planning to expand their operations in physical gas and power markets in expectation of strong demand for commodities.
Nomura currently operates commodities businesses in Europe and Asia, primarily focused on providing commodity solutions to its institutional and corporate client base. The acquisition of NEML will be complementary to Nomura’s existing commodities franchise. The acquisition will also further enhance Nomura’s global investment banking franchise in the power and gas sector.
Jason Tudor, head of commodities in EMEA at Nomura, said: “The acquisition of NEML will immediately provide Nomura with a power and gas business in Europe and presence in our key focus European markets. It will enable us to trade with a broad range of highly regarded industrial and financial counterparties. We expect the business to significantly enhance our growing commodities business in the region.”
Kieran Higgins, co-head of fixed income in EMEA, said: “Nomura is actively looking to grow its position in Commodities, and this acquisition provides a timely opportunity for us. The newly acquired business will provide access to high quality clients, infrastructure and European markets and therefore significantly accelerate our goal of building scale in commodities.”
NEML is a wholly owned subsidiary of Nexen, a Canada-based exploration and production company listed in Canada and the US. NEML has trading activities in the UK, Belgium, the Netherlands and Germany and access to a scalable physical platform, including natural gas storage and transportation capabilities.
