Market report January Power - Certificates - Coal

Transcription

1 Market report January Power - Certificates - Coal

2 Disclaimer: This document is published by RWE Trading GmbH for information purposes only. It was not written or compiled with the intention that this information be used as the basis for an investment decision with respect to a commodity, market, contract or any other product and it should not be used for any such purpose. The information in this document is put at the reader s disposal without any guarantees being given. RWE Trading does not guarantee, neither expressly nor implicitly, the correctness and completeness of the information nor its suitability for any specific purpose. Preliminary Remarks: Before the introduction of COB2B certificate trading, the European energy markets only had very low levels of interaction. There were correlations between the National Balancing Point (NBP) for Gas in Great Britain and the oil index of the International Petroleum Exchange, but there was no connection between power in Scandinavia or Germany and the NBP. The new COB2B market mechanism has interconnected the power and the gas and oil markets in Europe. COB2B is the connecting link between UK gas and continental power. From this it follows that: the development of power prices is similar throughout Europe the COB2B trading mechanism has strengthened the connection between the power and the gas/oil markets. This has resulted in a correlation between the European power markets. Certificate trading is the link between the different energy sources and the markets. the direct influence of primary energy sources on power prices has increased and through the COB2B certificates so has power price volatility.

3 Power Spot Market: Although January started off on a very reserved note, there was a marked shift in price levels. With emissions certificates trading at more than 23/EUA, the prices on the power spot market, despite the weak demand caused by the holiday season, had a weekly average of around 44/MWh. This changed rapidly once the holidays were over. The increase in demand and the unexpected outage of the nuclear power plant Gundremmingen B drove the weekly average to just over /MWh. The mild and windy weather prevented the prices from rising even further. In the following period the market was time and again put under considerable pressure from the high availability of wind generated power. Expected power feeds of up to 16,000 MW ensured a weekly average under the euro level. There were only a few days where the expected wind generated power fell below the usual levels for this time of year for example on January 17. On that day the Phelix-Base was fixed at 72.98/MWh. The overall average for the month was 56/MWh. Power Futures Market: As in previous months, the highest European wholesale prices for power could be found in Great Britain. There, with a trading margin of 6.22, Cal09 contracts reached a monthly peak of 74.41/MWh followed closely by the prices for power in the Netherlands. Both countries have a very similar production structure which is based largely on gas. As a result, the very firm prices for oil and gas also drove up the wholesale prices for power. Scandinavia continues to have the lowest European wholesale power prices with a closing price of 50/MWh. Temperatures well above those which could be expected for this time of the year also prevented a marked increase for the calendar year in France. Here the month closed at 61.94/MWh, only slightly above the German front year. German Cal09 contracts initially traded at 61.85/MWh but then increased, reaching 63.25/MWh on January 8. After then falling to their monthly low of 59.15/MWh on January 23, the prices moved up again to close the month at 61.10/MWh (-0.40). The delivery month of February started January trading at 70.04/MWh. It reached its high for the month on January 15 with 70.54/MWh. This was followed by a continual price decrease which continued up until January 21 when the front month quoted at 62.73/MWh. After further dips in the price the front month closed trading for the month at./mwh barely above the low for the month which had been reached two days earlier (.25/MWh). The relatively weak market price when compared to the previous month is due largely to the low spot market prices. These were the result of high levels of wind generated power and mild temperatures. In addition, in the course of the month expectations grew that the nuclear power plant Biblis A would soon be back on line, which would markedly improve the German power plant availability. 3

4 70 Cal09-Base Cal09-Peak Base [EUR/MWh] Peak [EUR/MWh] Feb. 07 Mrz. 07 Apr. 07 Mai. 07 Jun. 07 Power prices on the spot market Phelix Spot Base/Peak Jul. 07 Aug. 07 Sep. 07 Okt. 07 Nov. 07 Dez. 07 Jan. 08 Feb. 08 Quelle: European Energy Exchange (EEX) 1 1 Front-Month [EUR/MWh] Front-Month Base Phelix Spot Base Spot [EUR/MWh] Sep. 06 Okt. 06 Nov. 06 Dez. 06 Jan. 07 Feb. 07 Spot market vs. futures market: 12-month period 2007 / 2008 Phelix spot base / Front month base connection between short term market situation and long term expectations. Mrz. 07 Apr. 07 Mai. 07 Jun. 07 Jul. 07 Aug. 07 Sep. 07 Quelle: European Energy Exchange (EEX) 0 4

5 70 Cal09-Base Cal09-Peak Base [EUR/MWh] Peak [EUR/MWh] Power prices on the futures market: 12 month development 2007 / 2008 Front-year Cal09 Base / Peak Jan. 05 Mrz. 05 Mai. 05 Jul. 05 Sep. 05 Nov. 05 Jan. 06 Mrz. 06 Mai. 06 Jul. 06 Sep. 06 Nov. 06 Jan. 07 Mrz. 07 Mai. 07 Jul. 07 Sep. 07 Nov. 07 Jan. 08 Feb. 07 Mrz. 07 Apr. 07 Mai. 07 Jun. 07 Jul. 07 Aug. 07 Sep. 07 Okt. 07 Nov. 07 Dez. 07 Jan. 08 Feb. 08 Quelle: European Energy Exchange (EEX) Base [EUR/MWh] Deutschland Frankreich Niederlande Skandinavien Großbritannien Quelle: EEX, RWE Trading GmbH Development of power prices on European futures exchanges: annual development Front year Cal06, Cal07, Cal08 & Cal09 Base 5

6 Coal API#2-Swaps After the coal prices for the 2nd quarter 2008 had moved down to $ 109/t at the beginning of December, bullish FOB markets brought increasing prices again just before Christmas. Weak freight rates, however, prevented a stronger price increase. At the beginning of the year, the API#2 swap for the second quarter 2008 quoted at $ /t. The beginning of the new year saw a continued increase in prices. A strong demand for short term shiploads as well as interruptions and malfunctions at the loading stations lead to peaks of up to $ /t. In the run-up to the Chinese New Year and with decreasing freight rates, the prices for coal swaps declined in mid-january. However, a triple-prong attack on prices consisting of force-majeure declarations in Australia, export restrictions in China and the problems of the South African electricity company Eskom lead to unexpected price increases. Within 10 days coal prices increased by $ 17.50/t to close the month at $ /t (+11.55) Price [USD/t] API#2 SWAP 2Q Quelle: RWE Trading GmbH Coal prices December 2007 / January Quarter 2008 API#2 SWAP 6

7 CO 2 Emissions Certificates Emissions prices for Phase 2 started the last month of 2007 at over 23/EUA, but then fell during the course of the month to 21.90/EUA. The new year then saw price increases which were in line with stronger coal prices and German power prices. EUA08 contracts rose again to 23./EUA, a level they had had in November. The drop in prices on the commodity markets together with the fears of a recession in the US influenced the emissions market during the second half of the month. EUA08 contracts dropped to just under the 20 euro level. The publication by the European Commission of its plans for a third phase of emissions trading did not result in any impulses for the market. Dragged along by the energy prices, contract prices briefly picked up again, but fell at the end of the month to close at 19.25/EUA the lowest level since the end of August EUA 08 [EUR/EUA] EUA Trading Date CO 2 Emissions Certificates December 2007 / January 2008 EUA08 OTC Markt Quelle: RWE Trading GmbH 7

8 Glossary: API#2 API#4 APX ARA Backwardation Bpd Cif Clean Spread Contango Conversion factor Dark Spread ECX EEX Endex EUA EXAA Fob Front year, Y1 Front month, M1 Front quarter, Q1 ICE IPE LNG Location Spread MA NBP NYMEX One year spread OTC Phelix All Publications Index #2: Price index for coal delivery cif ARA All Publications Index #4: Price index for coal shipments fob Richards Bay Amsterdam Power Exchange Amsterdam, Rotterdam, Antwerp Higher notation of futures contracts with short terms over futures contracts with long terms Barrels per day Cost, Insurance, Freight of the named port of destination Spark Spread Emissions costs Higher notation of futures contracts with long terms over futures contracts with short terms 1 therm = kwh Spread between power and coal price European Climate Exchange European Energy Exchange European Energy Derivatives Exchange European Union Allowances (EUA) - state certified entitlement to emit a certain amount of greenhouse gases; 1 EUA = 1t CO2 Energy Exchange Austria Free On Board port of shipment One year contract with deliver to start at the beginning of the coming year from the point of view of the trading day One month contract with deliver to start at the beginning of the coming month from the point of view of the trading day One quarter contract with deliver to start at the beginning of the coming quarter from the point of view of the trading day Intercontinental Exchange International Petroleum Exchange Liquefied Natural Gas Spread between two trading locations Moving average National Balancing Point; virtual Hub in the UK New York Mercantile Exchange Spread between two one-year contracts Over-the-Counter Physical Electricity Index hourly weighted averages at the EEX spot market Phelix Base Hourly weighted averages per day for the hours Phelix Peak Hourly weighted averages for the hours 9-20 (8:00h 20:00h). Spark Spread Spread between power and gas price Spread Difference between two prices 8

9 Swap TTF WTI Enables the fixing or the indexing of the energy procurement prices. Swaps are transactions whereby a price for a certain period of time is converted to another price. It is purely a financial transaction. There is no physical delivery. Title Transfer Facility; virtual Hub in the Netherlands West Texas Intermediate RWE Trading GmbH Huyssenallee 2 D Essen Deutschland T +49 (0)201/12 09 (Switchboard) 9