European utility hedging rates up in Q1 -analyst

Published 12:01 on May 26, 2015  /  Last updated at 12:01 on May 26, 2015  /  EMEA, EU ETS  /  No Comments

Three of central Europe’s largest utilities hedged proportionally more forward power in the first quarter of 2015 compared to the same period last year, according to an analyst.

Three of central Europe’s largest utilities hedged proportionally more forward power in the first quarter of 2015 compared to the same period last year, according to an analyst.

RWE, Vattenfall and Enel have forward sold some 25% of their expected power generation for the next three years, up from around 18% in 2014, said Emil Dimantchev, a senior analyst with Thomson Reuters Point Carbon.

“Utilities continue to expect the power price to drop due to more output coming from renewables,” he told Carbon Pulse, adding that this has pushed them to seek to lock in more longer-term revenue this year compared to last.

The three companies’ collective hedging rates, in terms of percentage of power generation, are back up to levels last seen between 2011-2013, with RWE’s at its highest since 2009, Dimantchev told Carbon Pulse on the sidelines of the Carbon Expo conference in Barcelona.

However, he noted that utilities’ absolute forward power sales, in terms of MWh, could be lower this year, also due to renewables as well as sluggish demand.

Power companies may also be more actively hedging this year because they expect EU carbon prices to rise in the wake of the MSR agreement and as backloading continues to bite, he added.

Additionally, hedging rates may have been artificially low last year as the sector awaited the details of Germany’s plan to tackle coal-fired power emissions, he said.

The three companies account for around 70% of central European power sector emissions covered by the EU ETS, Dimantchev said.

As the main buyers of carbon allowances, utility hedging rates are closely watched by market participants as a demand signal.

By Mike Szabo – mike@carbon-pulse.com

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