E.ON’s hedging rates steady as power sales fall 2.4%

Published 17:08 on November 11, 2015  /  Last updated at 17:08 on November 11, 2015  /  EMEA, EU ETS  /  No Comments

E.ON, Europe’s third biggest emitter, sold less forward power in Europe but appeared to hedge the same proportion of it over the first nine months of 2015, according to Q3 results released on Wednesday.

E.ON, Europe’s third biggest emitter, sold less forward power in Europe but appeared to hedge the same proportion of it over the first nine months of 2015, according to Q3 results released on Wednesday.

The Germany-based utility only reports its hedging rates for outright generation, ie. its nuclear and hydroelectric output that is less impacted by short term changes in fuel and carbon costs.

The results showed E.ON’s ‘Europe’ operations to be fully hedged for this year, and one and two years ahead, on a par with hedging levels of a year earlier.

With output already well hedged, this meant E.ON had to slow its hedging rate over Q3, hedging just 10 percentage points more for Y+2 to take it to 100% of expected generation, compared to 40 percentage points over Q2.

E.ON’s total EU power sales fell 2.4% y/y for the year to Sept. to 154.7 TWh amid thinner margins for gas-fired generation in Germany and an uptick in profitability for coal-fired units.

The hedging rates of major utilities are closely watched by the EU carbon market as utilities sell power forwards and simultaneously buy the required carbon allowances and fuel to lock in profit.

Hedging rates, along with outright generation rates, are indicators of the levels of CO2 purchasing of the major utilities, by far the biggest compliance buyers in the ETS.

The company posted its biggest ever quarterly loss after writing down €8.3 billion – almost half its stock market value – on the value of its power plants and oil and gas business.

It still plans to spin-off most of these assets into a separate company, Uniper, in 2016.

SALES AND GENERATION

E.ON’s total EU power generation from the plants it owns dropped 10.6% y/y over the nine months to 101.4 TWh, from 113.4 TWh.

Its EU ETS-regulated thermal generation fell even further, down 16% y/y to 44.6 TWh from 53.1 TWh.

It blamed the declines on lower power prices, the decommissioning of some of its plants in Germany, and the selling of some facilities in Italy and Spain.

By Ben Garside – ben@carbon-pulse.com

Comment