E.ON hedging advances in Q1 as sales dip and power output plummets

Published 10:51 on May 11, 2016  /  Last updated at 14:24 on May 9, 2017  /  EMEA, EU ETS  /  No Comments

Utility E.ON, Europe’s third biggest emitter, advanced its forward hedging over the first quarter even as its electricity sales dipped, its quarterly results showed on Wednesday.

Utility E.ON, Europe’s third biggest emitter, advanced its forward hedging over the first quarter even as its electricity sales dipped, its quarterly results showed on Wednesday.

For its expected outright central European generation, E.ON said it had hedged 100% of its Y and Y+1 output and 80% of its Y+2.

This represents a higher rate than its hedged position a year earlier, when it had hedged 100%, 100% and 50%, respectively.

Some 40 percentage points of the Y+2 hedging was done over the first quarter, the data showed.

E.ON’s Q1 electricity sales slipped 3% year-on-year to 188.9 TWh.

GENERATION SLUMP

The company’s total EU power production dropped 20% to 35 TWh over the quarter as margins for thermal generation were squeezed by low power prices.

“The decline resulted in particular from the reduced dispatch of coal-fired assets in France, Germany, and the United Kingdom due to the current market situation and from the sale of generation operations in Italy and Spain in the prior year,” it said.

Of ETS-regulated output, coal-fired generation dropped 33% to 8.4 TWh while cleaner gas output fell 6.8% to 5.5 TWh, cutting the company’s demand for EUAs.

In its results, E.ON said its earnings rose 8% to €3.1 billion due to a one-off deal with Russia’s Gazprom that drastically cut the price it paid for its gas.

It said the company remained on track to list Uniper, its power generation and trading arm, in the second half of the year following a decision to formally divide the businesses from Jan. 1.

FACTFILE

  • Utility hedging rates are closely monitored by participants in the EU ETS because the data can provide a window into existing and future EUA demand from the bloc’s biggest allowance buyers.
  • Vattenfall, CEZ and Enel have already reported slight advances in Q1 hedging, while RWE results are due on Thursday, and ENBW on Friday.

By Ben Garside – ben@carbon-pulse.com

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