EON’s H1 hedging rates up as its EU power sales fall 5.5%

Published 10:37 on August 12, 2015  /  Last updated at 10:44 on February 2, 2016  /  EMEA, EU ETS  /  No Comments

EON, Europe’s third biggest emitter, sold less forward power in Europe while appearing to hedge a smaller proportion of it, according to first-half results released on Wednesday.

(Corrects hedging numbers, which originally suggested a reduction in hedging)

EON, Europe’s third biggest emitter, sold less forward power in Europe while appearing to hedge a larger proportion of it, according to first-half 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 these hedging rates for its ‘Europe’ operations outstrip levels from a year earlier, a sign that the company may scale back its carbon buying over the rest of the year.

It had hedged 100% of this year’s expected generation, 100% of Y+1, and 90% of Y+2, compared to 100%, 100% and 60% at the same point a year earlier.

The results showed EON advanced its outright hedging over the second quarter, with 40 percentage points more done for Y+2, compared to advancing just 10 percentage points over the first quarter.

EON’s total EU power sales fell 5.5% y/y in H1 to 101.8 TWh, down from 107.7 TWh, the results showed amid thinner margins for coal-fired generation in Germany.

The company’s global EBITDA fell 13% y/y to €4.3 billion, which EON said was partly due to further declines in wholesale electricity prices, lower oil prices, and a weak ruble.

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.

EON’s ETS-regulated installations emitted 67 million tonnes of CO2 last year, around 4% of total ETS emissions, according to Carbon Market Data.

SALES AND GENERATION

EON’s total EU power generation from the plants it owns dropped 7.9% y/y in H1 to 70.3 TWh, from 76.3 TWh.

Its EU ETS-regulated thermal generation fell even further, down 12.9% y/y in H1 to 30.4 TWh from 34.9 TWh.

EON said the decline was due to lower output from coal plants due to poorer market conditions and the decommissioning of some coal plants in Germany.

UN CLIMATE DEAL

EON CEO Johannes Teyssen said that both the recent G7 agreement and the EU’s deal on the MSR “augur well for a global treaty to reduce carbon emissions” in Paris in December.

He said the CO2 intensity of EON’s power generation was down 35% across Europe on 1990 levels.

“We intend to move resolutely forward along this path, when it comes to climate protection, we want to continue to be part of the solution,” he said.

EON said its plans to spin-off its thermal power assets into a separate company, Uniper, in 2016, remained on track.

By Ben Garside – ben@carbon-pulse.com

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