Statkraft sees Nordic spot power prices down in 2014

OSLO Thu May 15, 2014 5:39am EDT

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OSLO May 15 (Reuters) - Nordic spot power prices were expected to fall this year as water reservoir levels remained high, Norway's Statkraft, the biggest hydropower producer in Europe, said on Thursday.

Nordic electricity spot prices fell by 28 percent to average 30.2 euros a megawatt-hours (MWh) in the first quarter from the same period a year ago, driven down by warmer weather denting consumption and leaving hydro reservoirs above normal levels.

Lower power prices and lower production resulted in Statkraft's underlying operations (EBITDA) falling by 0.3 billion Norwegian crowns ($50.66 million) to 3.8 billion, 8.2 percent lower than in the first quarter of 2013.

"We expect Nordic short-term prices to be lower than 2013 but... we have Europe's largest reservoir capacity which gives us a high-level flexibility," said Jens Bjoern Staff, Statkraft's chief financial officer, when presenting the first quarter results.

Meanwhile, higher inflows have pushed Nordic forward power prices lower. The contract for power delivery in 2014 hit a record low of 28.85 euros a MWh on April 4, and were trading at 29.95 euros on Thursday.

Nordic reservoirs had enough water to generate 45.1 terawatt-hours (TWh) by the end of March or 109 percent of long-term medium, Statkraft said in its presentation.

Despite robust water reservoir levels, Statkraft's hydro power production fell by 10 percent in the first quarter, putting its total output down by 11 percent to 15.4 TWh, equal to 13 percent of Nordic total consumption in the first quarter.

Asked whether lower production was a deliberate choice in anticipation for prices to rise later Staff said: "Our huge reservoir capacity makes us to store water for a long period of time and then we can produce when prices are better for us."

The fall in hydropower production was partly offset by wind power generation, which rose by more than 60 percent to 0.5 TWh, mainly due to an output from Sheringham Shoal offshore wind farm in Britain.

In April, Statkraft signed a preliminary agreement to develop 600 MW of wind power in central Norway, and it plans to make the final investment decision in the second half of this year on the planned 350-400 MW offshore wind farm Dudgeon, where Statkraft owns 30 percent and Statoil 70 percent.

"Our wind power projects are on track and our strategy is to increase wind power production both in the UK and Norway," Staff said.

WILL KEEP GAS PLANTS

Statkraft's gas-fired generation fell by over 80 percent in the first quarter to just 0.1 TWh due to competition from cheap coal. The company said it intended to keep its remaining gas-fired assets in Germany.

"Our gas-fired power plants are not in cold reserve. They are amongst one of the most effective in Europe, and they are ready to run again when the things pick up again... There is a possible upside here," Staff said.

Statkraft has already closed the 430 megawatts (MW) Emden and the 510 MW Robert Frank gas-fired plants in the last two years because German subsidies bolstered low-carbon wind and solar energy generation, boosting supply and lowering prices.

It is now left with the 800 MW Knapsack I, the 400 MW Knapsack II, which it only opened last year, and a 200 MW plant at Herdecke.

Average spot price in Germany market declined by 21 percent to 33.5 euros a MWh in the first-quarter, mainly due to warmer temperatures reducing consumption.

Statkraft's other biggest investment projects include building two hydro power plants in Turkey with at total capacity of more than 600 MW and an onshore wind farm in Sweden of 270 MW within 2015-2017. ($1 = 5.9221 Norwegian crowns) (Reporting by Nerijus Adomaitis; Editing by Sophie Walker)

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