7 bd asset optimisation and trading - vattenfall · stockholm, 21 september 2011. 2 | capital...
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Asset Optimisation and TradingHarald von Heyden
Head of Business Division Asset Optimisation and Trading
Stockholm, 21 September 2011
2 | Capital Markets Day, Stockholm | 21 September 2011
Today’s focus
• Organisation and key figures
• AOT comprises four business activities
• AOT’s role within Vattenfall
• Hedge strategy process
• Hedge position
• Market development and outlook
3 | Capital Markets Day, Stockholm | 21 September 2011
Organisation and key figures
Asset Optimisation
and Trading (AOT)
Asset optimisation
Europe
Asset optimisationNordic
Trading Operations
• Optimisation and Dispatch of Assets
• Hedging and Hedging Strategy
• Interface to Assets
• Analysis
• Models and systems
• IT operation
• AOT common processes
• Market Access
• Prop Trading
• Fuel Sourcing
• Origination
Key figures: • EBITDA (2010): SEK 6,035 million (10% of Group Total)
• FTE: 650
• Nationalities: 24+
Trading Volume (External) 2010
Electricity in TWh 1,900
CO2 (EUA and CER) in mt 430
Gas in TWh 925
Counterparts ~550
Transactions per day >1,650
4 | Capital Markets Day, Stockholm | 21 September 2011
AOT comprises four main business activities
Dispatch optimisation
• Maximize value of assets in spot and intraday markets
Asset backed proprietary trading
• Maximize value of assets in forward markets
- Trade on flows incl. hedging
- Exploit physical optionality
Non asset backed proprietary trading
• Generate profit on back of financial risk capital
• EUR 200 million max loss limit
• Acquire & restructure contractual assets (semi-physical contracts) and other contracts
Origination
1 2 3
4
5 | Capital Markets Day, Stockholm | 21 September 2011
Electricity and commodity markets
AOT’s role within Vattenfall
•Coal
•Oil
•Gas
•CO2
Asset Optimisation and Trading
GenerationPower
Supply of fuelsSales
Sourcing power and gas
•B2B
•B2C
•Hydro
•Nuclear
•Thermal
•Renewables
6 | Capital Markets Day, Stockholm | 21 September 2011
Introducing new hedge strategy
Identify hedge
objectives
Set guiding
thresholds
Analyse/decide
hedge strategy
Implement and
review
• primary focus on production
plans and how the volumes
should be hedged from a Business
Unit perspective
• financial aspects only implicitly
represented
New hedge strategy process
• financial aspects explicitly
incorporated when deciding the
hedge strategy
• focus is derived from an overall Group
perspective whilst taking national level
requirements into account
Old hedge reference environment
7 | Capital Markets Day, Stockholm | 21 September 2011
Hedge ratios
78 76
38
9996
31
0
10
20
30
40
50
60
70
80
90
100
2011 2012 2013
% hedged of forecasted electricity generation, 30 June 2011
Nordic region
Continental Europe
EUR/MWh 2011 2012 2013
Nordic region 45 44 45
Continental Europe 56 55 59
8 | Capital Markets Day, Stockholm | 21 September 2011
Market development and outlook
• Oversupply situation in Northern Europe
• Risk of market splitting and lower liquidity
- E.g. the Swedish market will be split into 4 price areas 1 November 2011
- Liquidity constraints on some local power and gas markets e.g. Netherlands,
UK and Spain
• Post-Fukushima changes in German and Swiss physical market
- Will Germany become a net importer?
- Grid constrains
• Increased and changed regulation
- Proposed financial regulation by the EU on e.g. transparency, market integrity,
capital requirements, MiFID and mandatory clearing
9 | Capital Markets Day, Stockholm | 21 September 2011
Appendix
10 | Capital Markets Day, Stockholm | 21 September 2011
0
10
20
30
40
50
60
70
80
90
100
jun
-04
okt-0
4
feb
-05
jun
-05
okt-0
5
mar-0
6
jul-0
6
no
v-0
6
ap
r-07
au
g-0
7
dec-0
7
maj-0
8
sep
-08
jan
-09
jun
-09
okt-0
9
feb
-10
jul-1
0
no
v-1
0
mar-1
1
jul-1
1
okt-1
1
jan
-12
ap
r-12
jul-1
2
okt-1
2
jan
-13
ap
r-13
jul-1
3
okt-1
3
EU
R/M
Wh
-50
-40
-30
-20
-10
0
10
20
30
TW
h
Systemprice Hydrological Balance
Changes in the Nordic system price are highly correlated with changes in hydrological balance
Syste
m p
rice a
nd
hyd
rolo
gic
al
bala
nce
Outlook• Changes in the balance will
continue to be the main
price driver going forward.
Correlation has not
changed.
• A new major downturn in
the economy will surely
affect Nordic prices as
output falls.
Financial crisis 2008
pushed prices down
despite weakening
hydrology
11 | Capital Markets Day, Stockholm | 21 September 2011
10
20
30
40
50
60
70
80
90
jul-0
5
no
v-0
5
ma
r-06
au
g-0
6
dec
-06
ap
r-07
au
g-0
7
jan
-08
ma
j-08
se
p-0
8
feb
-09
jun
-09
okt-0
9
ma
r-10
jul-1
0
no
v-1
0
ma
r-11
au
g-1
1
no
v-1
1
feb
-12
ma
j-12
au
g-1
2
okt-1
2
jan
-13
ap
r-13
jul-1
3
okt-1
3E
UR
/MW
h
Systemprice SRMCC
Marginal cost of coal acts as support to the Nordic system price- except hydrological balance is very positive
Syste
m p
rice a
nd
marg
inal co
st
of
co
al
Outlook
• With normalisation of the hydro
balance, dark spreads will be under
pressure in the Nordic region
considering the expansion of wind
and nuclear.
• Could CO2 prices again edge
towards zero if the economy turns
down and output falls?
• The uptrend in coal prices will be
broken if the economy turns down.
Although, support of coal prices will
remain when money flies into gold,
commodities, property (things that
retain value when „money dies“).Hydbal >15 TWh
12 | Capital Markets Day, Stockholm | 21 September 2011
0
10
20
30
40
50
60
70
80
90
100
feb
-05
jun
-05
okt-0
5
mar-0
6
jul-0
6
no
v-0
6
ap
r-07
au
g-0
7
dec-0
7
maj-0
8
sep
-08
jan
-09
jun
-09
okt-0
9
feb
-10
jul-1
0
no
v-1
0
mar-1
1
jul-1
1
okt-1
1
jan
-12
ap
r-12
jul-1
2
okt-1
2
jan
-13
ap
r-13
jul-1
3
okt-1
3E
UR
/MW
h
Systemprice German Off Peak
German off-peak prices provide additional support - except hydrological balance is very positive
Syste
m p
rice a
nd
Germ
an
off
-peak
Outlook
• With normalisation of the hydro
balance, also the Nordic-German
off-peak spread will be under
pressure in the Nordic region
considering the expansion of wind
and nuclear.
• German off-peak prices will be
supported by nuclear
decomissioning. They will also
stay strong in relation to peak
prices although considering the
expansion of solar power.
Hydbal >15 TWh
13 | Capital Markets Day, Stockholm | 21 September 2011
0
10
20
30
40
50
60
70
80
90
100
110
120
feb
-05
jun
-05
okt-0
5
mar-0
6
jul-0
6
no
v-0
6
ap
r-07
au
g-0
7
dec-0
7
maj-0
8
sep
-08
jan
-09
jun
-09
okt-0
9
feb
-10
jul-1
0
no
v-1
0
mar-1
1
jul-1
1
okt-1
1
jan
-12
ap
r-12
jul-1
2
okt-1
2
jan
-13
ap
r-13
jul-1
3
okt-1
3E
UR
/MW
h
Systemprice German Peak
The Nordic system price is most of the time below the German peak - except hydro balance is extremely strained in winter*
Syste
m p
rice a
nd
Germ
an
peak Outlook
• More installed wind capacity in the
Nordic region will lead to higher
peak / off-peak spreads and higher
volatility in the spot prices.
• Solar power expansion will put
pressure on German peak prices.
Hydbal < - 30 TWh
Potential if hydro goes
extremely negative
again?
*in combination with low nuclear availability, low temperature and precipitation.
14 | Capital Markets Day, Stockholm | 21 September 2011
Import/Export Balance Germany (7day moving average)
-8000
-6000
-4000
-2000
0
2000
4000
6000
8000
Jan Feb Mar Apr Mai Jun Jul Aug Sep Oct Nov Dec
MW
(+
Im
po
rt / -
Exp
ort
)
2007 2008 2009 2010 2011 Average (07-10)
The German moratorium triggered a big trade balance swing
Isar 1, Philippsburg 1
Neckarwestheim 1
Unterweser, Biblis A
Grafenrheinfeld (maintenance)
Offline before:
Biblis B, Krümmel
Brunsbüttel
Grohnde, Gundremmingen B
Philippsburg 2, Emsland
15 | Capital Markets Day, Stockholm | 21 September 2011
Import/Export Balance Germany-France (7day moving average)
-5000
-4000
-3000
-2000
-1000
0
1000
2000
3000
4000
5000
Jan Feb Mar Apr Mai Jun Jul Aug Sep Oct Nov Dec
MW
(+
Germ
any im
port
s / -
Germ
any e
xport
s)
2007 2008 2009 2010 2011 Average (07-10)
France contributed the most with a shift of >4,000 MW
16 | Capital Markets Day, Stockholm | 21 September 2011
Highest nuclear production in France since years facilitates high exports
Nuclear Production France
0
40
80
120
160
200
240
280
320
360
400
440
Jan Feb Mar Apr Mai Jun Jul Aug Sep Oct Nov Dec
TW
h
Estimated 2011 based on target 2011 2010 2009 2008 2007
If France sticks to the target,
a lower utilisation (~1,500MW)
would be the result for Q4
17 | Capital Markets Day, Stockholm | 21 September 2011
Higher wind production in Germany gives relief to imports
Offpeak Import/Export Balance DE-FR (7day moving average)
-5000
-4000
-3000
-2000
-1000
0
1000
2000
3000
4000
5000
Jan Feb Mar Apr Mai Jun Jul Aug Sep Oct Nov Dec
MW
(+
Germ
any im
port
s / -
Germ
any e
xport
s)
2007 2008 2009 2010 2011 Average (07-10)
Wind Germany 2011 (deviation from norm)
18 | Capital Markets Day, Stockholm | 21 September 2011
Wind and solar complement one another in the peak
Typical Wind & PV production pattern in Germany
0
2000
4000
6000
8000
10000
12000
14000
Jan Feb Mar Apr Mai Jun Jul Aug Sep Oct Nov Dec
MW
Total Wind & Solar Solar (Peak) Wind
19 | Capital Markets Day, Stockholm | 21 September 2011
Definitions
Origination
Proprietary
Trading
Asset backed
TradingTrades with an underlying natural exposure from a trading
asset
Trades with no underlying natural exposure
Trading of highly non-standardised contracts, often with
multi-commodity components. Origination also
incorporates Portfolio Management services, mainly
executing more or less standardised transactions
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