Turkish Electricity Emergence of a Traded Market

Transcription

1 Turkish Electricity Emergence of a Traded Market Stuart Penson London, 10 November 2011 London, Houston, Washington, New York, Portland, Calgary, Santiago, Singapore, Beijing, Tokyo, Sydney, Dubai, Moscow, Astana, Kiev, Hamburg and Johannesburg

2 Themes Emergence of a traded market Drivers Investment Privatisation Cross-border trade Role of Argus Price references Methodology Turkish power market today Price drivers Risks to market development Conclusions

3 An Emerging Market - Drivers

4 Investment $100bn investment in electricity sector needed in next 15 years EPDK Requires increase in private sector and foreign investments GW of new capacity installed; 7.1GW by private companies 7GW of new generation capacity expected to be commissioned Still more capacity required to meet projected annual demand growth of 6-7pc

5 Monthly Demand (GWh)

6 Privatisation - Distribution Block sale of distribution companies previously owned by TEDAS began in So far 14 distribution regions have been sold. Distribution in companies were put out to tender at the end of 2010: AYEDAS, Bogazici, Akdeniz, Gediz, Toroslar, Trakya, Dicle. One sale completed: Dicle in southeast Turkey. Two sales cancelled: Akdeniz and Gediz One regional company offered to third bidder with new deadline of Dec Three regions turned over to companies who had offered the third highest bids in the initial tenders.

7 Privatisation - Generation Aim: to improve operational effectiveness and efficiency; reduce energy costs; increase system reliability and quality of electricity Limited capacity privatised so far Privatisation in 2008 of ADUAS energy assets (6 hydro-electric, one geothermal, one diesel powered mobile station). Total installed capacity= 141 MW. Won by Zorlu Enerji with US$510m bid (US$3.62m/MW) Privatisation in 2010 of 52 Small run of the river Hydroelectric PPs, grouped into 18 portfolios. Total installed capacity= 142MW. Tender process completed with revenue of US$439.9million (US$3.10/MW)

8 Privatisation - Generation Four thermal power plants to be privatised initially on a standalone basis (Hamitabat, Soma, Can and Seyitomer) Installed capacity = 3227MW. Original aim was to complete sales by end of Only Hamitabat auction has gone ahead, but that was cancelled after only one bid received. Nine portfolios composed of 13 thermal and 28 hydro power plants (between 356MW and 2,795 MW each). Three all thermal portfolios, two mixed thermal/hydro portfolios and four all Hydro portfolios. In total 16.2GW installed capacity. Process will begin once the initial 4 thermal power plants have been privatised.

9 Cross-border Trading Turkey s grid connected with Entso-E in September 2010 for year-long trial. Installed import capacity from Bulgaria and Greece is 800-1,300MW; export capacity is 1,000-1,100MW. Commercial auctions (trial phase with limited capacities) began in June Up to 500MW import capacity offered to market. No limit on offered export capacities. Trial phase recently extended to Autumn 2012 to allow further evaluation.

10 Cross-border Trading Volatile results Low levels of available capacity High demand for Bulgarian imports to Turkey transit to Greece Greek export demand Supported by high prices in Greece, tax increase for gas generators from October Low capacities on Bulgaria-Greece border leads to demand to transit power via Turkey

11 Cross-border Trading

12 Cross-border Trading Good level of interest from domestic and international firms, despite low capacities Auction winners and participants include: Aegean Power, AGE Elektrik, Aksa, Alpiq, Altin Asri, Cengiz Elektrik Cez, Edison Trading, EFT, EGL, Energa Power Trading, Energo Pro, Enerjisa, Ezpada, Fina, Gen-I, GreenEnv, Heron, Kartet Karadeniz, Neco Hellas, OET Elektrik, Park Elektrik, PPC, Protergia, RE Power, Statkraft, Terna Energy, Turcas, Unit Elektrik, Verbund, Voytron

13 Why Trade? Manage price risk hedging in a competitive market Efficient wholesale price discovery consumer benefits Price signals for investment Efficient plant dispatch, optimisation Proprietary trading, pure trading The European experience

14 Private Companies Must Trade Their Power Output/Requirements Bilateral contracts between private entities (MWh) Source: EPDK

15 Market Development Gains Momentum

16 Trading Over-the-Counter Innovation, development of products Counterparty relationships Brokers Bespoke structured deals European power market 75% OTC

17 Price References PMUM Currently operates as a planning market. Load is estimated by the grid operator and matched against generating units and costs to calculate hourly prices. New day-ahead market from December will introduce demand side bidding; provide a reference price more closely tied to fundamentals Turkdex/VOB Launched base load electricity contract in late September. Will be settled against the PMUM day-ahead market. Uncertainty about launch of day-ahead market may be holding back liquidity Price Reporting Agencies

18 About Argus The world largest independently-owned energy market price reporting and market intelligence service company Offices in London (Headquarters), Singapore, Beijing, Tokyo, Dubai, Astana, Moscow, Washington, Houston, plus 10 satellite offices Founded in 1970 Today over 80 publications and services 300+ employees Private UK registered company held by founder s family and its employees

19 Role of Argus Trusted provider of impartial price references Independent Transparent methodology Price references used by producers, consumers, traders, investors governments, regulators Contract basis, mark-to-market, price verification Used for settlement of exchange-traded financial instruments, swaps

20 Argus Methodology for Turkey Weekly (Thursday) survey of market participants bids/offers Including Turkish, Greek, Bulgarian and international counterparties Telephone, , instant messaging Intelligent assessment of prices Expert team of market reporters Methodology available at: Internal audits of reporting procedures, ensures strict compliance with stated methodology

21 Argus Information Matrix

22 Market News and Analysis 20 Oct 2011 Turkish power - November price slips but temperatures offer support 17 Oct 2011 Turkish thermal plant to start 600MW unit in December 17 Oct 2011 Turkey s Akenerji secures financing for Erzin plant 13 Oct 2011 Turkish power Day-ahead, November prices fall on rising supply 10 Oct 2011 Turkey s Aksa adds 190MW unit to Antalya plant 06 Oct 2011 Turkish power Forward prices rise on gas costs, winter outlook 04 Oct 2011 Turkey cancels power plant auction 03 Oct 2011 Turkey imposes gas price hike after 34-month hiatus 30 Sep 2011 Turkish power prices rise in fourth quarter 29 Sep 2011 Deadlines for Turkish power region bids extended 26 Sep 2011 Tender for Turkish gas-fired plant gets just one offer 26 Sep 2011 TurkDex launches base-load electricity futures contracts 23 Sep 2011 Greek TSO to hold daily auctions for capacity to Turkey 22 Sep 2011 Turkish power Forward prices rise on firm spot market 20 Sep 2011 Turkey s Zonguldak coal plant back to full operation 20 Sep 2011 Greek-Turkey power border costs higher for October 19 Sep 2011 Turkey-Europe power interconnection trial extended 16 Sep 2011 EBRD to fund clean energy in Turkey 16 Sep 2011 Norway s Statkraft to build third Turkish hydro plant 15 Sep 2011 Turkish power October rises on expected gas-price increase 15 Sep 2011 Turkish nuclear plant seeks licence 15 Sep 2011 Turkish power plant to start up in July Sep 2011 Turkish power market steps up lobbying on stamp duty 08 Sep 2011 Turkish spot power prices rise on supply cuts 08 Sep 2011 Turkish coal-fired plant expected to restart 06 Sep 2011 Turkish power up on gas supply problems 25 Aug 2011 Turkdex electricity exchange open to amendments

23 Argus Turkey Assessments Weekly price assessments, analytical market commentary and daily news for Turkey, published in Argus European Electricity report

24 Argus Turkey Front-Month Base Load Assessment (TL/MWh) Low PMUM weighs on September Outages and expectations of gas price increase lift October

25 Argus Turkey Quarters and Year-Ahead Assessments (TL/MWh)

26 Weather Price Drivers Short Term Air con consumption drives summer peak. Sensitive to higher/lower than average temperatures Hydro reserves 20-25pc of total generation from hydro Plant outages Sep 2011: PMUM spikes to over TL200/MWh as gas supply issues force large units to cut generation; delayed restart of Zonguldak 600MW coal unit

27

28 PMUM Day Ahead and Gross Demand

29 PMUM Day-Ahead Average (TL/MWh)

30 Price Drivers Longer Term PMUM day-ahead What impact from PMUM switch to full day-ahead market? Gas prices Gas prices for generators held flat for 34 months until ~14% increase October 1. A similar rise in Q1/Q2? New capacity Icdas 600MW coal plant due on line December. High efficiency will displace more expensive generation. Retirement of older inefficient capacity Economic outlook High growth rates for Turkey predicted, but demand growth will not be uniform

31 Demand Growth Stalling?

32 Risks to Market Development Stamp duty on transactions Exemption for physical power? PMUM day-ahead market launch delayed previously EUAS share of generation, unwinding of residual long-term contracts Pace of privatisation Gas market Long-term supply contracts, lack of advance information on end-user price changes creates uncertainty in forward power trading Foreign companies appetite for investment, trade, risk Financing competing with European investment cycle Transparency of fundamental (generation/consumption) data Renewables traded in the market or fixed price?

33 Conclusions Fast pace of development in last 12 months Opportunities and challenges ahead Need for reliable, independent forward price references Argus fully committed to long-term coverage of Turkey and the region

34 More information Argus Electricity Desk Contacts: Editor Deputy editor Turkish market reporter CEE/SEE market reporter London, Houston, Washington, New York, Portland, Calgary, Santiago, Singapore, Beijing, Tokyo, Sydney, Dubai, Moscow, Astana, Kiev, Hamburg and Johannesburg