EON SE plans to more than double its power trading in Turkey this year, helping to offset falling profits from buying and selling in shrinking western European markets.
The trading arm of EON’s Turkish joint venture Enerjisa will probably boost activity by 150 percent to about 30 percent of the nation’s total, according to Benedikt Messner, Istanbul-based managing director at the Enerjisa unit.
EON is seeking to make money in Turkey to offset losses in Europe, where falling demand and power prices are hurting the company’s profits. The Dusseldorf, Germany-based company said last month that it expects its profit to decline by one-third this year as consumption in Europe may slide further.
“Turkey is especially interesting as energy demand is rising long term,” Messner said in an interview at EON’s headquarters. “Trade, volumes and transparency are growing.”
The Mediterranean country needs to build as much as 5,000 megawatts of additional power capacity a year, from about 62,000 megawatts in October, to meet annual growth of on average 6 percent over the next decade, according to Enerjisa. One megawatt is enough to power 2,000 European homes. Energy demand in the European Union is expected to fall 6 percent by 2035, according to BP Plc’s Energy Outlook.
Enerjisa operates 20 power plants with a total capacity of 2,437 megawatts and has 1,826 megawatts under construction, according to EON’s factbook. Enerjisa seeks 7,500 megawatts, or 10 percent of total generation, by 2020, Chairman Selahattin Hakman said in December.
Enerjisa’s four power traders may buy and sell about 15 terawatt-hours this year, up from 6 terawatt-hours in 2013, as trading volume in the Turkish day-ahead auction and on its over-the-counter market rises by 67 percent from 30 terawatt-hours last year, according to Messner. Total power generation was 239 terawatt-hours in 2013, according to Enerjisa. One terawatt-hour is about one month of output from EON’s biggest nuclear reactor, Brokdorf in Germany.
“It’s about securing the value of our power plants and to make money from it,” he said.
EON, Germany’s biggest utility, said last month that power trading volume at its Global Commodities unit dropped 8.3 percent in 2013 as Europe’s renewable energy boom drove power prices to record lows. The unit’s profit declined 75 percent.
German power for next-year delivery, a European benchmark contract, declined to a nine-year low of 33.65 euros ($46.09) a megawatt-hour yesterday on the European Energy Exchange AG. The contract traded at 33.75 euros as of 5:13 p.m. in Berlin.
Turkey started liberalizing its energy market from 2001 and the power sector should be fully opened by the end of this decade, when most of the long-term power delivery contracts from state-owned generators expire, Messner said. Those contracts currently cover half of the country’s usage, he said.
Five of Enerjisa’s plants, or 54 percent of generation, are fueled by natural gas, which the company buys at tariffs set by Turkish incumbent Botas Boru Hatlari Ile Petrol Tasima AS. Turkey gets about 59 percent of its gas from Russia’s OAO Gazprom under long-term contracts linked to oil prices, according to Eurogas, a Brussels-based lobby group.
“If this market opens, then it would quicken the market development,” Messner said. “An insight into the pricing formula would allow buyers of Botas’ gas, including us, to hedge the oil price component.”
Last year, gas plants provided 44 percent of Turkey’s total power production, according to Sabine Meixner, EON spokeswoman for political affairs and corporate communications, citing data from Turkish grid operator Teias. That compares with around 11 percent in Germany, according to data from AG Energiebilanzen e.V., an association of energy lobbies and economic research institutes.
“Turkey has higher prices as gas-fired plants set prices in more than 7,000 hours per year,” Messner said. “In Germany, we have a different development now.”
Angela Merkel’s plans to boost Germany’s renewable energy supply to as much as 45 percent by 2025 from about 24 percent are cutting into profit at gas-fired plants in Germany. Output from gas-fired plants dropped 25 percent since 2010 while generation of green power rose 45 percent in the 2010-13 period, AGEB data show.