European 2014 Power Contracts Fall to Records as Carbon Drops

Power contracts for 2014 delivery in Germany and France fell to records as December European Union emissions permits reached an all-time low, reducing production costs for some generators.

German 2014 power, a European benchmark, declined as much as 1.4 percent while the equivalent French contract lost 1.2 percent, according to broker data compiled by Bloomberg. Carbon allowances for December declined as much as 13 percent.

German baseload power, for supplies delivered around the clock, fell 75 cents to 41.80 euros ($55.53) a megawatt-hour, according to broker data compiled by Bloomberg. French year-ahead electricity fell 55 cents to 45 euros.

German year-ahead power prices may recover, according to Macquarie Group Ltd. Power for delivery in 2014 may average 44.60 euros this year and recover to 50.40 euros by 2016, the bank said in e-mailed report, citing its own forecast for higher carbon permit prices during this year.

EU carbon permits for December slid as much as 66 cents to a 4.72 euros a metric ton on the ICE Futures Europe exchange in London. Power can track fuel and emissions prices, which affect the cost of production at plants that burn fossil fuels.

Coal for 2014 delivery to Amsterdam-Rotterdam-Antwerp dropped 0.6 percent to $98.60 a metric ton.

Power contracts for next-week delivery in Germany dropped 3.5 percent to 42.25 euros a megawatt-hour as of 5:25 p.m. Berlin time, while the equivalent French contract lost 3 percent to 48 euros, broker data show.

Low temperatures in Frankfurt are forecast to decline to minus 10 degrees Celsius (14 Fahrenheit) on Jan. 25 versus a 10-year seasonal average of 2 degrees, according to CustomWeather Inc. data on Bloomberg. Minimum temperatures in Paris are expected to reach minus 9 degrees on Jan. 25, compared with a 10-year average of 4 degrees.

The German 2014 clean-dark spread, a measure of the profit utilities get from selling electricity after accounting for the cost of coal and emissions permits, fell as much as 4 percent to 7.28 euros a megawatt-hour, according to data compiled by Bloomberg. The 2014 clean-spark spread, for gas-fed generators, shrank 2.4 percent to a record minus 15.06 euros a megawatt-hour.

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