Statkraft Seeks Power Profits in Turkey as Europe Margins Shrink

Statkraft SF, Europe’s biggest hydropower producer, is boosting capacity and trading in Turkey to offset falling demand and profitability in western Europe.

Higher prices in Turkey make trading more attractive and plants more profitable than in Europe, according to Claus Urbanke, Oslo-based Statkraft’s head of new markets. Day-ahead power in Turkey cost 70 percent more on average than in Germany in May, according to Bloomberg calculations using data from Turkish day-ahead market PMUM and the EPEX Spot exchange.

European utilities from EON SE to CEZ AS are entering new markets as the euro area’s longest recession cut German power demand to a 10-year low. Electricity use has risen more than 15 percent since 2010 in Turkey, where Statkraft is currently building two hydro plants, compared with a 2.5 percent drop in Europe’s biggest economy.

“Turkey could surpass Germany as a power market by 2020 and is a good opportunity for us to make up for shrinking markets at home,” Urbanke said in an interview in Dusseldorf. “Turkey has a large potential for hydro power along with very good growth in demand over the past 10 years, which we expect to continue in the coming years.”

Day-ahead electricity sold for an average of 55.43 euros ($72.04) a megawatt-hour in May on PMUM. That compares with 32.56 euros for Germany on the EPEX Spot exchange.

A boost in solar generation in Germany has reduced prices during daylight hours, when demand is at its highest. The premium of next-month power for delivery in the 12 hours from 8 a.m. over the around-the-clock contract in Germany has shrunk to an average 8.94 euros a megawatt-hour this year, according to broker data compiled by Bloomberg. That compares with a mean of 11.38 euros in the four years through 2012.

Spark Spread

Next-year profit for German gas-fired plants, known as the spark spread, has traded below zero since January 2012, according to Bloomberg calculations. The measure dropped to a record minus 18.55 euros a megawatt-hour on June 17 and was at minus 17.96 euros today, the data show.

“The price differences in Turkey are more pronounced and the generally higher prices make this market more attractive,” Urbanke said on June 6.

Statkraft has one 20-megawatt hydropower plant in Cakit, southern Turkey, that supplies about 32,000 households, according to its website. The company plans to start a 102-megawatt plant in Kargi in the north in 2014 and a 517-megawatt unit in Cetin in the southeast in 2016, Urbanke said.

Turkey’s economy is expected to grow 4 percent this year, compared with an increase of 0.4 percent in Germany and a 0.6 percent contraction in the euro area, according to Bloomberg News surveys of economists.

Gas Plants

Power use in Turkey rose to 242 terawatt-hours last year from 210 terawatt-hours in 2010 according to a Statkraft presentation. German consumption last year fell to 595 terawatt-hours, the lowest since 2003, from 610 terawatt-hours in 2010, according to AG Energiebilanzen e.V., an association of energy lobbies and economic research institutes.

In 2012, Turkey produced around 44 percent of its power from natural gas-fired plants, according to Statkraft, compared with 11 percent in Germany.

“Gas power plants are the price setters in the Turkish market during most hours of the day,” Urbanke said. “That’s why prices on the wholesale power market in Turkey are significantly higher than in Germany.”

The Turkish Privatization Administration is currently looking to sell 45 power plants with a total generation capacity of 16,200 megawatts, including 27 hydro stations, according to its website.

Statkraft is interested in the plants as it seeks to boost its power generation capacity in Turkey, Urbanke said.