Jera to Buy EDF Trading’s Coal Business Amid Expansion

  • Companies expect to reach a final agreement in December
  • EDF selling fossil-fuel power assets amid environment concerns

Jera Co., a venture between two of Japan’s biggest power utilities, agreed to acquire EDF Trading Ltd.’s coal-trading business as part of a push to lower fuel costs and expand its overseas business.

The Tokyo Electric Power Co. Holdings Inc. and Chubu Electric Power Co. venture signed a non-binding agreement to buy all of EDF Trading Australia Pty, including a 7.5 percent interest in the Narrabri coal mine in Australia, and 100 percent of Amstuw BV, which operates the Rietlanden coal terminal in the Netherlands, the companies said in a statement on Tuesday. A final agreement is expected in December, the companies said.

The purchase comes as Tokyo-based Jera looks to expand its coal and natural gas trading businesses amid heightened competition among Japanese power utilities and new entrants after the government fully liberalized the retail market in April. Coal will remain as the dominant fuel in global power generation over the next decade despite environmental concerns as many governments place a bigger emphasis on economic growth and cheap electricity, according to BMI Research.

“Combined coal demand of Chubu Electric and Tokyo Electric will continue to be more than 20 million metric tons a year in the mid- and long-term as it will remain an important and cheap source as baseload capacity,” Izumi Kai, general manager of Jera’s trading business development unit, told reporters in Tokyo on Tuesday. “This is a precious opportunity to get a platform and know-how for commodity trading, which could be used for LNG and electricity trading in the future.”

EDF, one of the world’s biggest coal traders, plans to sell 10 billion euros ($11 billion) of assets by 2020 to help finance new projects in the face of new taxes and regulations in the U.S. and Europe that are making coal less attractive.

Jera will also acquire EDF Trading’s coal purchase and sales agreements and other assets mainly in Europe, Kai said. When the deal is finalized, EDF Trading will acquire a minority stake in Jera’s trading unit in Singapore and its 30 coal business employees will transfer to Jera Trading Singapore Pte Ltd., he said. Kai declined to say how much Jera may pay for EDF Trading’s assets as negotiations are ongoing.

Even though the coal trading operations in Europe that Jera will acquire from EDF Trading will likely shrink in coming years, the company expects that about 30 million metric tons of it can be maintained, Kai said.

The combination with its own procurement volume would make Jera Japan’s biggest thermal coal trader, rivaling global middlemen like Trafigura Beheer BV and Vital SA, Kai said.

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