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Price and margins overview

Electricty Prices

Electricity prices in France, Germany, Spain and the UK remained below average in April and continued to decline till the first week of May, primarily due to mild weather conditions, high renewable output and low demand. Peak and base load prices remained fairly stable with occasional peaks observed through the second and third quarter, attributed to the rise in gas prices, rally of carbon contracts, bullish movement of coal contracts and concerns around French nuclear plants. Prices declined in the first week of September due to weaker coal, carbon and gas market accompanied by low demand.

Oil Prices

Brent and WTI crude prices continued to rise until mid May, reaching nearly US$75 driven by OPEC supply cuts, decline in US oil rigs, escalating violence in Libya, fall of Venezuela's oil output and sanctions against Iran. Oil prices fell in June after President Trump threatened to impose tariffs on imports from Mexico. Prices continued to float around US$60, fueled by optimism from the new round of US-China trade war and OPEC extending its current deal and agreement between Mexico and the US. Prices fell sharply in August, reaching US$55 due to rise in US oil stock and Trump's announcement of additional tariffs on Chinese exports. Prices rose in September, triggered by the Saudi oil facility attacks, optimism around the US-China commercial negotiations, and expectations that OPEC and Saudi Arabia will continue output cuts.

Gas Prices

From April to September 2019, average prices of Henry Hub declined by 18 percent, EU border declined by 38 percent and NBP declined by 44 percent, due to increase in renewable power generation, forecasts of mild weather, along with decline of spot contracts and bearish movement of coal and carbon prices. In the September beginning, the European gas prices declined by 66.4 percent y-o-y to 10 year lowest of US$3.2 per MMBTU, impacted by high levels of storage at terminals, robust supply amid low demand. The occasional peak prices were supported by a rise in oil and CO2 prices and low wind generation. The announcement of closure of Groningen gas fields and reduction in OPAL pipeline gas flows, helped prices to recover by September end.

Coal Prices

Coal prices continued to decline throughout the second and third quarter of 2019, due to high level of stocks at North western terminals, increasing fuel switching due to low gas prices, poor utility demand and low level of trade. Coal prices were fairly stable during the later part of the third quarter, supported by increased demand from Asian markets, support from the strengthened Euro against the USD and rising demand for coal fired generation due to forecast of cooler temperature and continuing French nuclear problems. The prices recovered in September as a result of rise in freight rates and gas prices.

Carbon Prices

Carbon prices increased by 36 percent during April to July 2019, reaching the peak price of EUR29.76/T, due to hot weather spurring demand for allowances, as the heat wave across Europe boosted power demand for cooling. The prices declined to EUR25.53/T at the end of September. The average quarterly carbon price increased by 16 percent in 2Q19 and 6 percent in 3Q19, supported by speculative buying combined with strong compliance demand. The prices declined after August due to uncertainty around Brexit and skepticism surrounding economic slowdown in Europe, resulting in low auction activity. The prices were also negatively impacted by decline in EAU emission and waning industrial demand.

Dark/ Spark Spreads

A comparison of clean dark spread and clean spark spread indicate that there were nearly 28 percent of working days from January to September 2019, when it was cheaper to operate gas plants compared with coal plants, due to the continued rise in price of EUAs. The falling coal prices supported the movement of clean dark spread. The CDS in France, Germany, Spain and the UK improved in September due to rise in gas prices.

Regulatory and economics news overview

European Union

The EU has been witnessing a plethora of initiatives taken by its member countries to reduce emissions and promote renewable energy sources. The initiatives include reducing tariffs for lower energy consumption, investing in renewable production and setting up action plans for zero emissions. Also, countries have imposed CO2 emissions tax on industrial companies, apart from plans to ban petrol and diésel vehicles.


The UK has also undertaken a lot of initiatives to promote clean energy usage. It has proposed a plan for zero emission by 2050 along with a proposal for renationalization of energy networks. In the Cfd Round 3, the government announced record low prices, with first year delivery at GBP39.650 per MWh (2012 real) and the second year at GBP41.611 per MWh (2012 real), for 5.8W of new capacity of which 5.47GW were for offshore wind projects.

There was also an announcement by Ofgem (independent energy regulator) for reducing the retail energy cap by GBP75 per year to GBP1,179, which will result in reduction in energy bills for about 15 million households who are protected by the price caps.


Germany has been providing incentives to encourage less consumption of energy and promote green energy. It has removed energy audits for firms consuming less than 500,000Kwh per year of energy, in addition to financial aid provided to regions affected by its policies to withdraw coal. The country has also enacted a new tax exemption for plants with an output of less than 2MW, which are not connected to a grid.

To promote smart meter gateways, the government has certified the second producer of smart meter gateways and will make use of smart meter gateways compulsory once the third producer has been certified.

The government has also adopted a block-chain strategy to promote technological investment and support the digitalization of the energy transition.


In a boost to renewable energy production in France, the Eurpoean Commission approved support to six offshore French wind farms, for which approvals were pending. The government has also signed an MOU with EDF (French electric utility company) for early closure of the Fessenheim nuclear plant during 1Q20 and 2Q20, owing to the ceiling on the electricity production of nuclear origin set by the law of 17 August 2015 on the energy transition for green growth.


Spain has passed a new law, to remunerate self consumers in case of electricity surplus by removing the charges associated with it. The country has also doubled the budget for incentivizing the program for efficient and sustainable mobility in Autonomous Communities. In 2019, in Spain Combined Cycle Gas Turbine became the third source of electricity in 2019, after Nuclear and Wind, supported by various measures.

The REE, which is the Spanish transmission system operator, has received requests (with deposited guarantees of 150,000MW) to grant access and connection to its renewable facilities.


The Dutch government has initiated steps to reduce CO2 emissions and encourage green fuel. It plans to impose a CO2 emissions tax on industrial companies as a part of proposed measures to meet the target to reduce greenhouse gas emissions by 49 percent by 2030 from levels the 1990 levels.

  • It is also the first AAA rated nation to offer investors with green bond, under which it would give preference to funds to prove their own environmentally friendly credentials.
  • It has taken initiatives to ban petrol or diesel vehicles in Amsterdam by 2030 and also introduced a tax on foreign waste, which accounts for 25 percent of the country's total waste.
  • The government announced subsidy for gas turbine project to six partners in the consortium of a project as part of Dutch hydrogen program. The country plans to phase out net metering scheme, responsible for the growth of Solar PV, by 2031. The process is expected to start by 2023.

The government is halting production at Groningen, Europe's largest onshore natural gas field, by 2022, due to tremors in drilling damaged buildings leading to protests by resident and campaigners.


The Regulatory Entity for Energy Services (ERSE) in Portugal approved a directive defining the new parameters for electric network connections, including the connection tariffs to be supported by producers and consumers. It has also approved the terms and conditions for the special regime energy auctions by the Last Resource Supplier along with tariffs for natural gas and prices to be applied during the gas year 2019 -20.

The ERSE also concluded the regulatory review process for the Portuguese natural gas sector and has published three diplomas.

The Secretary of State for Energy has determined a discount of 31.2 percent in tariffs, to be applied to economically vulnerable households enabling them access to natural gas networks, applicable from 1 July 2019 to 30 June 2020.

The government approved the reduction of the VAT rate applicable to the fixed component of the natural gas access tariff for consumers consuming below 3.45kVA capacity allowance and 10 cubic meter consumption. It also approved the review of the legal regime, applicable to electricity generation, transport, distribution and commercialization activities apart from reviewing the extra-market measures regulatory mechanism.

In a step toward climate change, the government approved the Action Plan for the Adaptation to Climate Changes, following the National Strategy for Adaptation to Climate Changes 2020.


The ARERA (The Italian Regulatory Authority for Energy, Networks and Environment), through the document `Strategic Framework', presented the strategic objectives and the main lines of action for the period 2019 -21. The ARERA also made changes to the regulation concerning the retail sales of natural gas and other gas distributed through urban networks.

In June 2019, the Ministry of Economic Development approved the regulation on the remuneration scheme related to the availability of electricity production capacity. The decree `FER', approved by the Ministry of Economic Development, has been published in the Gazzetta Ufficiale n. 186 of 9 august 2019. It deals with incentives for plants producing electricity through alternative sources. The Ministry also approved the regulation of the remuneration scheme for the availability of electricity production capacity.

Russia and CIS


  • The government made a decision on the price of the renewable energy development program until 2050, settling on US$11.04 billion for the 2021 prices.
  • To support the implementation of the target heat power market model (the size of this segment is c.US$25 billion), the Ministry of Energy of the Russian Federation developed templates to calculate the price of an `alternative boiler' for natural gas, coal, and fuel oil.
  • The Board of Directors of ROSSETI (operator of energy grids) approved the concept for ROSSETI digitalization transformation plan, with total expected investments exceeding US$20 billion until 2030.


  • Kazakhstan has witnessed significant growth in the production of electricity through renewable energy. The development of new Kazakhstan Ecological Code is currently underway and KazEnergy is directly involved. The country is also expected to expand the use of gas in electricity generation.


  • The Ukrainian Parliament voted for amendments to the law regulating Alternative Energy sector in the first reading and in all likelihood, these amendments have passed the second reading as well (while the official confirmation is yet to be received). The law requires mandatory auctions for the solar and wind power plants starting from 01 January 2020.
  • According to the State Agency for Energy Efficiency and Energy Saving, during January -September 2019, more than EUR2 billion was invested in the development of over 2,500MW of new renewable energy capacities in Ukraine.


  • Azerbaijan, Russia and Iran are preparing to create an energy corridor -- North-South Azerbaijan-Russia-Iran energy corridor -- for which a feasibility study is currently being prepared. The country will also start to hold auctions on renewable energy sources by mid-2020.


  • To address energy transformation, the government is planning to unbundle and attract investments through Eurobonds, PPP projects, JVs and privatization.
  • Uzbekistan announced the winner of the first ever solar power auction in the country which opens new markets for private investment and makes progress toward the country's goal to increase use of renewable energy. This Public Private Partnership (PPP), tendered under the World Bank Group's Scaling Solar program, is expected to add 100MW of clean, renewable energy to the country's energy mix.


  • The country is considering introduction of a new law on electricity and water. The law aims to harmonize the Georgian legislation with the EU requirements and develop competitive market in the energy sector.

Capital markets overview

Eurostoxx Utilities

The Eurostoxx Utilities index increased by an average of 4.3 percent q-o-q in 3Q19. The index cumulated 16.4 percent gains in the last 12 months.

Best Performance

Centrica plc (*GBP), Iberdrola SA, Enel SpA, EDP Renováveis, Snam SpA, Naturgy Energy Group, S.A, RWE AG registered the best performance in 2Q19, in terms of share price behavior. During this period, 10 of the top 18 European players experienced positive price evolution.

Enel SpA, RWE AG, Iberdrola SA, Fortum Oyj, EDP Renováveis, ENGIE SA (GDF Suez S.A.) registered the best performance in 3Q19, in terms of share price behavior. During this period, 12 of the top 18 European players experienced positive price evolution.

Vauation Levels

Valuation levels in the sector averaged at 9.3 EV/EBITDA in 3Q19, 8.14 percent above the previous quarter (8.6 EV/EBITDA in 2Q19). Wide differences persist in EBITDA multiples, with RWE Aktiengesellschaft (XTRA:RWE), SSE plc (LSE:SSE), Energias de Portugal S.A. (ENXTLS:EDP), Snam S.p.A. (BIT:SRG), Fortum Oyj (HLSE:FORTUM), EDP Renováveis S.A. (ENXTLS:EDPR), National Grid plc (LSE:NG.), Iberdrola S.A. (BME:IBE), Naturgy Energy Group S.A. (BME:NTGY), trading at 11x TEV/EBITDA and above (as of 30 September 2019).

Net Debt Ratios

Net debt ratios for 3Q19 averaged at 3.5x EBITDA, 9.3 percent above the figure registered in 1Q19

Credit Ratings

In May 2019, ENGIE SA (ENXTPA:ENGI) observed a downgrade in its Moody's rating to `A3'.

To read the full report downlaod here.

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