The energy industry is currently shaped by a difficult general economic situation. The heavily subsidised expansion of renewable energy, the decrease in demand for electricity as a result of the economy and a non-functioning CO2 market are the main reasons for the low wholesale prices for electricity. In addition, long-term volume and oil price-indexed gas supply agreements not in line with market conditions are driving gas power plants to become less profitable. However, with the increased expansion of renewables, the flexibility of gas power plants is needed more and more to compensate for weather-related fluctuations in wind and sun and to guarantee the security of supply. For this reason, solutions for how the market should be designed are now being developed in Europe, where capacity payments for power plants with secured output (such as gas power plants) have already been introduced in France and Italy.
In recent months, VERBUND has intensively reviewed all options for optimising the entire gas portfolio. The first building blocks are the withdrawal of Energie Steiermark from VERBUND Thermal Power and the realignment of VERBUND Thermal Power. Both measures will help determine the course of action for further optimisation of thermal generation.
At the same time, efforts are ongoing to terminate gas supplier agreements not in line with the market and to cut costs at the operational level. These are key steps in providing greater latitude for future decisions regarding the optimisation of the entire gas portfolio. The measures are consistent with the VERBUND strategy of focussing on electricity generation from hydropower and wind power and no longer investing in CO2-emitting technology.
ENERGIE STEIERMARK withdraws from VERBUND Thermal Power
Energie Steiermark and VERBUND announce the withdrawal of Energie Steiermark from VERBUND Thermal Power. Previously, Energie Steiermark held shares of approximately 20% and VERBUND approximately 80% in the joint subsidiary. As of 18 December 2013, VERBUND thus holds over 99% of the shares in VERBUND Thermal Power. As part of the reorganisation of the ownership structure, the supply of district heating from the Mellach site to the regional capital, Graz, in accordance with the formerly applicable agreements was contractually guaranteed through 2020. Details of the transaction were not made public.
In an additional step for the thermal subsidiary, VERBUND announces the dissolution and simultaneous realignment of VERBUND Thermal Power. Both measures, the withdrawal of Energie Steiermark and the realignment of VERBUND Thermal Power, represent initial key steps in providing greater latitude for necessary decisions in the future regarding the optimisation of the entire gas portfolio.
VERBUND Thermal Power GmbH operates 4 thermal power plants throughout Austria: 1 in Dürnrohr (Lower Austria) and 3 others in Styria: Neudorf-Werndorf as well as the hard coal-fired power plant and the Mellach combined cycle gas turbine power plant. The Mellach combined cycle gas turbine power plant opened in June 2012 will remain in flexible operation until a final solution has been reached. For historical reasons, Mellach also has a volume and oil price-indexed gas supply agreement not in line with market conditions. VERBUND therefore filed an application for redress for competition law infringements by EconGas with the Austrian Cartel Court in May 2013. The proceedings are currently ongoing so that no further commentary can be provided.
In France, VERBUND operates 2 combined cycle gas turbine power plants in Pont-sur-Sambre and in Toul.
The long-term gas supply agreement for the Pont-sur-Sambre combined cycle gas turbine power plant was already cancelled by court order. A number of other cost-cutting measures were implemented, and further options were developed and evaluated.
Cost-cutting measures and an analysis of further options are also ongoing for the Toul gas power plant.
In Italy, VERBUND holds an interest in additional thermal power plants through the minority interest (46%) in Sorgenia. In the Italian market, Sorgenia is confronted with significant market distortions. Sorgenia’s management is working on a restructuring plan.