Bloomberg New Energy Finance - Week In Review

This Week In Review was sent on Tuesday 6 May.

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The Week in Clean Energy

CLEAN ENERGY

Rollercoaster ride for fuel cells, cross-border energy bids in Europe

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CARBON

EU carbon allowances advanced as fewer contracts traded

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GAS

Ukraine gas goes into reverse

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POWER

Baltic governments nationalise

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POPULAR INSIGHT NOTES

Q2 2014 European Policy Quarterly Outlook

2 May 2014

Quarterly Outlook

First look at sides of the GE-Alstom-Siemens triangle

2 May 2014

Analyst Reaction

Romanian policy turns crash GW-scale renewables market

1 May 2014

Analyst Reaction

NEX vs AMEX Oil, Nasdaq, S&P 500 and MSCI AC World

NYSE BNEF Global Clean Energy Indexes

CLEAN ENERGY

Rollercoaster ride for fuel cells, cross-border energy bids in Europe

The last week has brought a reminder of the volatile nature of the fuel cell industry, as US producer ClearEdge Power filed for bankruptcy on 2 May, less than two months after raising USD 5m in a debt and equity sale to unnamed venture investors. Shares in quoted fuel-cell makers dropped after the filing, with Ballard Power Systems falling 4% and FuelCell Energy declining 2%.  The latter company hit the headlines in its own right in the last few days, for winning a contract to build and operate two 2.8MW power plants in Connecticut for UIL Holdings. 

ClearEdge’s bankruptcy comes when players are jostling for position in the industry: only a few weeks ago fuel-cell company Plug Power, one of the best performing Nasdaq companies so far in 2014, acquired Relion for USD 4m to gain direct ownership of fuel-cell manufacturing technology. While the sector may see further changes in the ranks of individual organisations, overall the commercial-scale roll-out of some fuel-cell technology will continue to gain momentum in 2014.  

Fuel-cell cars received a boost last week with the announcement of the ‘H2FIRST’ project by the US Energy Department, which aims to accelerate the design and construction of fuelling stations for vehicles that run on hydrogen. The technology offers the promise of a fossil-fuel replacement, though it is years from being seen as mainstream. One hurdle is the lack of fuelling stations. Under the project, the Department will collaborate with Sandia National Laboratories and the National Renewable Energy Laboratory on designs and materials for hydrogen fuelling stations. Researchers will also share data with state agencies, automakers and hydrogen suppliers to reduce the cost and time needed to develop the infrastructure.

In the meantime, the battle for Alstom’s power and grid business continues: General Electric’s USD 16.9bn bid for the French company’s energy business is not good enough, said French President Francois Hollande on 6 May. “There is another offer and we will see if it will be a better one,” he said, referring to a counter-proposal from Germany’s Siemens. “We want the offers to be improved on jobs.” Both approaches could have a tough time clearing European competition hurdles, perhaps especially the possible Siemens-Alstom tie-up given its high market share in the region, according to Bloomberg New Energy Finance. 

Alstom is not the only cross-border game at play: Rolls-Royce Holdings said on 30 April that it is in talks to sell its power-generation assets to Siemens. An agreement with either Rolls-Royce or Alstom would enable the German company to expand its energy business as it seeks to improve profitability and catch up with rivals GE of the US and ABB of Switzerland. The likelihood of the deal with the London-based company may be influenced by the outcome of the talks with Alstom, though Siemens could execute both deals, it said. 

In project news, Boston-based renewable-energy developer First Wind said on 1 May it had closed financing on a 148MW project in Maine. The wind farm with a price tag of USD 369m is expected to begin generating power in Q4 2015. Further north, Canadian Solar, the best-performing solar maker in the last year, received a USD 105m loan from the National Bank of Canada to build three solar plants in Ontario. Construction on the first project will begin in July. In Latin America, Corporacion America got a USD 176m loan to complete two wind farms in Uruguay from a group of lenders led by the Inter-American Development Bank. This marks the company’s first foray into wind power, as the world’s largest private airport operator by number of facilities diversifies into energy and technology. The projects will cost some USD 211m and have total capacity of 90MW. 

Finally, in Asia, Hong Kong real-estate tycoon Zheng Jianming continues to extend his reach in the solar PV industry, after Shunfeng Photovoltaic International – in which Zheng has a major stake – agreed to buy the inverter and building-integrated PV units of insolvent Sunways of Germany. Shunfeng plans to become a global clean-energy major with a spate of deals including its USD 480m acquisition of Wuxi Suntech Power, once the largest panel maker, on 28 April. The Sunways deal allows Shunfeng to supply panels and inverters, used to convert solar power into current suitable for the grid. Zheng also owns a 22% stake in LDK Solar – the second-biggest solar wafer supplier by 2012 capacity.

 

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CARBON

EU carbon allowances advanced as fewer contracts traded

Carbon allowances advanced 2.3% during a week of light trading volumes. European Union allowances (EUAs) for December 2014, the benchmark contract, finished Friday’s session on London’s ICE Futures Europe exchange at EUR 5.24/t, compared with EUR 5.12/t at the close of the previous week. 

Front-year EUAs were trading as high as EUR 5.54/t on Wednesday morning. Only 12.4Mt of December 2014 EUAs exchanged hands that day, compared with the 15-day moving average of 19.6Mt. EUA market activity was relatively light on most days, as Thursday was a public holiday in many European countries. 

December 2014 EUAs dropped to a low of EUR 5.13/t on Friday as data showed emitters exchanged fewer United Nations offsets than estimated for EU contracts, signalling lower future demand. 

UN Certified Emission Reduction credits (CERs) for December 2014 lost EUR 0.01/t last week to end at EUR 0.15/t.

GAS

Ukraine gas goes into reverse

Under an agreement reached last week between UkrTransGas, Ukraine's state-owned energy company, and Eustream, Slovakia’s pipeline operator, 22mcmd of natural gas will flow from Slovakia to Ukraine from September. The deal was facilitated by the European Commission. 

Ukraine consumes an average 5bcfd (140mcmd), and relies on Russia for over half its supplies. The larger country shipped around 900bcf (25bcm) of gas to Ukraine in 2013, so the import deal with Slovakia is sufficient to displace 30% of Russian import volume. Providing Ukraine with alternatives to Russian gas is a priority for the EU as it tries to support the fledging government in Kiev. Gazprom upped the price it charges Ukraine for its gas by 81% to $485 per 1,000 cubic metres last month – more than the price paid by EU buyers. 

Meanwhile, in North America, Pacific NorthWest LNG, a 12MMtpa terminal to be located in British Columbia, found another equity investor and offtaker in Sinopec. The Chinese company will take a 15% equity stake in the project and signed a 20-year deal for 1.8MMtpa. Sinopec will be the fourth minority investor in the project. All investors so far have bought equity and signed 20-year off-take agreements proportional to their equity stakes (ie, 10% of 12MMtpa = 1.2MMtpa). After the deal closes, Petronas will hold 62%, Sinopec 15%, Indian Oil Corporation 10%, Japan Petroleum Exploration 10% and Petroleum Brunei 3%. Sinopec also signed a heads of agreement for the purchase of another 3MMtpa of LNG sourced primarily from Pacific NorthWest LNG. Assuming that the full 3MMtpa comes from Pacific NorthWest LNG, this means that the facility has signed off-take deals for 7.56MMtpa of its 12MMtpa design capacity.

 

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POWER

Baltic governments nationalise

Two Baltic countries made moves last week towards gaining greater control of their energy sectors through pushing the acquisition of distribution grids from E.ON by state-owned companies. E.ON has been divesting its stakes in many of its smaller gas and power companies.

Lithuania’s state-owned energy companies, Lietuvos Energija and EPSO-G, were asked by the government to apply for approval from the competition authority to buy stakes in the country’s gas and power utilities from E.ON. Lietuvos Energija, which holds 17.7% of Lietuvos Dujos, seeks to buy E.ON’s 38.9% of the gas utility as well as E.ON’s 11.8% of electricity distributor Lesto. In Estonia, the Economy Ministry said on 29 April that discussions were starting, to buy out the gas pipelines from utility Eesti Gaas, which is owned 37% by Gazprom, 33.7% by E.ON and 17.7% by Fortum. Other European countries have also been engaged in renationalising their respective energy sectors in what could be considered more ‘anti-European’ moves than those seen in the Baltics. Hungary’s renationalisation activity is a populist response to public dismay at high power bills. In Poland and the Czech Republic, meanwhile, the governments have been increasing state power in the sector by exerting greater direct influence on their national champions in order to advance industrial and energy policy. 

In other news, French energy minister Segolene Royal said she would modify the way state-set electricity rates charged by EDF are decided, in order to moderate increases for consumers over the next three years. She also said a French ‘energy-shift law’ was planned for July. The minister also announced that France plans to create majority state-controlled companies to manage hydro-electric dams. This is a retreat from the government’s long-delayed plans to organise competitive tenders for these dams.

EU ETS and global carbon price (EUR/tCO2e)

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