Prompt and month-ahead contracts:

Despite a rather cold start, the month of April saw FRA electricity demand average c. 55.9GW at the max, down by a further 7.2GW m-o-m, on the back of overall milder temperatures and reduced consumption during the Easter holiday break.

In terms of generation, nuclear power output averaged 31GW at the max, down by 5.67GW m-o-m and c. 7.6GW when compared to the same month last year, putting the reliability of FRA´s nuclear fleet into question once again (and exacerbated further by EDF´s announcement that it had found signs of possible corrosion issues on the auxiliary circuits of four of its nuclear reactors totalling 4.8GW). As for fossil-fuelled production, gas generation was down by an average 1.7GW at the max, whereas coal output was rather stable. Regarding renewables, no major changes were observed in terms of hydro and wind power production. However, solar power generation, though up by an average of just 1GW at the max m-o-m, showed rather healthy values during wk8 and reached a new all-time high of 9.7GW at the max on Tue, Apr 24^th

As for gas prices, TTF spot contract reversed the overall trend observed during our previous analysis. In fact, after starting April on a bullish note supported by a short-lived cold snap, the contract gradually lost ground namely on the back of forecasts pointing to milder weather conditions and prospects of healthy LNG cargo deliveries into Europe. The bullish impact resulting from news that RUS had stopped gas supply to Poland and Bulgaria on Wed, Apr 27^th (on the grounds both countries refused to pay for gas supplies in rubbles), was equally short-lived, with TTF spot contract adding EUR7.83/MWh d-o-d and retreating thereafter. Eventually, the contract was down by an average EUR26.841 m-o-m after closing at EUR96.432/MWh on Powernext on Sat, Apr 30^th.

FRA spot power prices were also seen following an overall downward trend in April. Milder temperatures, especially during the last week of the month, decreasing gas prices and EUAs contracts keeping below the EUR80.00/Tn mark during the first half of the month, all weighted on the contract. The only significant bullish move was observed on Mon, Apr 4^th, with FRA power baseload contract settling at EUR551.43/MWh (+74% when compared to Fri, Apr 1^st) on the back of very cold temperatures (demand registered 71.6GW at the max) and nuclear power generation reaching no more than 32.1GW at the max (with 27 out of 56 nuclear reactors out of service). By COB of Sat, Apr 30^th, FRA power baseload contract was down by an average EUR61.99 m-o-m after closing at EUR200.93/MWh. Its equivalent peak load contract closed at EUR191.74/MWh, down by EUR71.40.

Regarding month-ahead contracts, FRA May’22 power baseload contract was down by an average EUR62.72 m-o-m after closing at EUR212.60/MWh on the EEX on Fri, Apr 29^th. Despite some reduced NOR gas pipeline supply (due to maintenance outages) and lower flows from RUS, plus RUS having cut flows to Poland and Bulgaria, a milder weather outlook and strong LNG supply into Europe managed to bring power prices down. It´s worth noting here that LNG prices for delivery into Europe are at their largest discount to TTF gas prices (c. EUR29.00/MWh against almost zero 2.5 years ago). Lingering concerns that RUS might cut gas pipeline supply to more European countries and a slowdown in China´s demand for LNG due to newly decreed confinements has led to a glut in cargoes waiting to be discharged at European ports in the context of very tight slots availability. As a result, cargo owners are forced to offer discounts to deliver their supply to those buyers that have managed to contract regassification slots. For its part, FRA Jun’22 power baseload contract closed at EUR222.13/MWh, down by an average EUR56.38 m-o-m.

Medium and long-term contracts:

FRA power curve contracts were mostly on the up, supported by the impact current geopolitical tensions and, more specifically, resulting measures being proposed by the EU (such as an EU-wide full embargo on RUS energy exports) are having on the whole energy complex. To this we should also add ongoing concerns regarding the reliability of FRA´s nuclear power fleet. Although EDF is confident it will be able to return c. 20GW capacity to the grid for the coming winter, the market deems this news as unreliable and unrealistic given the ongoing issues the French nuclear fleet keeps facing. Nor does it help that France´s recently re-elected President Macron, in a bid to attract both pro-nuclear and pro-renewables voters, had promised, amongst others, to 1) develop nuclear, solar and wind generation assets more than ever, and 2) make France “the first major nation to abandon gas, oil and coal”. Even if these pre-election promises were to be fulfilled, it will take time to do so, and time is something the FRA power system cannot afford under the current circumstances.

In light of the above, it comes as no surprise that FRA Q422 power baseload contract was up by an average EUR11.31/MWh when compared to March, whereas both FRA Cal23 and Cal24 power baseload contracts added on average EUR34.51/MWh and EUR35.03/MWh m-o-m, respectively.

In terms of underlying fuel costs, TTF Cal23 gas contract added an average EUR7.432 m-o-m after closing at EUR78.770/MWh on Powernext on Fri, Apr 29^th. Though still bullish, the level of prices observed was not as high as those seen in March. This may be the result of some confidence gained by market players in view of: 1) currently increasing LNG cargoes waiting to be discharged at European ports (at prices significantly lower to the TTF reference price); 2) NOR´s announcement that it would increase the amount of gas to be exported to NWE and, 3) efforts made by various EU countries to reduce their reliance on RUS gas by either increasing the capacity of some of their existing regasification plants, lease some floating units, or build some new facilities. In the specific case of France, latest news suggest that the Fos-Cavaou terminal will see its capacity increased by 13TWh in 2023 and 30TWh in 2024, while plans for increasing capacity at the Dunkerque terminal are currently under study. Meanwhile, a decision on whether to invest in an LNG floating terminal at Le Havre is also on the cards …

As for coal prices, API2 Cal23 contract added $29.17 m-o-m after closing at $209.93/Tn on the ICE on Fri, Apr 29^th. The contract followed a bullish trend during the first 3 weeks of the month, supported by concerns that the EU would impose a ban on coal imports from RUS. This decision was officially confirmed by the EU on Apr 8th and entered into force on Apr 9th (note here that contracts concluded before Apr 9th and ancillary contracts necessary for their execution may still be executed until Aug 10th). This EU measure also had an immediate bullish impact on Asia-Pacific coal indexes (also supported by the US embargo on purchasing RUS materials). However, the last week of the month saw API2 Cal23 contract prices shed some ground on the back of increasing stocks.

Finally, re. emissions prices, EUA Dec22 contract closed at 84.45/Tn on the EEX on Fri, Apr 29^th, up by an average EUR6.59 m-o-m. Emissions prices traded rangebound during the first two weeks of April (settling between EUR77.00-80.00/Tn), and volumes thinning considerable ahead of the Easter holiday period. However, EUA Dec22 contract took a bullish turn starting on Wed, Apr 20^th, supported by some market players who started to feel the stress to meet their 2021 obligations (compliance period was due at the end of the month) plus some speculative trading.