Wholesale Energy Prices Continue 2011 Rise as Centrica Announces Record ProfitBy Icis Heren, PRNE
Wednesday, February 23, 2011
LONDON, February 24, 2011 - British utility Centrica announced record profits on Thursday as news of
soaring oil prices continued to put UK energy prices under upward pressure.
Centrica's pre-tax profit of GBP1.92bn in 2010 was an increase
of 18% over the previous year. ICIS Heren data shows that the key Day-ahead
UK price for wholesale gas rose by 38% in 2010 compared with 2009.
Year on year, the average price of wholesale gas for January
2011 was 59.031 pence/therm - an 88% increase over the price for January
2010, at 31.39 pence/therm. This index figure is a weighted average of all
the deals for gas delivered over the next month reported to ICIS Heren. These
deals took place the month before delivery.
And the Day-ahead price for gas delivered during working days
is up by 44% so far this year, compared with the same period last year.
Going forward, the ongoing increase in the oil price is
putting energy prices under significant upward pressure. The UK gas system
has developed significantly since the last time oil prices were above
$100/bbl, in 2008, and has significantly more import capability and
flexibility. Currently, the gas market is well supplied, although the impact
of higher oil prices is being felt across all European gas markets.
The oil price is still an important driver of prices on the
forward curve, where companies including utilities buy gas as part of their
hedging strategy. The price for gas delivery during the next winter of
2011/2012 has increased by 12% since last October.
"UK gas prices are now well below 2008 levels when oil last
traded above $100/bbl. Spot gas prices are also cheaper than long-term
European gas contracts which are linked to the oil price. But we should not
underestimate the impact that oil prices could still have on the UK gas
market if they continue to rise," said Edward Cox, gas editor at ICIS Heren.
Power generation profits falling
However, while gas prices have risen, the average price of
wholesale power for January 2011 was GBP51.81/MWh - a 48% increase over the
price for January 2010, at GBP35.06/MWh
This has caused the typical profit margin for gas-fired power
plants to fall, as fuel costs have risen more than the power price that
generators can achieve in the wholesale markets. In January '11, the typical
profit margin was GBP6.28/MWh - a fall of 27% from the previous year. This
'clean spark spread' also takes into account the cost of emissions.
"New generation coming online in the last year in the UK has
kept a lid on power prices," said Zoe Double, power editor at ICIS Heren.
"Gas-fired generation margins for the front season - a benchmark for the UK
power market - are close to record lows."
UK clean spark spreads for Summer '11 have averaged
GBP4.65/MWh in February to date. Last year, the Summer '10 clean spark spread
averaged GBP8.10/MWh over the same period.
ICIS Heren is an information service provider for gas, liquefied natural
gas, power, carbon and coal market intelligence. We publish a suite of
tailored reports providing news, analysis, benchmark price assessments and
indices. Through our reports we aim to bring liquidity and transparency to
power and gas hubs, helping you analyse the sector and make informed business
For more information visit www.icis.com/heren
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For further information please contact: Edward Cox Editor, European Spot Gas Markets ICIS Heren t: +49-211-5403-9689 e: email@example.com Zoe Double. Editor, European Daily Electricity Markets ICIS Heren t: +44-207-911-1875 e: firstname.lastname@example.org
Edward Cox, Editor, European Spot Gas Markets, ICIS Herent: +49-211-5403-9689, e: ed.cox at icisheren.com Zoe Double, Editor, European Daily Electricity Markets, ICIS Heren, t: +44-207-911-1875, e: zoe.double at icisheren.com
Tags: February 24, ICIS Heren, London, United Kingdom