European power contracts fall on French nuclear output

Forward power contracts across most of western Europe have posted steep declines today as French state-controlled EdF's upward revision to its nuclear output have weighed on expectations of a tight supply-demand balance in the winter.

EdF now expects nuclear generation to be 315-325TWh this year, compared with the 20-year low of 300TWh set on 16 April. The revision reflects adjustments to planned outages and takes into account "conditions observed on sites for resuming activities", the utility said.

French power contracts for winter delivery fell faster than elsewhere in the region but have maintained a wide premium. The French fourth-quarter base load last traded at €54/MWh for financial delivery today whereas the physical contract for the same period last changed hands at €54.50/MWh. Argus assessed the physical fourth-quarter base load contract at €62.40/MWh at yesterday's close.

French physical contracts for winter delivery previously extended a wide premium to their derivative equivalent on concerns of potential supply shortfalls during winter. The last fourth quarter trade seen in the over-the-counter market yesterday went through at a premium of €1.45/MWh to the equivalent financial derivative contract on European energy exchange.

The derivative fourth-quarter contract for peak load delivery has posted sharper losses, with the latest deal seen at €81/MWh. The same contract was assessed by Argus at €99.30/MWh for physical delivery at yesterday's close. The peak contract might have fallen faster as French thermal plants, with considerably higher generation costs than nuclear reactors, may not set the marginal price in the spot market during peak hours this winter as often as previously expected.

French first quarter of 2021 base load saw similar declines to the fourth quarter, with the financial and physical contracts last clearing at €54/MWh and €54.50/MWh, respectively. In comparison, the physical contract was assessed at €60.50/MWh yesterday.

Further out, French 2021 base load was last seen at €46.75/MWh today, €1.75/MWh below its settlement value yesterday. Contracts for 2021 delivery have fallen despite EdF not revising its output estimates for the next two years.

CWE

Contracts across central-western Europe (CWE) have also fallen but declines were less pronounced than the French market.

The German fourth quarter base load last changed hands at €39.75/MWh today, €0.50/MWh below its settlement value at yesterday's close. The Dutch equivalent was seen at €38.80/MWh earlier today, against €39.35/MWh yesterday. The corresponding contract last saw liquidity at £43.10/MWh in the UK market, down from £43.90/MWh at yesterday's close.

The Belgian market — more closely linked to fundamental changes in France than the Netherlands and Germany — has shown a stronger reaction to EdF's announcement, with its fourth-quarter contract seeing strong liquidity and posting sharper declines. The contract traded for a combined 85MW earlier today, with the latest deal clearing at €44.50/MWh, €2.90/MWh below its settlement value yesterday.

By Bilal Muftuoglu