On September 2, Hidroelectrica, the largest electricity producer in Romania, put on sale on the market of bilateral contracts four electricity packages, of tape type, with delivery between April 1 and June 30, 2023. It was about four 5 MW packages, a total of 43,680 MWh of electricity, a small amount. Hidroelectrica offered the energy at a price of 390 lei / MWh, but did not have any response offer from any producer. Therefore, the auction was canceled.
What does this mean
Hidroelectrica sells most of its electricity through contracts concluded on centralized markets, with forward delivery – ie for the future. In this case, the company, probably relying on the fact that energy prices will remain high – the market price also depends on the future quotation of emission certificates, which have risen massively in the last two years – demanded a price of 390 lei, for the energy to be sold in a year and a half. A lot or a little? Much if we think about the prices at the end of last year and those of the first part of this year, little if we think about the prices now – the price is 50-60 lei / MWh lower than the transactions made in the second quarter of this year. Even lower than the transaction price for energy for 2022.
However, he did not find any buyer at this price. So no supplier or trader wanted to buy at 390 lei / MWh the energy with delivery in a year and a half, probably relying on the fact that, until then, the energy will be cheaper. If they have estimated well, especially the suppliers, they will win because that energy will be bought cheaper, with beneficial effects for the customers’ bill. If they have estimated poorly, and energy will become more expensive by then, they will be forced to buy from the market at higher prices, obviously their customers will pay more.
Hidroelectrica also sold energy at the beginning of 2021 with delivery throughout the year 2023. Then, against the background of much lower market prices than now, it found a buyer, at the price of 275 lei / MWh. So more than 100 lei below the price he tried to sell now and failed.
What is the risk
It all depends on the correct anticipation of the market. During the complicated year 2020, for example, transactions were canceled in a total volume of about 3.4 TWh of electricity, according to our information, a volume put up for auction only by Hidroelectrica, but for which no one showed up to buy, in the first phase. On average, the company had asked in those auctions a price of 250 lei / MWh for energy with delivery this year. Nobody wanted to buy then, in the first phase because the prices were lower at that time, and they kept falling (the spot price for the whole year was about 190 lei, for example) probably appreciating that it is expensive and betting on the fact that the price will not increase so much in 2021. Unfortunately, the price has risen well above this level, and whoever needed energy this year paid much more for it, including from Hidroelectrica.
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