Energy Trading & Origination

Operating results significantly lower than the previous year level

In a market environment marked by aligning prices between Italy and Central Europe, somewhat higher volatility and increasing prices, the Energy Trading & Origination division’s performance varied regionally.

EGL was not able to match the exceptionally good result achieved in the first half of 2009/10 in energy trading. In particular, results were weaker in cross-border trading with Italy. Hence the operating result of the Energy Trading & Origination division was distinctly lower with CHF 27.5 million as compared to the previous year (CHF 208.3 million).

Spain and Nordics: high volatility

The Iberian market saw prices increase in the first half of the financial year and high volatility on the spot as well as on the term market. EGL was able to take advantage of price developments thanks to excellent management of its trading positions and risks taken. Expansion of origination activities continued and EGL successfully entered into trading with biomass.

With high volatility and sharply increasing prices, the Nordic markets offered interesting trading opportunities for EGL in the first quarter of the financial year. During the second quarter, prices stabilised at a high level while volatility came down. EGL’s origination business performed successfully with both structured products as well as services.

Increasing prices after Fukushima accident

Since October 2010, prices have been increasing further in Central and Eastern Europe – reinforced by the temporary shutdown of 7 nuclear power plants in Germany after the accident at the Japanese nuclear power plant Fukushima in March. EGL made progress in origination in this region – in particular in France, Benelux, Germany and Poland.

For reasons of efficiency, energy trading for Central and Eastern Europe in Dietikon and cross-border trading with Italy were merged together to form one trading centre, effective from April 2011. The efforts to achieve a financial turnaround are showing first results, although EGL was not able to decrease costs in line with the decrease in margin potential in these markets.

In the partially liberalised Swiss electricity market, EGL has established itself as a specialist for energy- related services, and was able to prolong existing contracts as well as acquire new ones. As a regular provider, EGL contributed to increasing liquidity in the market for ancillary services. Due to the illiquidity of the Swiss term market, power trading activities have developed only slowly. Trading in CO₂ and green certificates generated good results.

Weak economic recovery in Italy

In Italy, the first half of the financial year was marked by a weak, but steady recovery of energy demand with rising prices. EGL achieved a good result in asset trading and sales in the retail business were satisfactory. In contrast, aligning prices in Italy and Central Europe during the winter and – even more accentuated – after the accident at Fukushima hampered cross-border trading. EGL was able to take advantage of fewer opportunities and was in fact confronted with margin erosion for these types of transactions. The trading result across Italy’s borders therefore remained significantly below than that of previous years.

The first successful energy trading and origination transactions took place in the United Kingdom trading region.