EDF Trading Annual Review 2014
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Introduction Chairman’s Statement 4–5 Chief Executive’s Statement 6–7 EDF Trading 8–9 The EDF Group 10 – 11 Our Markets 12 – 13 Origination, Business Development 14 – 17 and Group Integration Power – Europe 18 – 21 Natural Gas – Europe 22 – 25 Power and Natural Gas – North America 26 – 31 EDF Energy Services 32 – 35 Liquefied Natural Gas (LNG) and 36 – 39 Liquefied Petroleum Gas (LPG) Gas Production 40 – 43 Coal and Freight 44 – 47 Environmental Products 48 – 51 Flexibility Optimisation 52 – 55 Our Approach 56 – 57 Executive Committee 58 – 59 Control Environment 60 – 63 Risk Management 64 – 67 Regulation and Compliance 68 – 69 Culture 70 – 71 Community Support 72 – 73 Governance and Finance 74 – 75 Board of Directors 76 – 77 Financial Summary 78 – 81 EDF Trading is part of the EDF Group operating throughout the value chain across all energy commodities. EDFT provides wholesale market solutions that optimise and enhance the businesses of the EDF Group and our third party customers.
Chairman’s Statement EDF Trading is a core component co-operation between our of the EDF Group, optimising respective retail businesses in EDF Group assets and providing Europe and North America. a platform for our development In recent years EDFT has launched into new energy services and and grown some exciting businesses geographies. The EDF Group which all complement Group has an extensive portfolio of activities including EDF Energy generation, storage, transmission Services, EDFT’s North American and distribution assets and EDFT retail operation. Most recently, works with Group companies EDFT has entered the LPG helping us to mitigate risk, secure wholesale market. sustainable revenues and realise added value. EDF Trading partnered The energy markets never stop with various Group businesses evolving. New regulatory and during the year and activities include technology platforms, a growth managing EDF Energy Nouvelles’ in renewable energy production wholesale market exposure in Spain, and the upstream gas revolution performing EDF Energy’s mandatory in North America are just some power market making obligation of the many factors driving change. in the UK, diverting a number of I’m confident that EDFT will Edison’s LNG cargoes, optimising continue playing a significant role EDF’s Crystal gas storage facility in within the EDF Group providing core Germany, providing market access wholesale market access and driving for EDF Polska in Poland, offering new technological solutions to meet new customer services for EDF’s our energy requirements. commercial team and fostering EDF Trading delivered a strong performance in 2014 coordinating Group activities across the global wholesale energy markets. Its services help optimise Group EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 assets and play an important role in our planning and implementation of new strategies and initiatives. Philippe Torrion Chairman, EDF Trading Board, EDF Executive Committee Member, Group Senior Executive Vice President, 4 Innovation, Strategy and Planning, EDF 5
Chief Executive’s Statement I often tell our employees that EDF Trading provides efficient risk within the EDF Trading group. being part of the EDF Group gives management and wholesale market EDF Energy Services will form us a competitive advantage in the supply. We are also a pathfinder, a foundation for the EDF Group’s wholesale energy marketplace. identifying new opportunities, future expansion into the North Our relationship with the Group new geographies and new business American retail energy sector, and the support it brings offers for the Group. and EDFT will continue its role as us financial stability, an extensive A good example of this is our supplier of wholesale energy to and diverse portfolio of assets to commercial and industrial retail EDF Energy Services. optimise and the ability to trade in business in North America, Many competitors exited the many countries; all of which help EDF Energy Services, which we wholesale energy markets in create a strong, stable business. have grown organically and is 2014 due to poor trading This is a very privileged position. now a top 10 US non-residential opportunities and regulatory The EDF Group also benefits by retail electricity provider. In 2014, pressures. Despite the challenges having a strong wholesale market we began the process to establish of this environment, EDF Trading presence as a core competence. EDF Energy Services as a separately continued to develop new business managed customer focused entity under the asset-backed Group focused model that has been the foundation for our consistent and strong results over the years. As you read through our review of 2014, you will see how we have used our wholesale market presence providing energy optimisation services to support the EDF Group and our third party customers’ many different businesses and areas of activity. Looking forward, Our role as the wholesale we will remain focused on identifying market interface for the opportunities to apply our asset- EDF Group gives us a backed, physical optimisation business model in those competitive advantage. commodities and markets where We use this to help the the Group is becoming more active. Group optimise its assets, manage market risks, generate sustainable revenue streams and create EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 opportunities for future business developments. John Rittenhouse Chief Executive, EDF Trading 6 7
EDF Trading EDF Trading is a leader in the global wholesale energy markets operating across all energy commodities and active along the entire energy value chain – production, shipping, transportation, storage and supply. We combine our skills and resources to optimise and add value to the assets controlled by the EDF Group and our third party customers. The wholesale market specialists Providing worldwide logistics Platform for EDF EDF Trading is a wholesale energy We support the EDF Group and third Group development specialist. We are global in our party customers with midstream EDF Trading serves as a pioneer perspective, asset-backed and assets ranging from ocean-going and platform for EDF Group operate along the value chain in dry bulk carriers to inland rail development into new energy power, natural gas, LNG, LPG, coal, and barge logistics, dry bulk services and geographies. freight and environmental products. terminals, LNG re-gasification and With offices and operations underground gas storage. We also A trusted partner throughout Europe, Asia and North have extensive power transmission Fundamental to all that we do is our America, we apply our expertise in and gas interconnector capacities culture in which decisive managers the physical and financial markets across Europe and North America. and talented people balance to support the EDF Group and innovation with precise procedural third party customers with a wide Dedicated retailer services and compliance controls and a range of wholesale market services Downstream, EDF Trading has rigorous approach to risk. We trade including market access, asset worldwide supply agreements from a position of financial stability optimisation, risk management, with commercial and industrial and robust liquidity and have a EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 supply and logistics. consumers of power, natural gas, Moody’s A3 credit rating. LNG and LPG, industrial retail A multi-commodity offering aggregators and utilities. In North EDF Trading manages an extensive America we have established portfolio of upstream assets mostly EDF Energy Services, a dedicated consisting of power generation, commercial and industrial retail natural gas production and business for power, natural gas and long-term off-take agreements environmental products. in power, natural gas, LNG and coal. 8 9
The EDF Group Every day, millions of people turn to EDF Group companies for the power and gas they need for their homes, businesses and communities. The Group is a global leader in energy production and supply and a true innovator in low carbon energy technologies. A world leader in energy Supply and distribution Research and development The EDF Group operates around EDF Group companies manage With an R&D team of 2,125 people, the world and is active throughout power transmission and gas the EDF Group spent €650 million the energy value chain. It has interconnector capacities across last year conducting leading-edge significant interests in power Europe and North America. research. The aim is to make the generation, gas production and Through a wholly-owned subsidiary world a better place by improving storage, environmental initiatives, the EDF Group channels energy to access to electricity, fostering transmission networks and retail the whole of Europe. innovations with tangible customer consumer sales. benefits, cutting CO2 emissions by Marketing and wholesale developing alternatives to fossil fuels As of 31 December 2014, the Group’s The EDF Group’s experience and building safer power grids. generation capacity exceeded in electricity and gas supply 136 GW. It transmitted across in Europe and North America Corporate strength 1.46 million km of networks and crosses many different regulatory In 2014, the EDF Group employed served 38.5 million customers. environments and serves more approximately 158,000 people than 38.5 million customers. worldwide and had sales of around Power generation €72 billion. It is listed on the Paris The EDF Group has unparalleled Expert trading, optimisation, sales and marketing activities ensure the stock exchange, a member of the depth and breadth of experience in CAC40 index, and has an A+ stable power generation and engineering. security and cost effectiveness of that supply. S&P credit rating. Its expertise encompasses the design, building, operation and maintenance of power plants fuelled by all types of energy. Jean-Bernard Lévy, Chairman and CEO of the EDF Group. EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 10 11
Our Markets EDF Trading is a service business. Our purpose is to work alongside the EDF Group and third party customers providing a specialised interface to the wholesale energy markets. We operate worldwide in the power, natural gas, LNG, LPG, coal and environmental products sectors. In 2014, the longer-term trends of increasing renewable energy production, North America’s shale revolution and China’s massive appetite for commodities all reflected on supply and demand. Individual commodity sectors were impacted by collapsing oil prices, regulatory developments, political unrest and unusual weather patterns. These events created periods of volatility for certain geographies and energy commodities. Our ability to deliver effective supply, logistics and optimisation services within such an environment is testament to the agility of the EDFT global, multi-commodity, asset-backed model. Through all the fluctuations, we are able to identify tangible business benefits for our customers. Justin Rowland Chief Commercial Officer, Trading EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 12 13
Origination, Business Development and Group Integration The EDF Trading origination team structures energy market transactions outside The advantage of EDF Trading’s business of the liquid market that provide bespoke products to the EDF Group and our model is that it is inherently flexible. third party customers. Our global presence allows us to provide these services across all the major energy markets in Europe, North America and Asia. EDF Trading creates incremental value for our customers when commodity markets This gives our customers the ability to structure transactions that connect these markets and therefore optimise their global energy exposure. move, supply chains are disrupted and supply and demand balances are changing. Whatever is happening in the marketplace, supported by a robust platform, we are able to apply our experience to identify opportunities that benefit our customers and the EDF Group. Philipp Büssenschütt Chief Commercial Officer Origination and Business Development Identifying and capturing opportunities, creating value EDF Trading’s origination team In Europe, prices and supplies were structures bespoke transactions affected by macro events, namely across all energy commodities, the crisis in the Ukraine, unrest in regions and tenor to allow the EDF the Middle East and, later in the Group and third party customers to year, the fall in oil prices. optimise their energy portfolios. Apart from the above mentioned Our team is not only located in the headlines, the overall theme for the main hubs of EDFT, namely London, year was one of low volatility and Paris, Houston and Singapore pricing. It was also a year where but also in a number of smaller financial institutions continued to regional offices to be closer to its exit the marketplace. customers. The energy markets Within such an environment, in 2014 were affected by some the strength of our origination exceptional factors. team to identify and capture In North America, the extreme cold opportunities came to the fore. weather in the first quarter put With our multi-commodity pressure on power and gas supplies global capabilities, we supported and temporarily drove prices to customers by providing stability and record levels and extreme volatility. value in the medium and long-term. EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 14 15
Origination, Business Development and Group Integration Activities – Origination and Business Development EDF Group integration Operating from offices in Europe, Expanding our flow business Evolving the EDFT business Our Group integration team is Extending cooperation Optimising the EDF Group Asia and North America, the The EDFT flow desk provides Our origination team secures the central to our relationship with the to new Group entities gas portfolio origination team works jointly with market access and execution physical and contractual asset EDF Group in that it collaborates With EDF Polska in Poland, EDFT continued its role of optimising our trading desks and the Group services for the EDF Group and third positions that not only strengthen with the Group to identify if, how we completed a new exclusive the EDF Group’s gas portfolio. integration team to support the EDF party customers. It operates across EDFT’s existing business, but also and when our energy market power and emissions market We established a hedging Group and third party customers. all the physical and financial energy help us capture opportunities services can be used beneficially. access agreement. programme and transacted markets creating structures in a in new markets, countries Where potential for cooperation For the first time, we entered into approximately 2TWh of gas and Structured transactions wide range of volumes in the short and commodities. exists, the team works with the agreements with EDF Energies associated flexibility. Our origination team identifies and and medium-term. The origination team was involved origination and relevant trading Nouvelles and signed electricity We also extended our contracts structures transactions that can In 2014, we expanded our services in EDFT’s recent entry into the LPG desks to prepare structured market access agreements to to optimise EDF’s Crystal and encompass all commodities and to German and Austrian energy market. We agreed with a leading proposals and implement the manage its wholesale market Bergermeer gas storage facilities on geographies. We do this to help users. We also supported EDF in US provider of midstream energy market services. exposures in Spain and to manage the TTF. In addition, we optimised customers optimise their assets, France by extending flow services to services to acquire medium-term In 2014 the team increased and dispatch one of its large wind EDF’s gas interconnector capacities manage risks and meet their its major commercial and industrial LPG export capacity on the Gulf its breadth of coverage with farm facilities in Texas. across North West Europe. energy needs. customers. In North America, Coast and also agreed with an Group entities and the scope of As an example, for Europe, the team our flow desk was particularly end-user customer in Asia for services offered. Supporting EDF and Collaborative activities worked with EDF Energy in the UK active at the beginning of the year the supply of LPG. its major customers for 2015 and beyond on a number of long-term power providing gas and power services Extracting additional value EDFT provided a range of wholesale During the year, we undertook transactions with large power during the cold wave that hit from EDF’s assets in France energy market services to EDF’s a number of new initiatives with consumers. We also structured an North America. In 2014, we enhanced our flexibility commercial team and its major EDF Group companies which innovative temperature contingent optimisation management services customers in France. This included included a new project with EDF gas contract with an energy retailer with the Group’s optimisation co-operating on tenders, extending Energy to integrate its coal logistics in France. In North America, the and trading team in France to our market access services to team into EDFT’s coal and freight team helped to add more than include pump storage assets in its customers and providing business creating a single coal 1,400 MW to EDFT’s energy addition to its coal, CCGT and hedging programmes. platform serving the Group’s management portfolio. hydro reservoir plants. We also began fostering links UK requirements. between our retail business Close cooperation continues Expanding services to activity in North America and with EDF to establish optimisation EDF Energy in the UK EDF Group businesses in Europe programmes in preparation for the We transferred ownership of the with regard to sharing best commissioning and operations of Hole House UK gas storage facility practices and serving energy the Dunkirk LNG terminal in 2015. to EDF Energy while retaining our intensive customers for EDF’s We continued to strengthen our market optimisation role. We also global locations. relationship with Edison in Italy. agreed to perform EDF Energy’s In 2014 we successfully diverted mandatory power market-making a number of its LNG cargoes and obligation imposed by Ofgem. continued to work with them on their gas flow business. Also, we have begun discussions EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 with Dalkia following its integration into the EDF Group last summer. Dalkia is one of the largest gas purchasers in France. Fabien Bremont 16 Head of Group Integration 17
Power – Europe ©EDF, William Beaucardet, Power Plant, France. EDF Trading is a major participant in the European wholesale power markets. We add value to the businesses of the EDF Group and third party customers This year’s low volatility and by providing a range of tailored services including market access, risk management and asset optimisation. weak prices created a challenging marketplace. We continued to capture opportunities and create value because of our in-depth EDFT through the value chain: market knowledge, diverse Source portfolio of positions and ability EDF Group power stations to transact across borders. Third party power stations Services John Grey Wholesale market access Head of European Power Asset optimisation Risk management Finding value in a 24/7 intraday services stable marketplace Fuel supply Virtual power plant services EDF Trading’s comprehensive Interconnector transmission capacity coverage of the European Grid operator scheduling services wholesale power market enabled Flow desk services us to continue capturing opportunities during 2014 when Supply the business environment was characterised by low volatility in Wholesale customers both pricing and demand. A warm winter in the first quarter set the pattern for a year in which there were no serious weather extremes. We did experience market fluctuations in the spring due to political instability in Eastern Europe and also in the autumn when there was disruption to the nuclear fleet in Belgium. But, in both instances, we had the breadth of resources to manage the situation and maintain support for our customers. The power sector continues evolving with new gas-fired plants coming on stream. We also saw a EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 marked increase in renewables with significant growth in wind and solar power generation. Against such a background, EDF Trading continued providing dependable wholesale market services to add value to and optimise the assets owned or operated by the EDF Group and our third party customers. 18 19
Power – Europe Activities Increased intraday services The increasing number of renewable energy providers and the intermittent nature of their output has led to significant Understanding the dynamics Adapting to new regulations growth in the European intraday EDFT has a unique perspective The European regulatory landscape market. EDFT began strengthening on European wholesale power. continues to change in terms of its intraday team in 2012 and we Our coverage of all the significant market design, financial regulation now offer a comprehensive, 24/7, national and international markets and competition. Working closely pan-European service. gives us a clear insight as to the with the EDFT regulation team, dynamics affecting each country we have evolved our power business EDF Group support and their interaction across protocols and liquidity provisions EDFT provides market access, the continent. This allows us to to ensure full compliance with the asset optimisation and wholesale monitor and analyse events such as new regulations, including REMIT market services to EDF Group interconnector capacities, flows and and EMIR. John Grey companies on a continual basis. price differentials to better identify It was noticeable in 2014 that, Head of European Power and capture opportunities. We provided market access for with the high costs of regulatory EDF Polska in Poland, for EDF Our use of data combined with compliance and the low volatility Bert in Hungary and for EDF’s the physical resources we manage of energy prices, many financial ©EDF, Vincent Bourdon, commercial division in France enables us to accurately hedge institutions left the marketplace. Pylon, France. through an agreement with market risks, maximise asset values a major car manufacturer. and secure supplies for the EDF We agreed to support EDF Group and third party customers. Energies Nouvelles in Spain with hedging services and began acting as a market-maker for EDF Energy in the UK. Third party customer support Throughout the year, our Flow team transacted with many third parties including utilities, large consumers, producers, financial houses and oil companies. Notable activities include a framework agreement with a Swiss power company to transact 10 TWh EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 of power over the next two years, and a five year supply contract with a UK water utility. We also established business relationships with a number of Stadtwerke and industrial customers in Germany and became a market-maker on the German, French and Italian wholesale energy markets. ©EDF, Michel Monteaux, 20 Power Plant, France. 21
Natural Gas – Europe EDF Trading is a leader in the European wholesale gas This has been a challenging year with significant markets and acts throughout the natural gas and LNG unpredictability around supply, demand and value chain. We operate on all the principal gas hubs and developing markets to support EDF Group and third pricing. Through it all, the EDF Trading business party businesses with structured optimisation solutions. model has proved resilient. Drawing on our experience, insights and managed assets, we have consistently delivered value to our customers. EDFT through the value chain: Source Marcello Romano Head of European Gas and Flow LNG supply contracts worldwide EDF Group North Sea natural gas production Services Short-term unpredictability The increasing availability and cost Procurement and supply competiveness of LNG will ultimately Wholesale market services unite wholesale gas into a global Pan-European interconnector capacity marketplace. The European market Pan-European pipeline capacity is on the cusp of change over the Nominations into the European gas network next few years as significant new Dispatch management flows of LNG enter the market from Gas storage management Australia and North America. In the LNG tanker contracts short-term, however, Europe remains Regasification capacity at European terminals susceptible to more regional supply International export agreements and demand fluctuations. Hedging services Flow desk services During 2014, the European wholesale gas market was Supply subject to intermittent volatility. Political unrest in Eastern Europe EDF Group power stations created uncertainty around supply Third party power stations programmes, which led to greater Wholesale customers use of stored gas and an emphasis on maintaining high storage levels. In parallel, the price of some natural gas and LNG supplies fell because of their link to collapsing oil prices. Adding to this, the warm weather experienced throughout the year reduced normal demand patterns. With the depth and breadth of our worldwide activities, EDF Trading is well positioned to accommodate EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 changing dynamics. The experience of our wholesale gas team and the insights gained from our global coverage enable us to optimise the assets we manage and continue reliably delivering value to the EDF Group and our third party customers. ©EDF, Jean-Louis Burnod, 22 Re-gas Terminal, France. 23
Natural Gas – Europe Activities Optimising the EDF portfolio EDFT supports the EDF Group with A coordinated business Enhancing our a dedicated, customer focused, EDF Trading has strategically European footprint optimisation capability for its developed a coordinated During the year we identified European gas businesses including approach to its European and captured opportunities to power generation plants, storage wholesale gas business. further enhance our pan-European facilities, pipeline capacity and gas wholesale capabilities. interconnector capacity. Intelligence gathered via our pan-European asset-backed natural We began preparations to enter the Our services range from gas business, customer flow desk Spanish wholesale gas market to procurement, supply, logistics transactions and from our global complement our LNG activities in and contract management LNG business gives us a unique the region, we expanded storage to portfolio analysis, pricing, understanding of the marketplace. optimisation activities in France, hedging and reporting. We use this insight in combination Germany and Holland and we Notable activities during 2014 with the breadth of our resources are also pursuing opportunities Marcello Romano included managing gas optimisation to access the most appropriate for expansion of our wholesale Head of European Gas and Flow for EDF Energy’s new CCGT plant at channels and better manage market activities in Eastern Europe. West Burton in the UK, optimisation supply streams, price differentials of EDF Energy’s gas storage and asset optimisation for the facility at Hole House in the UK, benefit of our customers. and optimisation of EDF’s Crystal ©EDF, Jean-Louis Burnod, gas storage facility in Germany. Flow desk services LNG re-gas terminal, France. We also expanded our customer The slow decline of gas prices flow business to support EDF’s during 2014 and the uncertainty commercial division in France of prices looking forward has and Edison in Italy. created a preference among some customers for transacting in smaller volumes over shorter timescales. Supporting third party Our flow desk supported such customers customers with standard transaction EDFT transacts with many third market access and execution party customers across Europe. services across a range of volumes in Significant transactions this year both the short and medium-term. included acquiring large quantities of natural gas from one of Germany’s largest distributors and supplying gas and asset optimisation services to multiple storage facilities across Germany and Holland. We also continued to expand our transacting and origination relationships with a number of EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 Stadtwerke and industrial customers in Germany and France. ©EDF, Julien Goldstein, Gas pipelines, Italy. 24 25
Power and Natural Gas – North America ©Shutterstock, Bikeriderlondon, Electricity Pylons, Texas. Managing a challenging environment In North America, EDF Trading is a major player in the power EDF Trading is a trusted leader Additionally, an extreme weather and natural gas wholesale markets. We apply our market in the North American wholesale system settled over Canada expertise to provide our partners with a comprehensive power and natural gas markets. and North America to create a range of market, optimisation and risk management services. Our expertise and coverage of period of persistent cold in which these markets enables us to temperatures reached record implement comprehensive levels. Within such a challenging strategies that provide market environment, during the weather EDFT through the value chain: access, monitize portfolios and extremes and the warm summer Source create value for our clients. that followed, EDFT’s strategy We partner with EDF Energy and platform proved its resilience. Long-term tolling contracts Services to provide wholesale We worked with EDF Energy Natural gas supply contracts market access and commodity Services to provide generators EDFT natural gas production services to energy management with the fuel required to continue Long-term third party gas production clients, commercial and running their plants, maintained EDF Energy Services clients industrial consumers and retail supplies to trading partners and Term gas storage contracts energy providers. successfully delivered against all During 2014, the energy markets our contract obligations. We also Services continued evolving to reflect the provided transaction support and increasing availability of shale creative products to our existing Wholesale market services gas, the growth of renewable and new power and natural Risk management energy sources and the decline gas customers. Hedging of coal-fired generation. Nodal pricing Gas storage across the USA and Canada USA and Canada pipeline capacity Interconnector capacity Supply EDF Energy Services Trading partners Gas asset owners Generators LDCs and utilities Municipalities and Cooperations Wholesale Retail Energy Providers (REPs) Our platform and strategy in both power and natural gas has always been focused on the operational needs of our trading counterparties EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 and clients. In 2014, despite extreme weather conditions and fundamental infrastructure challenges, we delivered our commitments and proved our worth as the market’s most dependable partner to do business with. Stan Horton 26 Head of East Power and Gas Trading 27
Power – North America Activities Weather resistant Comprehensive market coverage The extreme weather conditions EDFT is active coast to coast and at the beginning of 2014 proved present in all deregulated markets. the robust nature of the EDFT We began transacting in the newly business model. While the opened SPP and Entergy markets in Northeast markets recorded addition to our previously existing record loads and outage events, SERC, VACAR, FRCC, MISO, PJM, we successfully delivered on all NYISO, ISO NE, WECC, CAISO and of our wholesale power supply ERCOT market operations. obligations and found ways to During 2014, we were consistently provide creative solutions to our ranked in the Top 10 of Platts trading partners. Additionally, we Megawatt Daily power rankings. provided liquidity and hedging services to our retail energy provider partners who, as a result of the extreme cold weather, faced an ©Shutterstock, Robert Cicchetti, increase in load and supply. Polar Vortex January 2014, New York. Arun Eamani Head of Nodal and FTR Trading EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 Support for Group businesses Managing congestion During 2014, we optimized Our FTR (financial transmission positions for EDF Energy Services’ rights) and nodal teams successfully commercial and industrial clients. managed the congestion that We also continued providing occurred during the period of hedging services to EDF Group extreme cold weather. businesses in North America. Throughout the year, the teams worked with our flow desk and provided support to load serving clients on how to best manage ©EDF, Philippe Dollo, 28 congestion rights. Wind Farm, Minnesota. 29
Natural Gas – North America Activities Extensive end-user customer base EDFT consistently ranks in the top Wholesale market services 5 of NGI’s list of the largest gas EDFT’s upstream, midstream and marketers in North America and downstream positions provide trades with over 500 wholesale support to counterparties customers. We also partner with throughout the value chain. EDF Energy Services to provide With our range of wholesale broad based wholesale natural market services, we optimise gas solutions to their wide range assets, secure income streams of customers. and help create a competitive advantage for our clients. ©EDF, Philippe Dollo, New York. Stan Horton Head of East Power and Gas Trading Comprehensive Managing the extreme transport network weather conditions Continuous development of our Throughout a three month transportation network with leased period of persistent extreme and managed assets gives us the cold, despite severe power plant ability to manage gas deliveries outages, network loading and to customers across the North fuel switching, we provided American continent. Our pipeline continuous support to our transportation agreements customers. EDFT not only met extend throughout the USA, obligations, but met the broader Canada and into Mexico. We also needs of the market and proved manage capacity for gas utilities that it is a reliable and strong and exploration and production counterparty for customers companies. In 2014, we despatched along the value chain. to market an average of 6.5 bcf per day. EDFT is one of the market’s Notable Transaction EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 largest gas storage lessors and Among the new transactions has facilities throughout the major concluded in 2014, EDFT reached producing and consuming regions. agreement with a major gas Our long-term storage capacity production company to manage averaged 28 Bcf throughout 2014. a portion of their gas supply and optimise their natural gas transport positions. ©EDF, Philppe Eranian, 30 Gas facility, Brasil. 31
EDF Energy Services Stability in a transitory marketplace EDF Energy Services is EDF Trading’s business EDF Energy Services originates for commercial and industrial, power generation, and delivers energy solutions for asset management and retail energy providers large commercial and industrial in North America. We support each customer with users, retail energy providers and unparalleled wholesale market access and custom power generators. Drawing on our energy solutions delivered within an easy to access, expertise of the wholesale power, proactive account management framework. natural gas and environmental markets, we structure single and multi-product, medium to long- EDF Energy Services through the value chain: term programmes encompassing services ranging from supply Source and dispatch to hedging and wholesale supply. Two thousand trading counterparties Generation management 2014 was a challenging year in Producer services that it highlighted the transitory Environmental products supply contracts status of the North American energy environment. The energy infrastructure has not kept pace Services with the shale revolution and many energy users and suppliers were Demand response confronted by very real physical Electricity supply problems during the extreme Natural gas supply weather in the first quarter. Environmental products supply including RECs Carbon services Similarly, the significant supplies Risk management and hedging services of shale gas stabilised prices at a Market analysis and reports low level to the extent that many Weather risk products financial houses have left the Specialized data and billing systems marketplace, thus leaving Online information portal customers looking for stable Mobile application counterparties to transact with. Throughout the weather extremes, our business model and expertise Supply proved robust. EDF Energy Services not only met their obligations to Power station owners existing customers, but secured Large commercial and industrial end-users additional customers by providing Retail energy aggregators exceptional service under extraordinary market conditions. Within the marketplace we are recognised for our long-term commitment. With the credibility of being part of the global EDF Group, we are well positioned to continue The extreme cold weather of 2014 growing our customer base. illustrated the strength of our EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 client-focused business model. Our employees worked tirelessly to ensure we fulfilled our obligations and continued delivering value to our customers. Mary Anne Brelinsky 32 Managing Director, EDF Energy Services 33
EDF Energy Services Advanced technologies The application of advanced SOAR (scheduling online and reporting) continues to be a Activities technologies is an important customer favourite. On one site, value added service. a customer can view asset data, We have real-time scheduling market pricing and how the asset operations for our energy is interacting with the ISO. management and retail clients. Reports and data can be produced Customer focused delivery Also, to support multi-site, multi- to provide insight into the asset’s Exceptional service is at the heart state customers, we have recently performance and help make of EDF Energy Services. We work introduced a new electronic billing optimisation decisions. as partners with our customers system that enables integrated, The SOAR mobile application to establish the best product cross-state invoicing throughout continues to be very popular combination to meet their business all the deregulated markets we allowing for information to be objectives. In turn, each customer currently serve. viewed remotely. solution is delivered within a dedicated account management Our SCADA (supervisory control The SOAR retail application framework backed by detailed and data acquisition) solution was recently rolled out to retail market data, fundamental analysis has been positively received power and gas customers and and state-of-the-art technologies. by customers. It provides a set provides real-time usage data, of systems, communications market pricing, invoicing and technologies and NERC compliant reporting capabilities. Upstream customer services Active in the WMBE sector Increased customer transactions processes that enable real-time EDF Energy Services has an Our Anahau Energy business, The volume of business through control and monitoring of expanding footprint across the which transacts in those energy our flow desk continues to rise generation and load resources. North American power sector. sectors reserved for WMBE in response to market needs for We are the largest energy (women and minority business short or medium-term transactions. Mary Anne Brelinsky optimisation provider for third enterprise) suppliers, continued The desk provides standard Managing Director, party US power generators and building its customer base. transaction market access and EDF Energy Services manage approximately 22 GW We work together to originate execution services across a wide of natural gas, renewable, and supply customers who range of volumes in both the Supporting EDF Group businesses hydro and coal generation. choose or are mandated to short and medium-term. In North America, we are working purchase from a WMBE provider. Flexibility is inherent in our services. with EDF Renewable Energy to Depending on the need, we provide To help our customers achieve Downstream customer services optimise some of their merchant power generation customers with their strategic goals, we support Deregulation continues to gain plants. Additionally, we are structured energy management them with bespoke, single and momentum across North America collaborating to develop products agreements addressing all aspects multi-product, medium to long- in both the natural gas and power and services for customers looking of asset management. Our services term supply programmes and markets. EDF Energy Services is to incorporate renewable include dispatch, scheduling, a range of added value services currently active in 14 deregulated energy into their energy plans origination, fuel supply, demand including hedging and wholesale states and provinces throughout the and portfolios. response and risk management. market access. USA and Canada. With a portfolio of more than 400 commercial and From an international perspective, industrial customers, we serve our US-based commercial and approximately 2000 MWs of peak industrial origination team has load and deliver approximately been working with colleagues in 350,000 MMBtu/d of gas. EDF Energy in the UK and EDF in France to explore the development Our business model provides of tailored energy solutions for market access and liquidity to retail EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 shared multi-national customers. suppliers who serve mass market customers. Our flow desk provides physical supply, risk management, and hedging services to help these suppliers manage their portfolios. 34 35
LNG and LPG ©EDF, Jean-Louis Bernod, Gas Tunnel, France. EDF Trading is one of the leading participants in the global LNG market, offering services along the value chain including supply, logistics and terminal capacity. In 2014, we entered the complementary LPG market enhancing our services to the EDF Group and third party customers. EDFT through the value chain: Source EDFT gas producing wells Third party gas producing wells Third party gas suppliers Third party LPG suppliers Services Wholesale market services Gas storage Interconnector capacity Pipeline capacity LNG tanker contracts International export agreements Regasification facilities worldwide US LPG export capacity Asset optimisation services Hedging services Supply EDF Group Wholesale customers Commercial and industrial customers Preparing for a new age in LNG EDF Trading offers a complete In recent years we have been This, combined with an expected range of LNG services worldwide strategically developing our resurgence in nuclear power We have been strategically developing including purchase, supply and positions along the value chain to generation in the Far East, our LNG capabilities to stay ahead of delivery, ocean-borne logistics, maximise asset values and minimise will affect both supply and demand the fundamental changes occurring EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 terminal capacity, regasification supply costs. These developments trading patterns and create a and nominations into pipeline not only enhance optimisation much more dynamic wholesale in the wholesale gas marketplace. networks. We supply and optimise opportunities for our customers but environment. With the breadth Each development adds even more LNG to and from the EDF Group’s also correctly position our business and depth of our value chain European gas businesses and supply in anticipation of the fundamental activities, EDFT has the flexibility flexibility to our capabilities and a diverse international customer changes happening in the global to accommodate these changes creates new optimisation portfolio. We also have unique supply arrangements that provide LNG marketplace. and continue delivering benefits to customers around the world. opportunities for our customers. 2015 will see the beginning of considerable flexibility to producers. a new age for LNG as the first supplies from the USA and Australia come on stream. Matthew Arnold 36 Global Head of LNG and LPG 37
LNG and LPG Support for EDF Group businesses Activities EDFT provides tailored support to EDF Group businesses for LNG supply and optimisation. North American liquefaction Notably in 2014, we formed Reflecting the changing supply part of the EDF negotiating dynamics of the LNG marketplace, team that secured a 20 year, in 2014 we progressed the 0.8 MTA supply agreement with development of small-scale a US-based energy company liquefaction projects on the North developing a major liquefaction American west coast to better serve plant in Texas. We are working with our customers in Asia. EDF on the commissioning and A joint development agreement commercialisation of regasification has been signed to develop a capacity at the Dunkirk terminal, 0.6MT, barge-based, liquefaction which will become operational in plant in the Douglas Channel, 2015. And, throughout the year, British Columbia. we continued assisting Edison in the optimisation of its LNG Optimised LNG shipping supply contracts. Technological developments have led to the introduction of a new generation of larger, more cost ©EDF, Julien Goldstein, LNG Regas Facility, Dunkirk. efficient, tri-fuelled LNG vessels into ©EDF, Philippe Eranian, LNG Vessel, Italy. the global fleet. We have capitalised on the opportunities this represents by securing our ocean-borne Strengthening our transport needs on short-term LNG supply base charters to optimise shipping costs 10 new LNG master sales and for our customers. service agreements were signed in 2014. EDFT now has master agreements with the majority of the market’s key participants. We also secured a number of short, long and storage positions that Matthew Arnold enhance our flexibility to provide Global Head of LNG and LPG consistent customer support. EDFT enters the LPG market In 2014, EDFT entered the LPG (liquefied petroleum gas) market. This is a natural extension of our international ocean-borne LNG business and complements our positions in US natural gas. Production of liquefied gasses in North America is growing in tandem with shale developments and EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 our involvement in the wholesale marketplace gives our global customers access to these new supply sources. We have signed an agreement with a leading provider of midstream energy services to acquire long-term LPG export capacity from terminal facilities located on the US Gulf Coast. During the year we also agreed to supply LPG to an end-user 38 customer in Asia. 39
Gas Production In North America, EDF Trading Resources provides Opportunities in gas production services that link with and enhance the evolving gas market our midstream and wholesale natural gas activities. EDF Trading Resources is our acreage in the Marcellus region that dedicated North American gas we acquired in a joint venture with production business. a leading American coal business. EDF Trading Resources acquired We expect to commence output its first gas production assets in from these wells to coincide with 2012 in East Texas and now has the development of additional approximately 500 producing liquefaction capabilities in EDF Trading Resources through the value chain: wells with proven reserves. North America and the assumed Source wholesale price benefits driven During the year we gained pad site by export opportunities. permits for a number of wells on EDFT gas producing wells Joint venture gas producing wells Third party gas producing wells Services The key to EDF Trading Resources Production management is that we add value. It’s what Asset optimisation makes us a great partner to do Wholesale market services Interconnector capacity business with. We have the skills Pipeline capacity to help get the gas out of the Dispatch management ground, the logistics network to Gas storage transport it to market, and the Supply wholesale marketing expertise to commercialise its potential. Wholesale market Brad Watson President, EDF Trading Resources EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 ©EDFT, Fairfield gas 40 production Site, Texas 41
Gas Production End-to-end services EDF Trading Resources is founded Activities on a team of seasoned production specialists, petroleum engineers and geoscientists backed by experienced field operatives. We initially apply our skills to prove A growing portfolio the potential of a resource and then The EDF Trading Resources gas manage operations to maximise its production portfolio was initially output. Throughout operations we founded on acquired gas assets in adhere to best-in-sector safety and the East Texas basin. Those assets environmental practices. consist of around 500 producing wells, 30,000 acres of mineral Once a well is operational the gas leases and daily net production of is flowed along existing pipeline approximately 20 million cubic feet. capacities to areas of greatest demand. We have access to storage We have significantly expanded the and blending facilities to manage its portfolio into the Marcellus region quality and the support of EDFT’s through a joint venture covering wholesale marketing expertise to more than 22,000 acres of mineral realise its full commercial potential. leases with one of the largest coal businesses in the USA. Comprehensive transportation EDFT has an extensive North American gas transportation network with pipeline agreements across the USA, Canada and into Mexico. We are one of the largest gas storage lessors in the marketplace and have storage ©EDFT, Fairfield gas capacity throughout the major production Site, Texas. producing and consuming regions. Wholesale marketing support Gas production is a close fit with EDFT’s asset-backed business model. Our activities throughout EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 the energy value chain give us insights into the dynamics affecting the marketplace. Those insights are used to leverage positions and add value to EDF Trading Resources’ own assets and those of our joint venture partners and third party customers through structured optimisation, hedging and market strategies. Brad Watson ©EDFT, Fairfield gas 42 President, EDF Trading Resources production Site, Texas. 43
Coal and Freight ©EDFT, Coal Terminal, Amsterdam. EDF Trading’s coal and freight business provides Agility in a challenging dependable, cost effective support to EDF Group marketplace companies and third party customers around the EDF Trading manages assets at all On the demand side, a mild winter world. We have multiple sources of supply, our the key points in the global coal in all areas except North America own fleet of dry bulk carriers, strategic terminal and freight supply chain. In 2014, saw volumes to coal-fired power operations and facilities to store and blend. this ensured our ability to meet plants fall. Reduction in coal our customer commitments usage was further exacerbated by and continue delivering added growth in renewable and gas-fired value despite a challenging energy production. EDFT through the value chain: business environment. The EDFT business model provides Source During the year, changes in flexibility to accommodate such market dynamics unsettled the changes. Having multiple sources Australia coal mine conventional supply patterns. of coal supply worldwide, our own Supply agreements in Australia, Baltic, Reduced economic growth in China, fleet of dry bulk carriers, strategic Columbia, Indonesia, Russia, South Africa, USA the world’s largest importer of terminal operations and facilities coal, resulted in coal from Australia, to store and blend gives us a clear Services South Africa, South America and insight into the way the market Russia being redirected to South is behaving. This enables us to Procurement and supply East Asia, India and Europe. In turn, anticipate trends and structure Fleet of capesize and panamax dry bulk carriers this had a negative effect on the transactions that not only provide Three coal terminals in Amsterdam export competitiveness of coal from supply security but also enable asset Access to terminals in USA some North American regions. optimisation for the EDF Group and Floating cranes third party customers. Railcars and inland barges Blending and storage Wholesale market services Export capacity Supply EDF Group power stations Third party power stations Industrial users Commercial users Our activities along the supply chain and our global view of the coal and freight markets give us a unique insight EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 into evolving trends and marketplace dynamics. We apply this intelligence to identify and realise opportunities that consistently add value to the operations of the EDF Group and third party customers. Bert van Druten 44 Head of Coal and Freight 45
Coal and Freight Support for customers in Asia EDFT has an office in Singapore Activities from which we manage the supply and wholesale market requirements of our customers in Asia. The office is also the location of our Chubu Energy Trading joint venture Our own freight fleet with Japan’s Chubu Electric Despite over-capacity in the global Power Company. freight fleet, EDFT maintained a In Australia, our joint venture near 100% utilisation of its own Narrabri coal mine is now up vessels during 2014. to full production. Central to our effectiveness is that we have continuously refined our fleet of fuel efficient capesize and panamax vessels to reflect changing marketplace needs. Equally, with our freight origination Bert van Druten office in Singapore and our freight Head of Coal and Freight desk in London, we are ideally located to support customers and counterparties around the world. Working closely with the EDFT coal desk, our freight team provides Increased terminal services to ensure optimised supply activities in Poland for the benefit of EDF Group Our joint venture terminal in and third party coal customers. the Port of Gdansk, which opened Our position in the marketplace in 2013, has had a busy year. also gives us a good relationship The terminal is a dry bulk platform with charterers and distribution centre and plays a enhances our flexibility to respond pivotal role in our ability to reliably to opportunities particularly fulfil the coal and biomass needs of in China and the Far East. the EDF Group and our third party customers in Poland and across ©EDFT, Coal Freight, Amsterdam. Central and Eastern Europe. ©EDF, Konrad Pustola, Coal plant, Poland. Terminal operations Active in North America in Amsterdam In North America, EDFT trades EDFT’s three coal terminals in the physical and financial coal products Port of Amsterdam provide facilities and is one of the largest OTC market EDF Trading Annual Review 2014 EDF Trading Annual Review 2014 for storage and blending along with participants. We have numerous logistics for ship reloading and both customers and counterparts barge and rail inland transportation. including coal producers, utilities These assets enable us to meet and both physical and financial EDF Group and third party traders. Our coal transportation customer requirements for coal of assets include barging and rail a guaranteed quality and to deliver capacity contracts as well as on schedule even when traditional terminal throughput agreements. supply sources are disrupted. ©EDF, Marc Didier, ©EDF, Marc Didier, 46 Coal storage, France. Coal crane, France. 47
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