The German Federal Association for Wind Energy has said that it expects 1900MW of new wind capacity to be installed this year, down slightly from the 1917MW installed in 2009. In addition, it expects the global wind industry to also add less capacity in 2010 than in 2009. It projects that 38GW of new capacity will be installed, compared to the 38.343GW installed in 2009.

Cheng Kong Infrastructure, its subsidiary Hongkong Electric Holdings Ltd and the Li Ka-shing Foundation have made a joint US$9.1bn bid to buy Electricite de France SA’s UK power networks, according to a filing to the Hong Kong stock exchange. The networks cover the southeast and east of England, including London. EDF has not yet formally accepted the offer, given the need to complete consultations with the EDF worker union, but it has said that it will not pursue talks with other potential bidders for one year. The transaction will also require regulatory approval from the EU. EDF has been looking to sell the network in order to reduce the debt built up from its purchase of British Energy Group Plc in 2008. Li Ka-shing, Hong Kong’s richest man has control of Cheung Kong Infrastructure and has an estimated personal wealth of US$16.2bn. The company already has a stake in the UK’s Northern Gas Networks Ltd and in April agreed to buy a GBP211.7m stake in UK power utility Seabank Power Ltd from BG Group. According to Bloomberg data, around two-thirds of Cheung Kong Infrastructure revenue came from overseas activities in 2009.

German power: €50.46/MWh, up 1.86%
Coal: €98.03/t, up 0.71%
Natural gas: GB41.35p/therm, up 2.64%
EUAs for December 2010 delivery: €14.02/t, up 1.89%
CERs for December 2010 delivery: €11.82/t, up 1.55%
Brent crude oil futures for front-month 2010 delivery: US$77.16/bbl, down 0.6% as of GMT 09:00, July 30
WTI crude oil futures for front-month 2010 delivery: US$77.90/bbl, down 0.6%, as of GMT 09:00, July 30

Latest buzz

NYMEX crude for September delivery rose by 1.8% to settle at US$78.36/bbl yesterday, after hitting an intraday high of US$78.89/bbl, while ICE Brent crude climbed US$1.53 to finish the day at US$77.59/bbl. In both cases, the main driver was the strength of the Euro, which reached an 11-week high at over US$1.31 in early trading, on the back of more positive economic data from the Eurozone and a less than impressive US government report on unemployment.

Trading today will be overshadowed by the release of 2Q10 real GDP data for the US, which according to a Dow Jones survey, is estimated at 2.5%. Should it be any lower then crude is expected to come under significant pressure. Early Asian trading has already pushed both contracts lower due to reports that the Japanese unemployment rate has risen, while deflation continues and industrial output has dropped. A Bloomberg news survey has suggested that OPEC oil output has risen this month by 0.3% to average 29.4mbpd, 1.98mbpd above the cartel’s target. The amount of crude held in floating storage on board VLCCs has dropped by 73% over the course of this year to 11mbbl, as of July 29, according to ICAP Shipping International Ltd, as the shift towards backwardation has eliminated much of the incentive to hold oil in inventory. ExxonMobil, Royal Dutch Shell and oil service firm National Oilwell Varco have all reported strong earnings, despite the latter also reporting a 2.3% decline in revenue.

Some positive news has come from Germany, where unemployment has fallen for a 13^th successive month, to 3.21m, the lowest level seen since November 2008, according to the Federal Labor Agency.

According to the EIA, US natural gas production in May was essentially unchanged from the levels reported in April, totalling 64.92bnft³pd. Front month NYMEX natural gas traded yesterday in the US$4.79/mBtu range, before settling at US$4.83/mBtu (up 2.3%), thanks to the news that gas in storage rose by only 28bnft³ to 2919bnft³, down 3.1% on year, but up 8.9% above the five year average. The injection into storage was significantly below historical injections for the week.

Anglo American has reported that its thermal coal production for the first six months in South Africa for export had fallen by 6% as a result of heavy rain and geological issues. In contrast output at the Cerrejón mine in Colombia was unchanged from 2009 and its Australian thermal coal production has risen by 5%.

NTPC Ltd, the state-owned Indian power company is looking to import a record 14.5Mt of thermal coal for the year ending March 2012. The company will be importing the fuel directly for the first time, as opposed to previously obtaining imported coal through state-owned companies such as MMTC Ltd and the State Trading Corp of India. NTPC currently operates 15 coal-fired power plants and is planning to double its capacity to 75GW by 2017.

EUAs have been pushed up to above €14/t, on the back of a uniformly positive energy complex and a rise in the EU economic sentiment indicators to its highest level for two years. The index has been boosted from positive results from BASF, Siemens and Vattenfall. CERs also advanced but less than EUAs, causing the DEC10 CER-EUA spread to finish the day at -€2.20 and the DEC12 spread to end at -€3.27.

GE and its consortium partner, Cegelec SAS of France, have received a contract totaling more than €200m for the project, which will feature three GE Frame 9E gas turbines that offer the flexibility to burn heavy fuel oil, with distillate as a backup.

The new, 300MW power plant will be located in the harbor of Kenitra, which is 40 kilometers north of Rabat, the capital city of Morocco. The project is part of the Moroccan government’s plan to develop and modernize the nation’s harbors, to help support economic growth. The plan calls for commercial traffic in Morocco’s harbors to increase more than threefold between 2010 and 2030.

“Morocco’s electricity consumption is increasing by 6-8% a year,” said Fouad El Kaouri, director for realization of engineering and production projects of ONE. “In addition to helping to meet this demand, the new power plant is a key to the expansion and modernization of the port of Kenitra, part of the overall plan to upgrade six strategic harbors throughout the country. The expansion of the Kenitra harbor will support the exportation of products from Gharb, a key agricultural region of Morocco.”

The Kenitra project marks the second time ONE has selected GE’s Frame 9E gas turbines; three similar machines were supplied three years ago for the Mohammedia project, which also uses heavy fuel oil. “We are very pleased to again have the opportunity to provide technology that will help meet Morocco’s need for reliable power to support its strong economic growth,” said Ricardo Cordoba, GE Energy president—Western Europe & North Africa. “With their quick installation times and their capability to burn a variety of fuels including heavy fuel oil, our 9E gas turbines are an excellent fit for ONE’s projects.”

The 9E gas turbine is the workhorse of GE’s 50-hertz fleet. With more than 450 units installed, the fleet has accumulated over 22m hours of utility and industrial service worldwide. With its flexible fuel handling capabilities, the 9E accommodates a wide range of fuels including natural gas, light and heavy distillate oil, naphtha, crude and residual oil. The Kenitra 9E gas turbines will be produced at GE Energy’s Belfort facilities in France.

ONE is a state-owned company. With more than 4m customers, its mission is to satisfy electricity demand in Morocco including production, transportation and distribution.

German power: €49.54/MWh, up 0.47%
Coal: €97.19/t, down 0.11%
Natural gas: GB40.28p/therm, up 1.47%
EUAs for December 2010 delivery: €13.76/t, up 0.29%
CERs for December 2010 delivery: €11.64/t, up 0.17%
Brent crude oil futures for front-month 2010 delivery: US$76.30/bbl, up 0.3% as of GMT 09:15, July 29
WTI crude oil futures for front-month 2010 delivery: US$77.24/bbl, up 0.4%, as of GMT 09:15, July 29

Latest buzz

Oil prices have rebounded after yesterday’s precipitous decline, sparked by a surprise 7.3mbbl build in US crude inventories for the previous week, reported by the EIA. This was partly driven by a 1.18mbpd increase in imports to 11.2mbpd, the highest level seen since the week ending August 25, 2006.

The news caused NYMEX crude for September delivery to fall to a one week low, settling down US¢51 to US$76.99/bbl. Today has seen a return to above US$77/bbl, as a result of a fall in the value in the dollar against the Euro, which is enjoying positive momentum as a result of a strong performance from its banking sector in stress tests reported on July 21. There remain concerns regarding the future outlook for oil demand, given that the Federal Reserve in its latest Beige Book Report said that US economic activity had risen only modestly in June. Further concerns were raised when an unexpected 1% drop in US durable goods orders and was reported on July 28. The Conference Board also reported that US consumer confidence has fallen to its lowest level in five months in July.

NYMEX natural gas for August delivery rose by 2.91% to settle at US$4.811/mBtu, while gas for September delivery rose 3.36% to US4.802/mBtu. The main impetus behind the rise in prices remains the high temperatures across most of the major gas-consuming regions, but support also came from traders buying back previously sold contracts in order to cover their positions ahead of the August contract expiration. In addition, the fact that the Atlantic storm season is expected to last through to September, is making it difficult to justify a sale off, despite its lack of impact to date.

Prompt coal cargo prices for European delivery and Richards Bay FOB dropped by around US¢50/t yesterday, with the latter trading at US$89.50/t, despite the news that heavy seasonal rains have significantly impacted on Indonesian coal output in South Kalimantan and affected ship loadings. If the situation continues for another week, it could potentially lead to delays or producers declaring force majeure. Some sellers of prompt South African cargoes are holding back to see how this state of affairs develops, while ample supplies at Australian ports are thought to be one of the main reasons why prices have yet to rise.

Over in China, the coal industry has been doing remarkably well. According to the National Development and Reform Commission, the sector generated a total profit of CNY122.5bn in the first five months of this year, up 80.9% YoY. Domestic coal production rose to 1.57bnt in the first half of 2010, up 20.1%, while imports rose to 81Mt over the same period up 70.6% YoY. In contrast, exports amounted to just 10Mt, down 13% YoY. Coal prices have risen since they hit a low of CNY680/t in late March, to around CNY765/t and the commission is expecting prices to be relatively stable in the second half of this year, partly due to initiatives designed to reduce pollution and emissions.

European carbon prices have risen, thanks to a mildly supportive energy complex with oil prices and the 2011 German baseload contract being the main factors. CERs recorded smaller gains, causing the DEC10 CER-EUA spread to widen to -€2.12/t and the DEC12 spread widening to -€3.20/t. Interestingly, four analysts polled by the Reuters news agency viewed current EUA prices as a reason to buy, given expectations of an European economic recovery and a tighter market for emissions allowances in Phase III of the EU ETS which begins in 2013.

The MoU covers three major projects, the largest of which is the turnkey supply of a 1200MW power plant at Bassorah in the south of the country, consisting of three oil-fired steam units. Alstom will also supply the 400kV and 132kV gas insulated substations (GIS) required to deliver electricity from the plant to the grid.

Alstom will also rehabilitate a 180MW gas-fired power plant at Najaf and supply 400kV GIS substations and 132kV GIS and air-insulated substations in various locations across Iraq.

CEO, David M Ratcliffe, forecast in a conference call that the company’s earnings per share would decline to US¢94 from the US¢99 enjoyed a year ago. He also warned that demand from commercial customers is an issue, given that it fell one per cent in the second quarter.

The company’s 2Q10 profits were in line with analysts’ expectations, with net income rising to US$510m, up from US$478.6m, and profit pegged at US¢58 per share.

Southern Co recently won a US$3.4bn conditional loan guarantee to build two more nuclear reactors at the Vogtle station near Waynesboro, Georgia. It has also applied for a US$615m rate hike for its largest power utility, Georgia Power in 2011, along with an additional US$395m for 2012 and 2013, to help meet the costs incurred from complying with environmental legislation and to invest in new capacity.

German power: €49.31/MWh, down 0.06%
Coal: €97.34/t, down 0.15%
Natural gas: GB39.70p/therm, down 3.41%
EUAs for December 2010 delivery: €13.72/t, up 1.40%
CERs for December 2010 delivery: €11.62/t, up 0.43%
Brent crude oil futures for front-month 2010 delivery: US$76.28/bbl, up 0.2% as of GMT 08:45, July 28
WTI crude oil futures for front-month 2010 delivery: US$77.55/bbl, down 0.0%, as of GMT 08:45, July 28

Latest buzz

In stark contrast to Monday’s veritable buffet of positive economic news, oil prices were dragged down on Tuesday, thanks to a number of bearish signals. These included a 3.9 percentage point fall in the Conference Board’s Consumer Confidence to 50.4, from the 54.3 seen in June and a report from the Richmond Federal Reserve which indicated that there had been a drop in manufacturing activity. These outweighed the release of more strong company earnings data and a rise in US house prices. Adding to bearish sentiment was the news that the American Petroleum Institute has reported a surprise 3.1mbbl jump in US crude inventories for last week, compared to the 2.3mbbl draw down predicted in a Platts survey. As a consequence, US NYMEX crude settled yesterday at US$77.50/bbl, down US$1.48/bbl from the previous session.

Yesterday saw natural gas on the NYMEX rise for the second day in a row, as above average temperatures continued to boost demand for air conditioning and electricity. Natural gas for August delivery rose by 1.4% to settle at US$4.676/mBtu, while gas for September delivery rose by US¢6.3 to US$4.646. Today marks the expiry of the August contract. The National Weather Service has predicted that the hot weather across much of the US Midwest and East will remain over the August 1 to August 5 period.

Genscape has released its weekly status report on US coal inventories at power plants. Stockpiles have fallen by 1.6% and are currently down 16% on year. As a result, US power utilities have 55 days of coal burn on hand, as of July 26, two less than that seen in the previous week. Total inventories amounted to 152.5Mst, down from the 155.2Mst seen on July 19. Once again, the draw down in inventories has been attributed to the economic recovery and in the case of the weekly decline, the hot weather seen across much of the country.

Over in Europe, the carbon markets appear to have largely ignored fundamentals. Despite a slight drop in German Power and a large fall in the value of UK natural gas, DEC10 EUAs came off the lowest level for four months (€13.34/t), to settle at €13.72/t, up 1.40% on the previous session. Some support came from sentiment that the contract had been oversold as well as the news that the UK government will be putting pressure on the European Commission to increase the amount of auctioning taking place under the EU ETS. CER prices failed to continue their strong performance against EUAs, partly as a result of the shelving of plans to introduce cap and trade at the Federal level in the US. The DEC10 CER-EUA spread widened to -€2.10.

According to the WCI, five of its members (California, New Mexico, Quebec, Ontario and British Columbia) already have a system or are developing one and are responsible for around 70% of the carbon emissions in the region. The WCI is expecting to launch its regional scheme in January 2012, which would help reduce the costs involved in reducing carbon emissions as it would allow industrial emitters to buy and sell carbon allowances from other states, creating greater flexibility and increasing the potential number of emissions reduction projects. The aim is to reduce greenhouse gas emissions by 15 from 2005 levels by 2020. Under the new proposals, emitters will be able to surrender allowances at three year intervals, giving them additional flexibility as to when they reduce their emissions. It will also create an allowance reserve, if prices rise to unexpected levels.

However, it is by no means certain as to whether individual members will be capable of successfully passing cap and trade legislation. For example, AB 32, the Californian 2006 Global Warming Solutions Act is being delayed by a measure chiefly supported by two Texas oil companies, while Meg Whitman, the GOP’s gubernational candidate has said that if elected, she would delay the Act by a year.

In addition, Arizona, Utah, Washington, Oregon, Montana and Manitoba have decided to delay their participation, due to fears that cap and trade could lead to higher energy costs.  Only British Columbia, Ontario, Quebec, California and New Mexico are proceeding with plans to implement carbon trading by 2012. This is despite a recent economic analysis performed by the WCI that indicates that the scheme would “support robust economic growth and deliver net cost savings – even when the assumptions resulted in different carbon allowance prices.” The WCI estimates that the value of carbon allowances issued under its remit will be US$33/t by 2020.

A total of 10,000MW of new wind capacity was added to the grid in 2009, a record for the industry, partly as a result of the stimulus created by the 2008 Recovery Act.

In a conference call, Denise Bode, chief executive of the AWEA said that government support was crucial given that: “The manufacturing sector is making a decision right now whether they are going to come the United States or Europe or China.” She also told reporters that she counted at least 60 US senators who would be in favour of a renewable energy standard. If introduced, this would federally mandate a percentage of US generating capacity that must come from renewables by a certain date, boosting demand for wind turbines and also providing certainty for clean energy investors.