15 January 2019

Oil majors in transition: Shell to bid for Dutch Utility Eneco

By |2019-01-15T19:02:58+02:00Tuesday, 15 January 2019|Categories: Netherlands, oil industry, utilities|Tags: , , |0 Comments

Oil & Gas Major Royal Dutch Shell and Dutch pension fund PGGM formed a consortium to take over Dutch utility Eneco.

Eneco

Eneco is owned by 53 Dutch municipalities. In a turbulent political process they have decided to sell the company a few months ago. The company value is estimated in the region of €3bn. 

Total turnover in 2017 was €3.4bn. Although more known for its renewable investments, Eneco still generates half of its power (10.3 TWh p.a. in 2017) by fossil fuels, mainly gas. 

Eneco also has a large trading division focused on gas trading (45.3 TWh) and power trading (21.5 TWh).

Shell

The Dutch/British gas and oil giant recently declared to invest $1-2bn per year in its New Energies division, established in 2016. This corresponds to 4-8% of its total investment of around $25bn. 

Its European peers (in contrast to its US peers) pursue similar strategies: BP, Total, ENI and Equinor have pledged around $0.5 bn per year for renewables. ENI plans to increase renewable investments from 0.5 to 1.2bn over the next years. And Equinor even announced a 15-20 per cent share of renewables in its investment portfolio by 2030.

Eneco and Shell have partnered in several wind projects over the past years. The Dutch would fit into Shell´s strategy to invest in the power supply chain, similar to its First Utility akquisition in the UK. 

This would, if on a much smaller scale, mirror its oil and supply chain which starts at the oil field and ends at the gas station or at the industrial client. 

Direct access to power plants, networks or power markets would create: 

(1) an outlet for its large gas upstream division and (2) its increasing portfolio of wind and solar projects. This, in turn, may develop into a 

(3) “Plan B” strategy if stricter climate policies or faster electrification of transport require a quick downscaling of its oil business.

Shell is not a newcomer to the power sector. They are the second-largest power trader in the US and are heavily investing in downstream gas/power activities in Asia.

Shell´s and PGGM´s planned bid may not be the last word. Counter offers by other European oil or gas companies are quite possible. Total or Engie would be candidates, also given Eneco´s activities in France (ex ENI assets).

Read more on oil company strategies in the fossil and renewable world  in the next edition of our Global Energy Briefing (German and English version available for subscribers)

Image shows ENECO headquarters (courtesy Eneco)

14 January 2019

Wind Industry: SPIC to Build World´s Largest Wind Farm

By |2019-04-23T18:31:54+02:00Monday, 14 January 2019|Categories: China, wind projects|Tags: , , |0 Comments

Bejing has greenlighted SPIC´s giant onshore wind project in the northern wind-rich province of Inner Mongolia (Ulanqab), Recharge News and Asian Power report.

The 6 GW capacity would make it the largest wind base in the world, at an estimated cost of RMB 42.5 bn ($6.2bn). So far, MidAmerican´s 2 GW Wind XI project held the top spot.

SPIC will develop the project on a zero-subsidy basis,  i.e. in competition to coal power plants in the province which receive a price benchmark of 283 Yuan/MWh (41.3 $/MWh). This will be the standard approach for all large wind and solar farms in China from 2020 on.

State-owned conglomerate SPIC (State Power Investment Corp.) was only recently established through the merger of large power producer CPIC and nuclear giant SNPTC.

Read more on company strategies in the fossil and renewable industry  in the next edition of our Global Energy Briefing (German and English version available)

11 January 2019

Global Ranking of PV Cell Producers: China 8 : US 1

By |2019-01-14T15:37:08+02:00Friday, 11 January 2019|Categories: China, pv industry|Tags: , , , , , , , , , |0 Comments

Solar expert Finlay Colville recently presented the 2018 ranking of solar cell producers. In a nutshell, Chinese PV companies strengthened their position, in line with Beijing´s NDRC plan to dominate specific global growth industries.

1. About ten years ago the Chinese PV industry accelerated global expansion and strengthened the vertical value chain within China (module, cell, wafer, ingot, poly). But they still faced strong competition from high-quality pure cell producers in Taiwan, Japan and Germany and from thin-film specialists such as FirstSolar (U.S.).

2. Soon after, the Japanese and German producers were outcompeted via costs. Over time, even Taiwanese cell producers such as Hanwha Q-CELLS were unable to keep pace with the extremely fast expansion plans of their (mainland) Chinese competitors. 

3. In the next step, even Chinese pure-play cell producers such as Tongwei and Aiko set up a blistering pace of investment with multipes of 5 GW factories, disregarding any risk of oversupply and financial losses.

Ranking 2018

Today, the chart shows that 8 out of the Top 10 PV cell producers are Chinese companies, joined by Hanwha Q-CELLS (Korea) and First Solar (U.S.).

Four of the Chinese Top10 players (JA Solar, Trina Solar, JinkoSolar, Canadian Solar) are global module suppliers with well-known brands, covering almost the entire product range from p-multi to mono PERC cells. They have large in-house cell production capacities and buy additional cells from the likes of Tongwei or Aiko. 

Hanwha Q-CELLS also features a well-known brand and Korean-style conglomerate strategies.

LONGi Solar follows a slightly different path and features a highly integrated value chain from ingot to module.

Shunfeng, on the other hand, is a large cell/module producer mainly confined to the Chinese market. Investment limitations have so far delayed a shift from older product types to more efficient products.

Tongwei and Aiko pursue a strategy of extremely rapid expansion of cell capacities with 20 GW each. This will put pressure on competitors worldwide and may prevent cell prices to rise for some time to come.

Tempe/Arizona-based First Solar (U.S.)  is the only important thin-film solar cell producer worldwide.

Technology

The industry is at several technological crossroads: the switch from multi to mono crystalline products is already in full swing. The step from p-type fo more efficient n-type (and PERC) products is only starting and mainly supported by Chinese policies (Top Runner). If n-type production is mastered at reasonable cost and at gigawatt level, a large investment wave may start. But the timing is still unclear.

However, Colville hands his personal technology award not to Chinese c-Si cell makers, which follow a low-risk technological path mainly developed by Western competitors some years ago (PERC, AI-BSF), but to U.S. thin-film specialist First Solar. The company last year managed the switch to Series 6 product lines. It now occupies a unique position both in terms of products and manufacturing and may improve its Top10 ranking in 2019.

But the progress of the (from a Western point of view) “last man standing” does not alter the overall picture: The fight is over – Upstream PV from silicon to modules has become a Chinese industry.

Read more on company strategies in the PV and wind industry  in the next edition of our Global Energy Briefing (German/English version available)

10 January 2019

Peak Car in 2018?

By |2019-01-11T20:41:26+02:00Thursday, 10 January 2019|Categories: China, electric vehicles|Tags: |0 Comments

What is the state of the Chinese economy? Growth estimates for 2018 differ widely between the official 6.x percent, down to less than 2 per cent.

A strong indicator of weakness is the official car sales number for 2018. It declined, for the first time since 1990, by almost 6 per cent to 22.7 million units. December numbers were even 19 percent below last year, as Bloomberg (CAAM) reported.

The market of combustion engine cars (i.e. gasoline or diesel driven) suffered even more because the sales numbers of electric cars rose, thanks to generous government and municipal support. The fleet of new battery-electric cars (BEV) and plug-in hybrids grew strongly to over 1 million units in 2018 and may reach 1.6 million units in 2019 as strict quotas come into force.

But problems are not confined to the Chinese market. The headline-grabbing diesel car scandals may mask a global sales crisis of gasoline/diesel cars, as a recent study by RBC Capital suggests (see image above). Main reasons are urban smog policies, quickly rising electric car sales and new mobility services such as car-sharing or Uber-like products.

As for China, early estimates indicate a stagnation or another decline of car sales in 2019, unless car ownership restrictions in major cities will be relaxed.

As for global markets, RBC Capital expects a decline by 0.6 million to 94.6 million car sales (all drive types) in 2018 and another drop by 0.4 million in 2019. That is a clear break from the trend in the years before. Sales number for 2013 amounted to just 84.7, followed by steady growth until 2017.

As electric car sales (BEV, PHEV) are expected to grow by at least 0.7 million in 2018 und more than 1.0 million in 2019 there is little hope that combustion engine car sales will resume the growth path any time soon. Only in hindsight we will know if 2018 was the “peak combustion engine car” year.

Source of the chart shown above: https://www.bloomberg.com/news/articles/2018-12-19/the-global-auto-industry-is-likely-in-first-recession-since-2009

Find more on the latest electric car trends in the next edition of our Global Energy Briefing (German/English version available)

9 January 2019

Wind Turbines: Vestas – The First Global 100 GW Wind Giant

By |2019-01-11T20:42:14+02:00Wednesday, 9 January 2019|Categories: wind turbines|Tags: |0 Comments

Danish wind turbine giant Vestas reached a total installed capacity of 100 GW in late December 2018, according to company press releases. This equals a share of 16.7 percent of the world´s total installations of c. 600 GW wind turbines. Since 1979 the company has installed 66,000 turbines in 80 countries across the globe.

Order inflow looks promising with a record 12.9 GW in 2018 after 11.2 GW in 2017. The company reinstated its original 2018 cash flow target of €400 million, revoking a profit warning in November. Revenue expectations have remained unchanged at €10-10.5bn. The annual report is due on 7 Feb. 2019.

Looking forward, Vestas underlined that they will continue the strategic transformation from a pure wind turbine player to a provider of sustainable energy solutions. This would comprise hybrid solutions, storage, grid integration as well as digital and financial services. On the production and installation side, the focus will be on scalability and a modular approach to design, products, installation and integrated solutions.

Vestas Wind Systems A/S:
Market cap: 104 bn DKK ($16.1 bn),

P/E (ttm): 18,3

Image: Courtesy of Vestas Wind Systems A/S

Read more on the latest wind industry strategies in the next edition of our Global Energy Briefing (German/English version available)

8 January 2019

Shale Oil: Elliott Management bids for QEP Resources

By |2019-01-08T22:27:38+02:00Tuesday, 8 January 2019|Categories: Permian, shale oil|Tags: , |0 Comments

The wave of takeovers in the U.S. shale oil sector continues: Hedge fund Elliott Management (Paul Singer) makes a $2.1 billion proposal for Permian shale driller QEP Resources, as several news agencies report.

The offer is 44 percent above last week´s closing price but still way below the share price of last summer when crude oil was above $70 per barrel. QEP has 51.000 acres (c. 200 km2) in the Permian Basin, located close to large operators like ExxonMobil or Encana.

As large oil majors pour into the shale sector, small and mid-sized oil drillers owning attractive acreage have become the target of financial firms and large oil companies. For the likes of ExxonMobil or BP, shale oil is an interesting option for diversification and de-risking of capital investment thanks to short project times and predictable cash flow. For financial firms, some mid-sized drillers appear to be undervalued when oil prices fall and financing conditions for the oil firms deteriorate.

7 January 2019

Utilities in Transition: Vattenfall AB accelerating switch to renewables

By |2019-01-08T22:50:27+02:00Monday, 7 January 2019|Categories: company strategies, utilities|Tags: |0 Comments

Sweden´s Vattenfall AB is accelerating the transition to renewables, as German newspaper F.A.Z. reports.

The large utility, which is 100 percent owned by the Swedish state, plans to quadruple the share of renewables by 2025. This includes the expansion of wind power capacities from 3 GW (end of 2018) to 11 GW (2025). Within “one generation”, the group as well as its customers and suppliers should be “fossil-free”.  Currently, Vattenfall generates about  25 percent of its power from fossil fuels.

In Germany, Vattenfall has abandoned its lignite assets a few years ago and is abandoning its German nuclear assets. In Sweden, however, the company will continue to operate its large nuclear plant Ringhals.

Vattenfall is already one of the largest offshore wind power operators in Europe. Further wind farms are currently being built in the Baltic Sea. To finance these projects, the company intends to make greater use of external sources. Parts of wind farms could also be sold to investors.

Unlike E.ON (Innogy/RWE) or Ørsted, however, the company does not intend to become a global player, but continues to concentrate on Northern Europe and Great Britain.

In addition to wind farms, green hydrogen will play an important role in its corporate strategy. This includes a pilot plant in Luleå. Here, a steelworks replaces coke with hydrogen generated by green electricity (wind, hydro).

Additional RE activities are:

  • Vattenfall´s electrolysis plants near Gothenburg are involved in the production of biofuels from cellulose.
  • In Germany, a centralized power-to-heat project (Berlin) will provide district heating to consumers.

Find more on the latest utility strategies in the next edition of our Global Energy Briefing (German/English version available)

10 December 2018

Global Energy Briefing No 170: Global Energy Markets in December (English Edition)

By |2019-01-08T16:34:31+02:00Monday, 10 December 2018|Categories: coal markets, electric vehicles, gas price, international gas markets, Japan, oil markets|0 Comments

The current edition of our newsletter Global Energy Briefing (No.170) reports on prices, trends and events on the international energy markets. Topics are among others:

(1) Oil price outlook after OPEC/Russia-Decision

(2) US gas prices surge by more than 40 per cent; but sink  in negative territory in Permian Basin

(3) EU/Asian gas markets – relaxed winter outlook

(4) Hard coal markets: Prices down; weak 2019 outlook

(5) Power markets: Japan – back to nuclear

(6) Electric car markets: strong US numbers; China new all-time high in October; EV market share 7 per cent by December?

10 December 2018

GEB Nr.170: Die internationalen Energiemärkte im Dezember (deutsche Ausgabe)

By |2019-01-08T16:35:41+02:00Monday, 10 December 2018|Categories: Elektrofahrzeuge, Gasmärkte, Gaspreise, Japan, Kohlemärkte, Kohlepreise, LNG, Ölmarkt, Ölpreise|0 Comments

In der aktuellen Ausgabe unseres Abonewsletters Global Energy Briefing (Nr.170) berichten wir über Preise und Trends auf den internationalen Energiemärkten. Themen dieser Ausgabe sind unter anderen:

(1) Ölpreisausblick – Wie geht es weiter nach der OPEC-Entscheidung?

(2) Gaspreise USA – Turbulenter Markt in den USA; Gaspreise ziehen am Henry Hub um 40% an, während sie im Permian unter Null sinken

(3) Gaspreise Europa/Asien – weiterhin entspannter Winterausblick

(4) Kohlepreise geben nach – verhaltender Ausblick auf 2019

(5) Stromsektor: Japan setzt wieder auf Atomstrom

(6) Elektroautos: Starke Zahlen aus den USA und neues All-Time-High in China; Marktanteil könnte im Dezember bereits bei 7% liegen.

23 November 2018

Global Energy Briefing No.169: Big Oil in Transition? The Path to Decarbonization (English Edition)

By |2018-11-23T15:47:35+02:00Friday, 23 November 2018|Categories: company strategies, decarbonization, investment strategies, oil industry|0 Comments

Oil and gas account for more than half of global energy-related greenhouse gas emissions. International oil companies are now under pressure to demonstrate the sustainability of their portfolio and adapt their business models to the global transformation of energy systems. Investors, NGOs and the media are questioning them critically.

In this issue of our newsletter you will find 37 pages of background information on the discussion about Big Oil and company-specific strategies. How high are the emissions caused directly and indirectly by Shell, Respol or BP? What options does the industry have to move quickly to a sustainable 2°C path? Which companies are changing in the direction of “Energy Company”; which companies are sticking with their traditional business model?

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