Statkraft Seeks Hydropower Profits in Turkey as Europe Margins Shrink

Statkraft SF, Europe’s biggest hydropower producer, is boosting capacity and trading in Turkey to offset falling demand and profitability in western Europe.

Higher prices in Turkey make trading more attractive and plants more profitable than in Europe, according to Claus Urbanke, Oslo-based Statkraft’s head of new markets. Day-ahead power in Turkey cost 70 percent more on average than in Germany in May, according to Bloomberg calculations using data from Turkish day-ahead market PMUM and the EPEX Spot exchange.

European utilities from Germany’s E.ON to the Czech Republic’s CEZ  are entering new markets as the euro area’s longest recession cut German power demand to a 10-year low. Electricity use has risen more than 15 percent since 2010 in Turkey, where Statkraft is currently building two hydropower plants, compared with a 2.5 percent drop in Europe’s biggest economy.

“Turkey could surpass Germany as a power market by 2020 and is a good opportunity for us to make up for shrinking markets at home,” Urbanke said in an interview in Dusseldorf. “Turkey has a large potential for hydropower along with very good growth in demand over the past 10 years, which we expect to continue in the coming years.”

Day-ahead electricity sold for an average of €55.43 (US $72.04)/MWh in May on PMUM. That compares with €32.56 for Germany on the EPEX Spot exchange.

A boost in solar generation in Germany has reduced prices during daylight hours, when demand is at its highest. The premium of next-month power for delivery in the 12 hours from 8 a.m. over the around-the-clock contract in Germany has shrunk to an average €8.94/MWh in 2013, according to broker data compiled by Bloomberg. That compares with a mean of €11.38 in the four years through 2012.

Statkraft has one 20-MW hydropower plant in Cakit in southern Turkey, which supplies about 32,000 households, according to its website. The company plans to start a 102-MW plant in Kargi in the north in 2014 and a 517-MW unit in Cetin in the southeast in 2016, Urbanke said.

Turkey’s economy is expected to grow 4 percent this year, compared with an increase of 0.4 percent in Germany and a 0.6 percent contraction in the euro area, according to Bloomberg News surveys of economists.

Turkish power use rose to 242 TWh last year from 210 TWh in 2010, according to a Statkraft presentation. German consumption last year fell to 595 TWh, the lowest since 2003, from 610 TWh in 2010, according to AG Energiebilanzen e.V., an association of energy lobbies and economic research institutes.

“Gas power plants are the price setters in the Turkish market during most hours of the day,” Urbanke said. “That’s why prices on the wholesale power market in Turkey are significantly higher than in Germany.”

The Turkish Privatization Administration is currently looking to sell 45 power plants with a total generation capacity of 16,200 MW, including 27 hydropower stations, according to its website.

Statkraft is interested in the plants as it seeks to boost its power generation capacity in Turkey, Urbanke said.

Copyright 2013 Bloomberg

Lead image: Statkraft’s hydropower plant in Cakit, Turkey, courtesy Statkraft

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