The sharp drop in energy product prices, pressured by the coronavirus outbreak and an oil price war between Russia and Saudi Arabia, promises major and unexpected financial relief for power utility PPC.
The plunge of gas prices, alone, should benefit the Greek power utility by an estimated 100 million euros this year – assuming this drop is not ephemeral.
In the first half of 2019, PPC’s total purchasing cost for natural gas reached 222.5 million euros, a 57.1 percent increase.
In the liquid fuels category, PPC’s purchase expenses were also elevated, reaching 319.7 million euros, as a result of higher prices paid for mazut and diesel used by the utility at power stations on non-interconnected islands. To the delight of PPC, mazut and diesel prices are also tumbling.
Electricity tariff hikes made by PPC last September as well as a revised payback plan offering consumers greater incentive to service electricity-bill arrears through monthly installments are both producing favorable results.
A series of memorandums of cooperation, such as an agreement signed this week with Germany’s RWE, all promising dynamic penetration into Greece’s renewable energy market, offer further potential for PPC.
However, the power utility still faces an uphill struggle along its road to recovery. PPC’s financial results for 2019 will be announced in April.
Besides lower oil prices in international markets over the past few days as a result of the coronavirus spread and price war between Saudi Arabia and Russia, energy commodities across the board are under great pressure, which has led to price reductions for natural gas, CO2 emission rights and electricity.
Lower oil and gas prices are offering relief for the economy and enterprises. However, there are two sides to this story, positive and negative. On the one hand, the price drops are creating opportunities for suppliers and consumers, while, on the other, natural gas futures indicate a decline until the end of the third quarter this year, meaning markets anticipate a downward trajectory in Chinese consumption and no sign of an economic rebound until at least September.
Prices at the Dutch trading platform TTF, a key index for LNG, slid to a three-month low on Monday, registering 8.627 dollars per MMBTU, before edging up to 8.993 dollars per MMBTU yesterday. This index has fallen 39.4 percent since the end of December’s three-month peak of 14.2 dollars per MMBTU.
Besides shaping LNG prices, according to new pricing formulas adopted at Gazprom, the TTF also greatly influences the rise of Russian pipeline gas.
CO2 emission right prices have fallen by 13.6 percent between December and early February, from 26.74 euros per ton to 23.11 euros per ton. A slight rise has been registered this week, to 23.25 euros per ton on Monday and 24.07 euros per ton on Tuesday. Lower prices on this front are favorable for lignite-fired power stations as well as energy-intensive industries.
Prices have also fallen in Greece’s wholesale electricity market. In the day-ahead market, the System Marginal Price (SMP) fell from 49.2 euros per MWh on Friday to 41.42 euros per MWh on Monday before edging up to 43.12 euros per MWh yesterday. A rise to 50.44 euros per MWh is expected today.