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Dutch energy market highlights for Q4 2014

In this article, Sia Partners has selected the most relevant Dutch energy market news and developments of the fourth quarter of 2014 for you.

Vattenfall has again taken an impairment which makes already a cumulative 5.8 billion euro that has been written off (60% of the take-over price of Nuon). Also interesting news regarding E.ONs' new corporate strategy: E.ON will focus on renewables, distribution networks, and customer solutions and will bring the 'dirty' fossil energy generation and nuclear production into a new legal entity. This spin-off should go public in a few years. In the Netherlands this has quite some impact since they have 4 gas-fired & 2 coal-fired power plants, of which one brand new. Similarly, E.ON is forced to write off 4.5 billion euro, predominantly on power plants and on their activities in South Europe.

Gas supply from Russia remains an interesting topic to follow as well, since the Russian President Vladimir Putin announced that Moscow will stop pursuing Gazprom's South Stream project (HQ in Amsterdam). This project has the objective to increase security of supply via an offshore pipeline originating at the Russian Black Sea coast in the area of Anapa, and extend approximately 931 km to the landfall in Bulgaria near Varna (see visual below). Putin's decision could result into more LNG gas inflow towards Europe via the Middle East (Qatar) but also from the United States.

Figure 1: South Stream

Source: South-stream fact sheet

Past weeks we all have experienced the favourable gasoline and fuel prices at tank stations. The lower oil price has an effect on oil indexed gas contracts, which causes gas revenues of the Dutch state to decrease. The CPB, responsible for reviewing Dutch economic policy analysis, initially estimated $108 for 2014 and $107 for 2015 per barrel. Current levels however have dropped to $70 dollar per barrel. As a consequence the finance Minister accounts the gas revenues to be 9.1 billion euro, being short of 4% for the total governmental revenues for the year. Impact on total state revenues may be not much, but it will affect for sure the new State energy innovation fund, which is injected by the state gas revenues.

Further news in this quarter:

- Dong Energy is no longer supplier in the Dutch energy sector.

- Nuon sells Utrecht heat facilities to Eneco

- 1800 jobs will be lost according to Eneco & Delta if unbundling will take place. Decision to be expected in 2015.

- Our gas supply for local consumption will still be possible until the end of 2019. This is an estimation of the Dutch state together with NAM.

Belgium will be able to better manage its power production shortage, by re-activation of the Doel 3 and Tihange 2 power plants. The fire in Tihange 3 early December did not help the situation. The question therefore remains if Belgium will have enough generation capacity for the increased winter demand. If the winter will be as mild as past year, there is nothing to fear. It is still unclear whether a 'back up supply' alternative from the Netherlands or France will be activated in time.

Some news also on the smart meter roll-out: Enexis has come back from an earlier decision to invest in Power Line Communication (PLC) based Smart Meter technology. Which communication technology between the meter and the area distribution unit will be used is currently under research. The large scale roll out will start next month!

Internal Sia Netherlands developments

For our Dutch office we inform you regarding the start of a new consultant per October 1st 2014 for our Energy & Utilities practice - Ruben Moorlag. Ruben has consulting experience and is a graduate from the Technical University of Delft. Also, Sia Partners has started the delivery of several transversal offerings in the Netherlands. The offerings that we have started with are CIO Advisory, Human Resources, Change, Training, and Operational Excellence. Sia Partners will commence to offer those cross sector, starting within Energy & Utilities and Financial Services, but subsequently also in the chemical and oil & gas industry.

Sia Partners

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