TOKYO:RWE Supply& Trading, a unit of Germany’s biggest electricity producerRWE, plans to offer structured products as hedging tools for Japanesepowersellers and buyers, leveraging their know-how from European markets, a senior executive said.
RWE is hoping to profit as Japan has opened up one of the world’s biggest energy markets to competition and as electricity trading activity by power companies is on the rise in the country.
“The Japanese market is quite attractive as it’s bigger than the size of the German and French power markets combined,” Peter Krembel, Chief Commercial Officer (Trading) at RWE Supply & Trading, told Reuters in an interview last week.
“It’s very interesting given the various grid areas, the number of utilities and from the underlying generation mix,” he said.
RWE’s trading unit formed its Japanese subsidiary in July and began trading power in August.
“So far, the pace of the liberalization of the Japanese electricity market has been lagging behind our expectation, but the market’s set-up has now started to get more refined, more attractive and more interesting for foreign market players to enter and participate,” Krembel said.
The European Energy Exchange (EEX) launched its new clearing service for Japanese power futures in May, following the launch of electricity futures trading by the Tokyo Commodity Exchange last year, while spot market trading volume at Japan Electric Power Exchange (JEPX) has been growing.
RWE hopes to leverage its expertise in Germany, one of the world’s most liberalised electricity sectors, which opened to competition 20 years ago.
The company will focus on power trading, boosting liquidity to help develop the market, and offer risk management products for local power companies.
“We’ll offer innovative structured products to Japanese large industrial power customers and generators which are designed to allow for a more effective risk management of their portfolio,” Krembel said.
Competition is expected from international traders, oil majors, and potentially Japanese trading houses and utilities, he said.
The global trading firm also wants to supply coal, biomass and oil derivatives to Japanese customers, on top of liquefied natural gas (LNG) that it already provides.
“We have multiple angles to expand beyond electricity trading in Japan,” he said.