Montel Magazine 2 - 2020 - Page 30

Less than two years ago, Nordic spot power prices soared above EUR 50/MWh, buoyed by one of the driest and warmest summers on record. Those prices filled up coffers of utilities that had seen their values decrease significantly since 2010 when prices reached a record high. Now, the situation couldn’t be much more different. Average spot prices fell to EUR 5.26/MWh in April, the lowest for any month since the turn of the century. Expectations for power prices one year ahead have dropped by almost 40% to EUR 22/MWh just in the last 12 months. “We will surely see some water spillage this summer and spot prices close to zero” “We are talking about a new reality with a strong financial impact in both 2020 and 2021,” says Magnus Hall, the CEO of Sweden’s Vattenfall, the largest power producer in the region. His company is losing about SEK 700m (EUR 66m) in earnings for every euro wholesale power prices drop. For example, a EUR 20 decline will hit earnings by about SEK 14bn. Other companies share Hall’s concerns, as the value of the region’s 400 TWh/year of power production is set to decline by a third from 2019 to 2020. The chief reason for the drop is the weather. The Nordic region has seen one of the mildest winters on record and heavy precipitation levels created a snow cushion in the mountains close to a record high, which will melt into power reservoirs this summer. Estimated snow and hydropower reservoir levels rose from normal at the turn of the year to a surplus of 38 TWh by mid-April. That means 16