Transcript
Page 1: RWE Supply & Trading - PelletRWE Supply & Trading GmbH RWE uses certification to guarantee sustainable biomass throughout the supply chain Page 5 RWE Group Lignite Wood Independent

RWE Supply & Trading

How the biomass supply market is becoming global What this means for Asian & European wood pellet buyers

WPAC

September 2018

Page 2: RWE Supply & Trading - PelletRWE Supply & Trading GmbH RWE uses certification to guarantee sustainable biomass throughout the supply chain Page 5 RWE Group Lignite Wood Independent

RWE Supply & Trading GmbH

RWE: Renewable and conventional power generator

Page 2WPAC September 2018

RWE Group

< Leading European generator with diversified and balanced generation technologies

< De-risking of portfolio with >60% of low CO2 generation capacity

< Leading provider of reliable and flexible generation capacity to balance intermittent production of renewables

< Opportunity to extract value from enlarged portfolio through leading commercial asset optimization platform

< 3rd largest installed renewable capacity in Europe, post E.On merger approval

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10.3

7.3

2.814.8

8.32.8

Lignite Hard coal NuclearGas Renewables Other

Pro forma combined electricity generation capacity1

46 GW

(as at 31 December 2017)

Firm and flexible capacity>80%

Low CO2generationcapacity>60%

1 RWE stand-alone (excluding Mátra) plus E.ON’s and innogy’s renewables businesses.

Page 3: RWE Supply & Trading - PelletRWE Supply & Trading GmbH RWE uses certification to guarantee sustainable biomass throughout the supply chain Page 5 RWE Group Lignite Wood Independent

RWE Supply & Trading GmbH

RWE: Producer, trader and end-user of wood pellets

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RWE Group

< Industrial scale wood pellet mill in Waycross, GA< Owner: innogy SE

< Commissioned in 2012< Port storage 50kt in

Savannah, GA< Industrial and domestic

quality

Upstream750,000 tonnes capacity

Midstream Covers the full interface

for trading

Downstream Annual portfolio c.1-2

million tonnes per year

< Wood pellet trading –physical and financial

< Integrated freight and logistics team

< Risk and credit management– Optimization of – Freight / logistics– Storage / working capital – Quality

< Co-firing in the Netherlands– Amer 2018– Eemshaven 2019

< Supply to traders and utilities Europe and Asia

< Industrial and heat market customers

RWE is the only party in the world with multi years of experience in all three parts of the supply chain

24/09/2018WPAC September 2018

Page 4: RWE Supply & Trading - PelletRWE Supply & Trading GmbH RWE uses certification to guarantee sustainable biomass throughout the supply chain Page 5 RWE Group Lignite Wood Independent

RWE Supply & Trading GmbH

RWE NL: large scale co-firing power

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RWE Group

Amer 9 Eemshaven

600 MWe & 350 MW heat800k mtpa co-firing from 2018, increasing to over 1.5 MM mtpa wood pellet demand in 2020

1,500 MWe, with 15% co-firing from 2019, 750k mtpa wood pellet demand

24/09/2018WPAC September 2018

Page 5: RWE Supply & Trading - PelletRWE Supply & Trading GmbH RWE uses certification to guarantee sustainable biomass throughout the supply chain Page 5 RWE Group Lignite Wood Independent

RWE Supply & Trading GmbH

RWE uses certification to guarantee sustainable biomass throughout the supply chain

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RWE Group

Lignite

WoodIndependent audit on sustainability of the feedstock

Pellet production Transport

Certified biomass is tracked and traced throughout the supply chain

Power Plant

Biomass certificate received at power plant

Two leading biomass certification schemes using two leading forest schemes

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Page 6: RWE Supply & Trading - PelletRWE Supply & Trading GmbH RWE uses certification to guarantee sustainable biomass throughout the supply chain Page 5 RWE Group Lignite Wood Independent

RWE Supply & Trading GmbH

Biomass trading – Biomass trading – All change in 2018

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Biomass Trading – Global Market

< The global market is no longer oversupplied– Industrial and heating demand has increased in Europe and in Asia – Supply has had issues in almost every major production region

< FOB Vietnam pricing is indicative of supply balance– Pricing power shifted from Korean buyers to Vietnamese sellers in November 2017– FOB BC competitive into Asia

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2018 is a transitional year – pricing has recovered and flows are now global

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Sep-2013 Sep-2014 Sep-2015 Sep-2016 Sep-2017 Sep-2018

CIF ARA Pricing (EUR/t, USD/t) Sep-13 to Sep-18

USD/t

EUR/t

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FOB Vietnam Pricing (USD/t) Jan-16 to Sep-18

WPAC September 2018

Page 7: RWE Supply & Trading - PelletRWE Supply & Trading GmbH RWE uses certification to guarantee sustainable biomass throughout the supply chain Page 5 RWE Group Lignite Wood Independent

RWE Supply & Trading GmbH

BC pellets: To Asia or to Europe?

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Biomass Trading – Global Market

ASEAN Supply Vietnam/Thailand/Malaysia

Ideally suited to supply small bulk vessels and bagged pellets to Korea and Japan

Evolved to meet Korean quality requirements. Will take time to meet Japanese standards

Issues in 2018 undermining credibility of supply

North America British Columbia

Shipping to Europe/Asia in Handy/Panamax

Potential spot opportunities for BC vessels already in 2018 due to Asean supply issues and additional Japanese and Korean demand

Canada is beginning to be the swing supplier

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Wood pellets produced in Asia to meet Korean demand Most not ready for Japanese quality & sustainability requirements

Wood pellets from BC to EuropeWork well in Japan tooSpot & medium term

WPAC September 2018

Page 8: RWE Supply & Trading - PelletRWE Supply & Trading GmbH RWE uses certification to guarantee sustainable biomass throughout the supply chain Page 5 RWE Group Lignite Wood Independent

RWE Supply & Trading GmbH

Biomass trading – a global market

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Biomass Trading – Global Market

Wood pellet flows to Europe and Asia

< As Asian demand exceeds SE Asian supply, the two markets compete for the same pellets– West Canadian pellets already are sold to both Asia and Europe (today’s swing supplier)

• Currently share of West Canadian pellets sold to Asia is smaller, but is increasing– Australia is similar but much smaller– Vietnamese pellets currently stay in Asia. Europeans may be interested – sustainability & quality tbc – Eastern Russian supply is minimal today

What makes a product suitable for all markets: Europe, Japan and South Korea?

< Reliable, good quality and sustainable supply, but also logistics– Price is a function of currency, freight and market conditions – and is different all over the world– Spot or long term? Sellers need to be flexible to meet different contract tenors

• Buyers don’t all want the same contract tenor • Korea vs. Japan shows the extremes

– Vessel size is also a constraint. More flexible suppliers can access more markets • Sellers need to be able to load bulk vessels from 5-60kt and / or containers. Most can’t

24/09/2018WPAC September 2018

Page 9: RWE Supply & Trading - PelletRWE Supply & Trading GmbH RWE uses certification to guarantee sustainable biomass throughout the supply chain Page 5 RWE Group Lignite Wood Independent

RWE Supply & Trading GmbH

Increased contracting into Asia

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Biomass Trading – Global Market

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Seller Buyer Start Date Tonnes/yr YearsCanada Japan 2019 70 15Canada Japan 2021 100 15Canada Japan 2021 30 15Canada Japan 2022 75 15Canada Japan 2022 75 15Canada Korea 2022 315 15Europe/USA Japan 2021 300 15USA Japan 2022 100 10USA Japan 2021 270 15USA Japan 2022 630* 15USA Japan 2021 250* 15USA Japan 2022 180* 15

Announced deals since Q4 2017, *CPs

Over 2 million tonnes of contracts into Asia announced since WPAC 2017

WPAC September 2018

Page 10: RWE Supply & Trading - PelletRWE Supply & Trading GmbH RWE uses certification to guarantee sustainable biomass throughout the supply chain Page 5 RWE Group Lignite Wood Independent

RWE Supply & Trading GmbH

European demand balances markets

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Biomass Trading – Global Market

The largest wood pellet market is currently European utility (industrial) demand

< c.16 million tonnes p.a. from 2020, mostly on medium term contracts

< Supply currently from Canada, the US and Europe (Portugal, Russia and the Baltics)

< Bulk, I1 or I2 quality, sustainability demonstrated through FSC, PEFC, SBP and / or GGL

European utility buyers have flexibility that can be used to balance the world marketMost have stable demand, pellets in storage and long term supplier relationships

< Storage is needed for when the utilities have issues themselves.

– It can be used to provide supply when others need it too

< Established supply chains allow for switching between different suppliers

– Standardized contracting helps this

< Vessels can be diverted on their way to one utility to meet demand somewhere else

– Outright sales and time swaps have been seen this winter in Europe to meet demand in:

• Industrial power and heating markets

• Residential heating market

The next market that European demand can be used to balance is Asia24/09/2018

WPAC September 2018

Page 11: RWE Supply & Trading - PelletRWE Supply & Trading GmbH RWE uses certification to guarantee sustainable biomass throughout the supply chain Page 5 RWE Group Lignite Wood Independent

RWE Supply & Trading GmbH

Need for trading to optimise long term contracts

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Biomass Trading – Global Market

24/09/2018WPAC September 2018

Limited Producer Flexibility Need for Flexibility< Long term contracts

– Commitments being made for 15 years

– Finance often linked to offtake

– Suppliers selling over 100% of capacity

< Take or pay contracts

– Pricing in / out of the money

– High cost to ramp down production

< Annual shipping schedules

< Freight agreements

< Currency hedges

< Supply disruption

– Production

– Rail

– Fibre

< Demand disruption

– One boiler need many pellet mills. Impact

can be disproportionate

< Port storage is limited

< Market opportunities created elsewhere

– Asean supply into Japan

– European winter demand

< Reduce freight costs to end user

The need for trading from BC has increased in 2018

Page 12: RWE Supply & Trading - PelletRWE Supply & Trading GmbH RWE uses certification to guarantee sustainable biomass throughout the supply chain Page 5 RWE Group Lignite Wood Independent

RWE Supply & Trading GmbH

Summary

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< 2018 is already different to 2017< The Asian market is now c.4.0 million tonnes< Over 2 million tonnes p.a. of contracts announced into Asia since WPAC

< This requires global supply and Canadian pellets are preferred

< Wood pellets are becoming a globally traded product< Asia and Europe should work together to benefit from industrial demand for a similar product < Specific regions will supply both markets

< Canadian supplier recently bought into US supply position

< SE Asian pellets have evolved to meet Korean market requirements< Low pricing impacts capex, quality, sustainability and reliability

< Under delivery already seen in Japan from Vietnam < Japanese customers expect a different product

< North American pellets best placed to meet spot and medium term requirements

< As the Japanese market continues to grow, trading will become increasingly valuable< Actual demand will be different to contracted demand< Flexibility in key regions can help Japanese customers manage their actual demand< Traders can buy and sell pellets to and from Japanese trading houses

Summary

24/09/2018WPAC September 2018

Page 13: RWE Supply & Trading - PelletRWE Supply & Trading GmbH RWE uses certification to guarantee sustainable biomass throughout the supply chain Page 5 RWE Group Lignite Wood Independent

RWE Supply & Trading GmbH

Thank you for listening

Page 1324/09/2018WPAC September 2018

Page 14: RWE Supply & Trading - PelletRWE Supply & Trading GmbH RWE uses certification to guarantee sustainable biomass throughout the supply chain Page 5 RWE Group Lignite Wood Independent

RWE Supply & Trading GmbH

RWE Supply & Trading Biomass Contacts

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Contacts

Biofuels Trading - Global Solid Fuels

TrigonosWindmill Hill Business ParkWhitehill WaySwindonSN5 6PB

Martin de Wolffmob: +31 61 506 5781email: [email protected]

Henry Peasemob: +44 7785 433 409email: [email protected]

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Page 15: RWE Supply & Trading - PelletRWE Supply & Trading GmbH RWE uses certification to guarantee sustainable biomass throughout the supply chain Page 5 RWE Group Lignite Wood Independent

RWE Supply & Trading GmbH

Please note!

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This document contains forward-looking statements. These statements reflect the present opinions, expectations and assumptions of the management and are based on information the management has at its disposal at the present time. Forward-looking statements contain no guarantee for the occurrence of future results and developments and are associated with known and unknown risks and uncertainties. The real future results and developments can therefore on the basis of different factors fundamentally deviate from the expectations and assumptions expressed here. These factors particularly include changes in the general economic situation and the competitive situation. In addition, the developments in the financial markets, exchange rate fluctuations, national and international changes in the law, particularly regarding tax regulations, and other factors can have an influence on the future results and developments of the company. Neither the company nor a company associated with it takes on an obligation to realise the statements contained in this announcement.

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