Consolidated and Separate Financial Statements

2014
Consolidated
and Separate
Financial
Statements
9
Gruppo Hera il Bilancio consolidato e d’esercizio
Introduzione
Relazione sulla gestione
CHAPTER 1
Report on
Operations
Hera Group –Consolidated and Separated Financial Statement as at 31 December 2014
1.06.02 TRADING AND PROCUREMENT POLICY
Gas consumption
down 11.6%
Portfolio
optimization
In 2014 gas consumption experienced a double-digit decrease (-11.6% compared to
2013), a much faster rate than that for the previous three years (-5.6%), dropping to 61
billion cubic meters, the lowest level for the past fifteen years. In fact, in addition to the
reduction in the thermoelectric sector (-14.3%), which suffered from a weak electricity
demand and the development of renewable sources, the civil sector went into a freefall,
caused mainly by the mild weather that characterized last year.
This market context had a major impact on Group sales. Consequently, in 2014 trading
activities were geared, on one side, to optimizing the portfolio, to balance the position in
the short term, and, on the other, to trading and managing new supply agreements for
thermal year 2014/2015.
Going into details, short-term adjustments, dictated by an efficient requirement forecast
activity, were carried out through purchase or sale settlements at the Virtual Exchange
Point (VEP), in Baumgarten on the Title Transfer Facility (TTF) and on the Net Connect
Germany (German NCG). Generally, these transactions took place at favourable prices,
making it possible to meet forecast performance, despite a contraction of volumes traded.
Starting in April, HeraTrading started activities for the procurement of both the gas
intended to fill the storage purchased at the auction, for about 0.35 billion cubic meters,
and the gas intended for the free market of HeraComm for thermal year 2014/2015, for
about 0.5 billion cubic meters, sourcing it directly from the spot market.
Moreover, in June trading began in modulated gas for the protected market on the
HeraComm REMI (delivery points), for a total volume of about 1.5 billion cubic meters for
thermal year 2014/15, in line with the terms of delivery approved by the Authority for
Electric Energy and Gas (AEEGSI), starting from October 2013. The trading activities,
which ended in June, resulted in highly favourable pricing and credit terms.
Modulated gas
trading for about
1.5 billion cubic
meters
Reform of the
electric market
In 2014, the seriousness of the crisis came full circle in the electric market. According to
Terna’s survey, demand for electricity in Italy was 309.0 TWh, down 3.0% from the
previous year. This decline pushed Italy’s clock back 12 years, in terms of electric energy,
below the levels recorded in 2002.
The drop in demand, also due to the exceptionally mild winter weather, the high
production of hydroelectric plants, due to the substantial rainfalls, and, lastly, the high
overcapacity determined by the development of renewable sources caused the situation
of the thermoelectric sector to deteriorate further. Accordingly, the sector is voicing its
concerns, requesting to reorganize the market and the regulatory framework, including by
modifying the Market for Dispatching Services (MDS), with the objective of rewarding the
flexibility of thermoelectric gas plants (Capacity Payment), pending the introduction of the
Capacity Market.
This negative scenario has a strong impact on producers. The Group, taking into account
the limited installed capacity compared to the final market served, has been able to
Approved by the Hera Spa Board of Directors on 24 March 2015
58
Hera Group –Consolidated and Separated Financial Statement as at 31 December 2014
address the challenges by operating the MDS plants. This made it possible to obtain
satisfactory results from the Teverola (Caserta) and Sparanise (Caserta) plants.
On the other hand, problems continued with the Ortona (Chieti) plant, given that it is
located in an area that is not in high demand on the MDS , and with the COGEN/Imola
plant, though in the latter case the problems were offset by the positive performance of
the associated district heating. Upgrading activities were performed on the Imola plant,
which could not operate due to cogeneration restrictions, with the objective to enable it
also on this market from the very start of 2015.
Increase of
activities in
electric trading
The year under review saw an increase in trading activities in electric energy and
Environmental Certificates on European markets, with positive results, in line with
expectations. Special attention was paid to the management/optimization of HeraComm’s
purchase portfolio through operations on the electricity market and on Over the Counter
(TC) platforms.
Commodity and currency risk management was highly effective, also in a context
characterized by falling oil prices and the significant change in the euro-dollar exchange
rate in the second half of the year. This process is implemented, for both gas and
electricity, through a portfolio concentration where formulas are destructured, positions
are netted and volumes are hedged. The results were positive even though in 2014 they
were affected, in terms of materiality, by the progressive delinking of gas and electric
energy prices from oil.
Approved by the Hera Spa Board of Directors on 24 March 2015
59