EDF To Divest Coal Trading to Jera (update)
Updates size of EDF Trading's coal business
Jera, the 50-50 supply & trading joint venture of Tokyo Electric and Chubu Electric, has signed a non-binding agreement to buy EDF Trading's coal and freight business. The acquisition would be by Jera Trading Singapore. Negotiations are expected to conclude with a final agreement in December 2016. Neither party indicated the likely transaction value.
EDF Trading, a wholly-owned subsidiary of French power giant EDF, is among the world's largest coal traders: in 2015, its traded volume was 845 million metric tons, of which 108.2mn mt was physical volumes and 736.8mn mt was derivative trades.
Coal remains an important part of the fuel mix globally, said EDF Trading, but demand will decline in Europe whereas it is expected to increase in Asia. Parent EDF announced in April that it plans to divest €10bn of non-core assets between 2015 and 2020 to fund its investment in a new UK nuclear power complex; among these are a large coal-fired power plant in Poland that may raise €500mn.
Jera and EDF Trading have had a long standing coal optimisation and trading joint venture founded in 2008, originally between Chubu Electric Power Company and EDF Trading. This new agreement will combine EDF Trading's coal and freight expertise in the Atlantic Basin with Jera's Asia-Pacific footprint to create a truly global coal and freight trading business.
Subject to final agreement, EDF Trading's existing contractual agreement with Jera will be converted into a minority equity interest in Jera Trading Singapore. Jera Trading Singapore will also acquire 100% of EDF Trading Australia, which holds a 7.5% interest in the Narrabri coal mining joint venture in Australia and 100% of Amstuw which operates the Rietlanden coal terminal in the Netherlands.
Jera's ambition is to trade 30 to 40 million metric tons per year of LNG and 20-30mn mt/yr of coal by 2030. But it plans to gradually reduce the exposure of its parents to long-term LNG supply contracts. In May 2016, it concluded a short-term contract with EDF Trading to buy 1.5mn mt of LNG at European LNG terminals over 30 months starting in June 2018, indexed to European hub pricing.
Jera's ambitions for 2030 (Graphic credit: Jera)
EDF is 85.27% owned by the French state, while another French energy giant Engie is 32.76% state-owned. Last month it signaled plans that it plans to divest all coal- and oil-powered generation plants, although CEO Isabelle Kocher scotched rumors it was thinking of selling off its LNG trading business.
Mark Smedley