Monthly Price Brief - A Review of European Gas and Power Price Trends: february 2008

Introduction
The growing role of wholesale traded energy markets across Europe creates a greater need for players throughout the value chain to be aware of the latest market movements and developments. From the wellhead or power station gate to the end-user, volatility in the spot and forward price of power and gas is creating an increasingly challenging environment for all market participants.

Report Highlights
Highlights
UK and EU energy trends have followed an upward trajectory over 2007-08

Bearish European power prices as milder weather slashes demand

European gas markets are under pressure and continue to firm.
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TABLE OF CONTENTS
DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
Energy trends have followed an upward trajectory over 2007-08 2
Energy trends have followed an upward trajectory over 2007-08 3
EU gas markets are bullish, led by Holland's TTF 4
EU gas markets are bullish, led by Holland's TTF 5
Wholesale power price dynamics vary significantly across the EU 6
Wholesale power price dynamics vary significantly across the EU 7
The EU-ETS is a global free market standard for carbon 8
The EU-ETS is a global free market standard for carbon 9
The wider economic climate is also key to foreign investment 10
The wider economic climate is also key to foreign investment 11
Crude oil prices have been driving inflation and household costs 12
Crude oil prices have been driving inflation and household costs 13
Bearish European power prices as milder weather slashes demand 14
Belgian baseload contracts dip at the near-end of the curve 15
French baseload weakens significantly across the board 16
German power contracts are trading down excluding Year-Ahead 17
Dutch Year-Ahead contracts firm as near-end contracts fall 18
UK baseload power prices register losses on the near-end 19
European gas markets are under pressure and continue to firm 20
Traders at the NBP add to spike fears as only Quarter-Ahead falls 21
Going out on the Dutch gas curve prices are rising and converging 22
Zeebrugge showed bullish form with only Quarter-Ahead softening 23
APPENDIX 24
This brief builds upon Datamonitor's extensive pricing proposition 24
Glossary 25
This brief contains a number of industry standard terms 25
Our analysis builds on other sources to provide greater insight 27
Further Reading 27
Extended Methodology 27
We assess the profitability of fossil fuel plants across northwest Europe 27
Our bespoke services can be tailored to your specific needs 28
Ask the analyst 28
Datamonitor consulting 28
Disclaimer 28
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Figure 1: Spurred by the soaring oil price, energy costs have been rising compared to this time last year 2
Figure 2: The year-on-year change in Brent crude oil is almost 43%, over $40/Bl. 3
Figure 3: Europe's key gas hubs are trading-up from last year despite the mild temperature 4
Figure 4: The Dutch TTF gas hub showed the biggest gains over the previous 12 months 5
Figure 5: Wholesale baseload power has been rising consistently across the EU 6
Figure 6: France and Belgium power prices have risen faster than the rest of NW Europe 7
Figure 7: Trading for the 2008 settlement period is encouraging compared with the US market 8
Figure 8: The re-allocation of CO2 allowances have improved the European system whilst US's CCX lags behind 9
Figure 9: The Sterling to USD exchange value has remained relatively stable as the Euro makes gains on Sterling 10
Figure 10: The year-on-year change between Euros and the Dollar would have boosted EU investment 11
Figure 11: The retail price index (RPI) has increased dramatically and fed through to energy costs 12
Figure 12: In real terms the median household dual fuel bill has fallen over the course of 2007-08. 13
Figure 13: Bearish European power prices as milder weather slashes demand 14
Figure 14: Belgian Quarter-Ahead prices dipped significantly during January, closely followed by Month-Ahead on lower demand 15
Figure 15: French power prices dropped significantly as both the milder weather and lighter trading affected pricing 16
Figure 16: German baseload prices fell as the bears took control - with the exception of Year-Ahead reflecting longer term supply positions 17
Figure 17: Contracts at the near-end of the curve softened considerably as mild Q1 temperatures and ample capacity depressed prices 18
Figure 18: Month-Ahead prices softened as temperatures rose, however, going further out traders firmed up Summer 2008 19
Figure 19: TypeFigTitleHere 20
Figure 20: Contracts at the NBP rose across the board with just the Quarter-Ahead price falling, indicating a potential supply squeeze 21
Figure 21: Gas contracts firmed, but the most notable development was the convergence of all Dutch contracts 22
Figure 22: Quarter-Ahead contracts dropped as concerns at the far end of the curve raised prices 23
Figure 23: Energy pricing proposition 24
Figure 24: Generation spread methodology 27
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