27.07.2016, 06:24

Turkish August power price may be lower at delivery

OREANDA-NEWS. July 27, 2016. Turkish day-ahead power is expected to deliver below recent over-the-counter (OTC) prices for the August contract, an Argus survey showed.

Most respondents to the survey expected purchases from lignite-fired independent power plants (IPPs) by state-run power trading company Tetas will now not begin until October — and most expect these purchases to lift power prices. Before the recent political upheaval, they had expected such purchases to begin in August.

The mean estimate of 34 market participants is for August power to deliver at 155.54 lira/MWh (\\$51.05/MWh), a TL3.96/MWh discount to the last OTC August base-load contract trade today. The bid-offer mean was estimated at TL153.53-157.55/MWh.

August spot expectations for 29.4pc of the participants were within the TL155-160/MWh band, for 26.5pc in the TL150-155/MWh and for 23.5pc in the TL145-150/MWh range. Five participants, or 14.7pc, expect August spot within the TL160-165/MWh band and one participant — or 2.9pc of the total — in the TL165-170/MWh band. One participant was undecided because of the recent price volatility of spot power.

August base-load traded as low as TL156.25/MWh on 3 June, but rose to a high of TL166.50/MWh on 22 June, as hotter weather lifted prompt prices. The contract has since declined as weaker-than-expected demand and strong wind generation weighed on July spot prices.

Delay seen to Tetas lignite output purchases

Most participants do not expect Tetas' purchases of lignite-fired output to start before October.

A new regulation approved in June allows Tetas to purchase domestic coal-fired generation from IPPs in a bid to support the sector and reduce dependence on foreign gas imports. The amount and price of these purchases are yet to be defined by the energy ministry.

These purchases had been expected to start in August. But expectations have changed following the failed coup attempt in Turkey.

Some 38.2pc of participants now expect purchases to start in October. One expected them in November, two participants in the fourth quarter and three participants not until 2017.

Around 15pc of respondents expected Tetas will start purchases in August and another 15pc said in September. Four participants said the timing of Tetas purchases was unclear and one participant provided no response.

Tetas purchases could buoy spot prices

Nearly 56pc of respondents to the survey expected Tetas' lignite-fired power purchases to support prompt power prices, while 20.6pc said prices would be unaffected. Only one expected the purchases would soften prices, but said they would increase spot market volatility. The remainder said that the potential impact was uncertain.

Tetas may need to reduce its power purchases from state-run utility Euas to accommodate power bought from IPPs, some participants suggested, which could offer some support to prices.

But this could be offset by an expected cut in the regulated gas tariff, which may happen in October following comments by the energy minister on 25 July.

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Turkish August base load vs expected spot %