Murray, E.ON form coal, power trading firm
The new London-based company, Javelin Global Commodities Holdings, will initially focus on coal and electric power but plans to expand into other commodities. Within a year, it hopes to have 25 employees in London and the US that are "highly experienced in marketing and trading domestic coal and US power."
Murray has signed a long-term export marketing and domestic advisory agreement with Javelin while E.On has entered into a long-term hedging and credit line with the newly formed company.
The agreement will help Murray offer new products such as variable pricing and volume fuel options in electric power markets, the coal producer's chief operating officer Robert Moore said. Javelin will also help with contracts that include physical power offtake, tolling and power price hedging to lock in margins.
Murray historically has not been involved in trading but current conditions have led it to re-evaluate its needs and "to back a well-financed and well-managed trading organization to support its traditional marketing efforts."
"We are no longer just competing with fellow coal producers. Today we are also in a head-to-head battle with low natural gas prices," Moore said.
Murray and E.On join other coal-related firms in diversifying to try to be more flexible during challenging times for the coal industry. Xcoal Energy & Resources set up a liquefied natural gas exporting unit in April and Consol said recently that it has entered into a contract with a utility customer that allows the buyer to switch between coal and gas deliveries on a monthly basis. Consol also launched an initial public offering of a master limited partnership of its Pennsylvania coal assets last week.
The group's announcement came the same day that Glencore said it was closing its Singapore coal marketing hub and shifting sales functions to the mines as well as its global team in Switzerland. It inherited the office, which will continue to market oil and gas, when it bought mining firm Xstrata in 2013.
Javelin chief executive Peter Bradley said he recognized the challenge the new venture faces, but said he is confident to have two key companies in coal markets and other commodities supporting it.
"The onset of shale gas production has changed the energy landscape in the US and abroad and we aim to provide services to clients to better manage their business in this dynamic environment," Bradley said.
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