23 May 2012, Energy Risk team, Energy Risk
This was the first year of operations for GDF Suez Trading following the merger of Gaselys and Electrabel Trading, and it was a successful start with 1,000 terawatt hours of power being traded in 2011. The power trading team is now one desk integrated in Brussels and its approach to power trading has shifted, says Ulrich Woesler, general manager in charge of trading. “The type of trading we do, how we access the market and with what intention we access the market has changed. It’s created big volumes in directional trading, and also upped volumes on the flow side. I think that has been the story of the merger – combining those forces and playing a bigger role in the market,” says Woesler.
With lower levels of liquidity in most markets other than Germany since the withdrawal of many financial players after the 2008 crisis, GDF Suez Trading has had a growing presence, thus increasing liquidity in a number of markets, particularly in emerging markets in eastern Europe.
In addition, the impact of the Fukushima nuclear disaster and the ensuing increase in the role of renewables have drastically changed European electricity trading and GDF Suez Trading has had to adapt to the new energy trading conditions. Creating an integrated team with traders from a range of different product backgrounds has been very useful in navigating the volatile landscape, says Woesler. “The big question is what does it all mean for the market design we are headed for? For trading, it has been particularly challenging and people have had to be very agile and flexible and I think here the merger has done us good because of cross-fertilisation of ideas. We have people who think very differently about markets and about trading and that mix has proven quite successful.”
GDF Suez Trading trades in the main European power markets and is a member of all the major European exchanges, trading in the spot markets and the forward and futures markets. Its expertise in both the physical and financial markets has meant that it has been able to develop sophisticated risk management strategies and products that address the reality of European power trading today.
One way in which the company has successfully solved liquidity issues is by using proxy hedging in different European markets. The company’s transactions around this have become more and more advanced and the techniques GDF Suez Trading has developed go beyond simple correlation analysis, says Woesler.
“It is really trying to catch the regime shift in European power because if you hedge different components, you need to catch the point where correlations are breaking down or where other points are becoming more dominant,” he says. “What I see is the cross-commodity element. Despite spreads having collapsed, it is still alive in a different way – alive in a more opportunistic way.”