Czech-German Cal’15 Baseload spread could shrink to €0.50/MWh – traders

The Czech-German Calendar Year 2015 Baseload spread could shrink to €0.50/MWh or lower if bullishness on the Hungarian and Slovak spot markets persists, regional traders said.

From the start of this year until 18 March, the Czech Cal’15 Baseload has settled on average €1.00/MWh below the German equivalent, ICIS data shows.

Since 19 March the spread has tightened to an average of €0.85/MWh, hitting €0.55/MWh on 17 April – the lowest level of the spread so far this year.

One Czech trader said that the tight spread on 17 April was driven by an increased interest in trading the Slovak Cal’15 product which has lifted the Czech front year price. At the same time the German peer posted losses.

ICIS data showed that between 16 and 17 April, the Slovak Cal’15 traded in 4 clips, at €35.25/MWh on average.

The level was some €1.15/MWh above the Czech equivalent at the time.

“Some 100MW of the [Slovak] Cal’15 changed hands, possibly because Slovak prices have had some premium and people saw a good opportunity to trade it,” the trader explained.

CEE spot price decoupling

Another trader echoed those views, adding: “There is always more buying activity on the Slovak market when the spot prices between the two countries decouple as more participants want to speculate or hedge their positions,” he said.

Hungary, Slovakia and the Czech Republic have been coupled since September 2012.

The project’s aim was to bring more price convergence between the three markets but any disruptions in imports from south east Europe bring volatility to the Hungarian spot market, which has lead to frequent decoupling of the three markets over the past few weeks.

On Wednesday, the Day-ahead Baseload on the Czech exchange outturned at €35.71/MWh while the Slovak and Hungarian equivalents settled at €36.83/MWh and €49.43/MWh respectively.

Falling German spot prices

In addition, the German spot price can fall below the Czech equivalent on days with high wind and solar generation.

This in turn can bring the prices on the Czech and German far curve closer together, one Czech trader noted.

Data from the Central Allocation Office showed that the hourly price to flow electricity from Germany to the Czech Republic was hovering around €0.00-0.05/MWh for Friday.

But one Czech trader said that on windy days the price can rise to up to €0.60/MWh which is much higher than the spread between the two markets.

“On days like that, you have to question whether you can make any profits on those cross-border auctions,” he said.

“The [price of] cross-border capacity does not allow low prices to spread from Germany to the Czech Republic,” he noted.

The same trader added that if the spot remains so volatile, the Czech-German Cal’15 spread can narrow permanently to a level of €0.50/MWh before the start of Q3 ‘14.

Another source went as far as to predict that the Cal’15 spread between the two markets could disappear completely.

“The Czech market is strongly affected by prices from the coupled markets, [in addition by] frequent cuts of imports from neighbouring Poland and good availability to flow energy to Hungary or to Germany,” he said.

“All those factors can put the Czech spot flat to Germany. I think the same will happen on the Cal’15 spread soon,” he added. Karolina Zagrodna