Fundamentals: Belgian nuclear power outlook cushions French supply concerns

The prospect of ample Belgian nuclear power plant availability this autumn is going some way to countering a more bullish trend in the neighbouring French power market.

Belgium’s nuclear fleet, which totals 5.9GW, is heading into the winter with its best availability since autumn 2013, data from plant operator ENGIE Electrabel showed.

The country’s power prices are typically correlated with France. But over-the-counter trades for the Belgian Q4 ’17 and Q1 ’18 baseload contracts have shown a growing discount to its southern neighbour.

Whether this will translate into Belgian cross-border flows into France in the fourth quarter of 2017 is at this stage uncertain.

This is because a wider French premium to the Belgian near curve is unlikely to hold if French nuclear plants are brought back online as expected this autumn.

Traders polled by ICIS said the French power market had so much upside risk at the moment from nuclear, low hydro stocks and increasing fuel prices that nobody could foresee the direction of the French forward curve.

“Ask a fortune teller,” said one power trader at a large European utility. He did however add: “I would avoid any short position whatsoever given the poor liquidity of the market.

France’s turn?

Belgian nuclear plant availability is scheduled to reach 83% for most of October and November, with the exception between 28 October–6 November when the outage of the 962MW Tihange 1 unit should bring it down to 67%.

According to a senior trader on the Belgian power market, this year’s Belgian nuclear schedule has brought a great deal of relief to the market as the country’s winter supply margins are typically squeezed, while this year, French nuclear plants are currently being audited which is itself a major source of supply risk.

An accident at the Tihange 1 nuclear unit in September 2016 prompted extended outages which ended in May this year.

But the problem with sufficient nuclear supply this year appears to be a French one, not a Belgian one.

Nuclear supervision

French nuclear availability is projected to ramp up later in September, but there have so far been consistent downward revisions to rolling availability figures this year which have led traders to price in extended outages.

In particular, an ongoing audit into French nuclear components has stoked fears that there could be delays to the maintenance schedules in the event of new anomalies surfacing.

On Wednesday the French nuclear safety authority ASN placed the two 1.3GW Belleville nuclear units under supervision due to “deterioration in the level of safety” since 2016 and the “absence of notable improvements by EDF to date”.

The news appeared to only marginally impact the French power near-curve howeverr, according to trade data seen by ICIS on Wednesday afternoon.

The plant was still scheduled to return to the grid on Thursday however, with no REMIT information on Wednesday afternoon that indicated further delays.

Liquidity dry-up

A lack of liquidity has been highlighted by several traders as a reason to refrain from taking positions in the French market beyond the front-month contract.

This reflects many of the same concerns market participants had at the end of 2016 and at the start of this year when power prices surged on subdued nuclear availability and cold spells.

“I think most players are just hands-off on France. The risk premium is so big that it is difficult to hold a long position,” said one senior trader. “If EDF is unable to start [reactors] and we get a cold period, prices will go a lot higher.

“In general, I think EDF will have reactors ready for the winter. They have shown ability to start up reactors, so this gives us the signal that they are probably going to start a lot more when prices go high enough. It’s a matter of accessing these probabilities.”

Should plant availability live up to its forecasts, the situation could soften and the price preium held by France is susceptible to collapse.

“Any spreads with France, I think, are driven by fear,” said a third utility-based trader. herman.moestue@icis.com