Annual report - HSE

Continental Europe
After a sudden increase in electricity supply prices for one year ahead due to disaster
in Japan and subsequent decision to shut down eight German NPPs in March 2011, the
number of long-term contracts on electricity supply decreased throughout 2012, dragging
along the European debt and economic crisis. Relatively high prices of raw materials and
energy products and lower euro value, compared to dollar, had no success in increasing
the electricity supply prices in the coming year, as the significantly larger production
electricity in solar and wind power plants had a major impact on the supply prices under
long-term contracts. On the basis of the embargo on import of Iranian oil to Europe
due to nuclear issues, concerns over potential interruptions in oil supply due to war in
Syria and later in Palestine, the oil prices were at high levels throughout 2012. Coal prices
on international markets fell in negative trends in the second half of the year, affecting
the value of long-term electricity supply contracts. Shutdowns of industrial facilities
contribute to lower emission levels and, consequently, to decreased demand for emission
coupons. The market highly depends on political decisions of the EU leaders, who still
have not reached an agreement on keeping/withdrawing a portion of coupons in/from
the European trading scheme. In 2013, we transit to a new period of emissions trading that
requires all electricity producers to cover their emissions entirely. Due to intensifying debt
crisis in Europe, a question arose, whether week European economy is capable of handling
the financial burden of emission coupons purchase. And the uncertainty regarding longterm
requirements in the area of CO 2
emissions limitation is one of the main factors in the
drop of investments in new production capacities of the Continental Europe. AS a matter
of fact, every investor needs a clear price signal that will allow them better prediction of
future cash flows and easier closing of investment financial construction.
The market of Continental Europe represents the market in which we generate a large
part of our turnover that we managed to increase in 2012, despite severe conditions. This
market is exploited particularly due to high liquidity for price risk management in trading
in other regional markets.
In 2012, we exploited the Czech electricity market mostly for purchases of electricity,
which we later sold to the German and Hungarian market. Market coupling was one of
the activities to balance the electricity price on the day-ahead market level on the Czech
and Slovakian market, which in 2012 were joined by the Hungarian market. In the Czech
Republic we trade with short-term and long-term electricity supply contracts, while in
Slovakia we trade solely on daily level due to poor liquidity of long-term contracts.
Annual Report HSE 2012
2 Business Report
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