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Spain's Endesa makes Eur1.4 billion coal impairment

http://www.chemnet.com   Nov 06,2019 S&P Global Platts
Endesa has made a Eur1.4 billion ($1.6 billion) impairment against its coal-fired power stations in its third quarter results due to closures announced at the end of September, the Enel-owned Spanish utility said Tuesday.

The company expects to continue operating plants that run on imported coal until 2021, Chief Executive Jose Bogas said.

The impairment included a Eur0.5 billion provision for dismantling.

Endesa had already announced closures for its fleet running on domestic coal, but the plan now includes two of Spain's largest plants -- the 1.4 GW As Pontes and 1.1 GW Litoral de Almeria units.

The company still needed to present documentation and a transition plan to the government, a procedure that could be delayed with forthcoming elections in Spain this month.

While there remained some scope for generation in the short term, Bogas said "the change has become structural so (the coal business) is not profitable now nor in the foreseeable future."

The company forecast cost savings of around Eur50 million a year from not running the plants.

The situation is expected to leave Endesa about 3 TWh shorter than planned over the next two to three years - volume it expects to procure from the wholesale market.

For full year 2019 Endesa revised down its sales forecast in Spain to 83 TWh from 86 TWh, at an average sales price of Eur72/MWh, Bogassaid.

The company's unitary margin (liberalized sales income per MWh) was stronger in annual comparison due to stronger nuclear output, amongother factors.

This was seen at Eur26/MWh for full year 2019, management said. This compared to its own target of Eur20/MWh.

Meanwhile nuclear generation returned to normal for Q3 after operational issues suppressed output in 2018, leading to a 4% gain in output on year.

Coal generation was down 79% on year.

For 2020 the company had forward sold 93% of expected output at an average price of Eur73/MWh.

Related story: Endesa to close entire Iberian coal fleet

RES SWITCH
With coal heading for the exit Endesa's focus is almost entirely on renewables, the utility targeting a 15% market share in Spain by 2030, implying 12 TWh/yr green generation from today's 1.8 TWh/year.

The company has the equivalent of 4.6 TWh of capacity approved with grid connections and 879 MW expected online before the end of this year.

With some of that volume likely to be rushed online, the company expects to cover its 3 TWh coal-related net short position in 2022 or 2023.

It sees merchant renewables in Spain as very low risk thanks to its "natural hedge" of customers.

The company has diverted 55% of its capital expenditure since September to renewable asset development.

In the gas market, Endesa reported a 90% increase in its unitary margin to Eur3.30/MWh, amid falling volume.

The company cited its increase in portfolio flexibility as the main driver, with its ability to buy spot LNG in Europe and sell portfolio gas in the US, where it has FOB contract with Cheniere.

Volume has declined however, with international sales reaching 6.8 TWh in the first nine months, down 12% amid a long international market.

This decrease was compounded by a 9% decline in retail volume to 48.7 TWh, caused by mild temperatures. These were partially offset by a 25% increase in volume to CCGTs, to 14.8 TWh in January-September.
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