Switzerland’s Axpo eyes prospects in Japan power, LNG trading

By Florence Tan and Emily Chow

SINGAPORE (Reuters) – Swiss-based power producer and trader Axpo is eyeing opportunities in electricity and liquefied natural gas (LNG) trading in Japan as changes in the country’s power sector create demand for hedging and spot LNG supply, a senior executive said.

Japan has set a target for renewables to account for 36% to 38% of its electricity mix by 2030 and fully liberalised its power market in 2016, leading to the creation of an increasingly liquid electricity futures exchange.

“Japan is a very interesting market because it has nine price zones and fundamentally you have renewables more in the east and nuclear more in the west so you have some spreads between the price zones,” Marco Saalfrank, a member of Axpo’s management board, told Reuters.

“This is very interesting to trade,” he added.

Like Europe, Japan’s gas demand is set to decline as the share of renewables and nuclear in its power mix grows, making it hard for utilities to commit to long-term LNG supply. Buyers will be seeking flexibility to divert cargoes to different locations, said Saalfrank.

For this reason, we see more liquidity, more need for risk management in the market,” he said, adding that Axpo may offer structured LNG products.

Axpo’s Asia staff footprint currently includes 12 Singapore-based staff trading power, LNG, gas and liquefied petroleum gas (LPG) in the city state and Australia. Besides Japan, Saalfrank said Axpo is also looking for opportunities to trade in New Zealand’s power markets.

In Europe, more natural gas is expected to be drawn from storage this winter than in previous years as the weather is set to be colder, said Saalfrank.

In light of the contractual dispute between Gazprom and Austrian gas importer OMV, he said central eastern European countries would be most affected if Russian gas supply was halted.

The West is well supplied by LNG, and (if) central eastern Europe sees a lack of gas, we will have a difference in (price) spread between western Europe and eastern Europe, and this will attract gas toward the countries which will need the gas,” said Saalfrank, who is also the head of continental Europe merchant trading for Axpo.

(Reporting by Florence Tan and Emily Chow; Editing by Michael Perry)