Top Stories
Verbund CEO says volatility is the ‘new normal’ on power and gas markets
Global Banking and Finance Review
Company
By Alexandra Schwarz-Goerlich
VIENNA (Reuters) – European countries must expect volatile power and gas markets in the long run even after the current conflicts in Ukraine and the Middle East have faded, the head of Austrian hydropower heavyweight Verbund told Reuters in an interview.
The escalating conflict between Israel and Hamas in Gaza has sent oil prices higher, and while gas and power prices have fallen far back from peaks reached after Russia’s invasion of Ukraine, they remain higher on average than before the war.
“Turbulence on energy markets is the new normal,” Verbund CEO Michael Strugl said. His company is one of the largest producers of electricity from hydropower in Europe, with around 130 hydropower plants in Austria and the neighbouring southern German state of Bavaria.
“Our assessment is that we will no longer see the price level we had in the past (before the war in Ukraine),” Strugl said, declining to provide more specific price forecasts.
In the past year daily wholesale gas futures prices, which are closely linked to power prices, have on average been twice as high as they were in the year before the war in Ukraine.
Most of this year they have hovered between 20 and 50 euros ($21.23-$53.09) per megawatt hour (MWh). Until 2020 they rarely went above 30.
Russia’s invasion of Ukraine last year sent wholesale gas and power prices soaring and governments scrambling to cushion the large knock-on blow to consumers.
A consumer rights group acting at the request of the Economics Ministry won a case on appeal against Verbund challenging a price increase in spring of last year.
Verbund has now appealed that ruling to the Austrian Supreme Court. Should Verbund lose, around 350,000 customers could be entitled to a refund.
“We urgently need a legal basis that holds up in court,” Strugl said, adding that the company had set aside 100 million euros to cover the potential costs.
($1 = 0.9416 euros)
(Writing by Francois Murphy; Editing by Jan Harvey)
Market volatility refers to the rate at which the price of a security increases or decreases for a given set of returns. It is often measured by the standard deviation of returns and indicates the level of risk associated with a security.
Consumer protection refers to laws and regulations designed to ensure the rights of consumers, promote fair trade, and prevent fraud and unfair practices in the marketplace.
Risk management is the process of identifying, assessing, and controlling threats to an organization's capital and earnings. It involves analyzing potential risks and implementing strategies to mitigate them.
Financial stability is a condition in which the financial system operates effectively and efficiently, allowing for the smooth functioning of financial markets and institutions, and minimizing the risk of financial crises.
Explore more articles in the Top Stories category
