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28 | 6th - 12th June 2014 | utILItY WeeK Markets & Trading This week Gas price plummets 31% from last year Average price of gas on the uK's wholesale gas market in May 31 per cent lower than last year The average price of gas on the UK's wholesale gas market last month scraped lows 31 per cent below the levels seen last year, intensifying the most bearish run seen on the UK gas market in years. The trend began in January this year as low temperature- driven demand le gas storage stocks unusually high and market prices unusually low. The net result for many of Europe's energy companies, including Centrica, was weaker than expected financial statements for the first quarter. Price data from markets specialist Platts shows that the price of gas traded for delivery the next day hit lows not seen in four years at 43.50 pence per therm in May. The average price over last month was 45.32p/th, which is 9 per cent lower than the April 2014 average. But gas prices slumped faster than electricity prices, the data showed. In May, electricity bought and sold for next day deliv- ery was priced on average 17 per cent below the same time last year. The average power price for near-term delivery in May was £39.83/MWh, just 3 per cent lower than the previous month, Platts price data shows. Analysts at Thompson Reuters Point Carbon expect that June and July could see more limited supplies help stem the recent steady losses. Lower LNG deliveries are expected for July, and a planned maintenance outage for the pipeline connecting European gas supplies to the UK is set for June, a recent market summary shows. JA eMIssIons Climate change deal could spur carbon trading, says IETA The Paris 2015 climate agree- ment could pave the way for the development of global, interconnected carbon emissions markets, said 80 per cent of respondents in a recent survey by the International Emissions Trading Association (IETA). The annual survey, con- ducted by PwC, found most IETA members believe carbon emis- sions markets will play a role in the international climate change deal to be decided next year. UN negotiations are currently under way on the agreement, which will be adopted in 2015 at the Paris climate conference for implementation in 2020. GAs Iberdrola signs 20-year deal with US-based Cheniere Iberdrola is set to tap into US shale gas in a $4.1 billion (£2.5 billion) deal with Cheniere, struck on Friday 30 May. The Spanish-owned utility signed a 20-year contract to buy around 1 billion cubic meters of LNG a year from the American firm. That will support Cheniere in building a liquefaction plant at Corpus Christi, Texas, to convert natural gas into LNG for export. Deliveries will start in 2018 or 2019, and prices will be linked to the US-based Henry Hub. In recent years, a boom in US shale gas supplies has seen prices fall in the country. A lack of export facilities has prevented that cheap gas from reaching the global market. Iberdrola follows Centrica in seeking to take advantage of the boom. Centrica struck a 20-year deal with Cheniere in March 2013 to buy LNG from its Sabine Pass plant in Louisiana, which is due to start flowing in September 2018. GAs Ukraine hands over $786m to avert crisis Ukraine's state oil and gas company, Naogaz, avoided a potential Russian gas supply cut by paying $786.3 million to Gazprom at the end of May, causing markets across Europe to rethink the political risk. Naogaz beat its 2 June payment deadline for the gas it imported from Russia in Febru- ary and March this year, follow- ing threats from Gazprom that it would cut supplies on 3 June if payment was not made. UK energy traders said gas markets across Europe breathed a sigh of relief on the morning of 2 June, with the UK price for gas this winter shedding 1.5 per cent in value to change hands at just below 60 pence per therm. Storage facilities: stocks unusually high Tricks of the trade Jillian Ambrose "Even energy firms have a task calculating costs" Amid increasingly heated politi- cal debate and volatile energy market moves there's at least a little comfort in the knowledge that some things never change. For this week it's the sighting of a national newspaper bleating over the mind-boggling profits enjoyed by energy suppliers. Just to be clear: I'd be first in line, tar and feathers at the ready, to lambast unfair energy company profits. But when the news report in question bases its outrage on "Ofgem data", I know presents large enough profits to warrant a headline. The truth is, even for energy companies themselves it is a mammoth task to untangle the many contracts and trades that ultimately determine the cost of wholesale gas and power, and therefore profitability. Hats off to Ofgem for trying to bring some clarity to a complex issue. It's just such a pity the result so oen is a headline which muddies already rather murky waters. that, at least for today, my out- rage will be directed elsewhere. Ofgem's o-misinterpreted "supply market indicator" esti- mates a forward-looking picture of average costs and margins for a large energy supplier, provid- ing a snapshot of a hypothetical scenario. Ofgem is the first to say it doesn't have access to energy companies' hedging strate- gies, operating costs or forecast customer consumption. In fact, it stresses that it "does not seek to provide a forecast of company profits". It even types that bit in bold. That doesn't stop the national press from running the indicator as if it were fact when the model