Strategic Mission of RWEST

During our mission we have noticed that the worldwide demand for liquefied natural gas (LNG) has increasingly come to the fore in energy trading. Key fast-developing countries such as China, Australia and Qatar have recognised its potential and increased their orders for LNG supplies. We have also further expanded our gas business in line with demand, which has seen us enter into a partnership with the world’s largest purchaser of LNG, Tokyo Gas. The primary aim of this partnership is to cover the US market. In Australia, we also entered into a contract for the medium-term supply of LNG with the leading oil and gas company, starting in the fourth quarter of 2020 for a period of two years.

To further promote global activities in the gas business of RWEST, we stopped by at the most important gatherings of the gas industry on our trip. We showcased our expertise at international trade fairs and conferences including the World Gas Conference, Gastech and Flame to expand on important collaborations and investments in the LNG business. So far, we have acquired 22 LNG trading partners and distributed three million tonnes of liquefied natural gas to end customers.

The so-called fuel switch, the term used to describe the use of gas instead of coal in electricity production, has now gained a foothold in Europe. In the first half of 2019, RWEST recorded an increase of 10.7 percent on the period last year in gas-fired power plants. This can be attributed to the increasing costs of CO2 allowances and the increase in gas supply from Russia and the US. With the contract between Gazprom and Naftogaz expiring at the end of this year, the European gas market is facing the challenge of regulating gas transit from Russia through the Ukraine in future. RWEST has been supplying gas to the Ukraine at an exponential level since 2013 and entered into a storage contract with Ukrtransgas in the summer of 2019, making us one of the most important European gas suppliers to the Ukraine.

We are also further expanding the gas trading business within Germany, with the first German liquefied gas terminal planned in Brunsbüttel. RWE has agreed to purchase a large share of its capacities with the joint venture German LNG Terminal GmbH. Another step forward was taken in March of this year when the federal government paved the way for the construction of LNG terminals with an amendment to legislation. Construction of the liquefied gas terminal can begin in 2020 and the terminal is expected to be commissioned in 2022.

Duisburg port is another important key LNG trading hub in Germany. Together with the University of Duisburg-Essen and Duisburg port, RWEST converted the first vehicles to LNG there at the end of 2018. Last week, another milestone was celebrated at the RWEST industrial customer event “Energy Talks”: the opening of a mobile LNG filling station.

This strategic initiative can be rated as very successful in our Mission Discovery. Our advice for 2020 is to keep promoting the LNG and gas business!

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Since Asia has already proven to be an important continent in the gas industry, we have decided to move ahead with expanding our full range of trading activities in the Asian market.

In Europe, the prospects for energy trading growth are seriously limited. For instance, decisions such as the transition away from coal mean there will soon be one less commodity available to trade in Europe. As a result, countries like the USA and Australia – as well as China, Japan and Singapore – continue to grow in commercial importance for us.

In addition to LNG and coal, iron ore, electricity and oil are traded on the Asian market. Having a local presence is important for the growing business volume to achieve lasting success – to understand the Asian market, it is necessary to have a foothold on the continent. For this reason, the existing office in Singapore has undergone expansion since 2010 and an additional office was opened in Beijing in 2018. This new trading office gave RWEST access to the entire Chinese market for the first time, allowing us to establish ourselves as an energy trading company in the country in the long term.

The development and expansion of our networks and partnerships was identified as an important factor in achieving large-scale success. For example, the meeting with the Chinese National Petroleum Company (CNPC), which is responsible for about 70% of gas imports into China, could be leveraged to drive our LNG business. Late last year marked another success with the conclusion of an additional charter contract with Shandong Shipping, which has been an RWEST partner since 2013. The 14-strong fleet has allowed us to improve on our commodities trading position, enabling more dry cargo such as coal and iron ore to be shipped.

In the course of pursuing our mission, the Japanese market has also grown in prominence. Given Japan’s status as a major energy importer, RWEST is already actively supplying LNG and coal to a number of customers in the country. Businesses such as the Tohoku Electric Power Company and structured fuel procurement firms are also interested in developing a relationship with RWEST to give them an insight into trading within the European electricity market. Although a liberalised electricity market is still in its infancy in Japan, the market is still of great interest to us due to its size, structure and market design based on the European model. With our experience of liberalisation in Europe and trading knowledge, we have a competitive edge over other market participants and can hope to quickly break into the market. In addition, there are long-term plans to set up a Japanese branch to help us establish ourselves in the country’s electricity market.

In particular, hard work, determination and good organisation are three attributes that connect Germany and Asia. These shared qualities are part of the reason we have been able to significantly expand our trading activities in Asia – and we have not yet reached the end of the line.

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Competitive pressure in our key account segment remains strong. With the advances in digitalisation and the trend toward green electricity, we not only face many challenges but also have new opportunities to further expand RWE’s key account business and complete the transformation from commodity retailer to market-leading solution provider.

We were quick to recognise and take advantage of the growth prospects and increasing interest in renewables. In the offshore area, in particular, we concluded two important deals this year. At the beginning of the year, we reached our first long-term green electricity deal in the form of a Power Purchase Agreement (PPA) with Belgium’s largest wind farm developer Parkwind NV. Off the coast of Zeebrugge we will have access to a total annual capacity of around 800 MW from 2020, and this is currently being marketed to our customers. Our long-standing customer Deutsche Bahn is also turning to green energy and thus to our growing portfolio as a consequence. A few weeks ago, in collaboration with innogy, we concluded a long-term, five-year electricity supply contract with DB that will take effect in 2024. During the term of the contract, DB will use a total of 25 megawatts from the Nordsee Ost offshore wind farm. This is the first offshore wind PPA anywhere in the German market. More green electricity transactions will follow, and will include electricity from PV systems.

To continue offering our customers the best solutions in the digital age, we are constantly working on developing new applications. In recent years, working with our customers and business partners, we have bundled a number of professional services together and made use of synergies to get the best out of the many potentials offered by digitalisation. Syneco, a leading power procurement company for local utilities, has recognised the potential offered by our digital solutions. It is making successful use of our tool for bilateral electricity and gas trading, the Easy Commodity Trader, or ECT. Last week we also gained another customer: the energy trading platform enmacc recently began using our digital Contract Wizard to design contracts easily and efficiently on modular principles.

One further area of innovation is in grid fee optimisation, where we have developed solutions to provide optimised control for batteries and generators at the customer’s end based on smart algorithms. There is a marketing opportunity for these systems in the balancing energy market, to make an additional contribution to security of supply.

All these themes are developed across divisional boundaries in collaboration with Commodity Solutions to benefit from our collective expertise at an organisational level.

Our success is built on strong customer loyalty and continuous customer acquisition, both of which we rate very highly. Something else we consider very important is our participation in Europe’s leading trade fair for the energy industry, E-world energy & water, where we are regularly represented with a stand of our own. This year alone, we had more than 200 successful customer meetings there, and identified current trends in the key account business in addition to showcasing our product portfolio. As part of our annual key account event Energy Talks, we invite our industry partners to attend product presentations and take part in follow-up dialogues. This year we enjoyed a further boost to customer loyalty as we welcomed more than 100 participants from seven countries.

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