JERA and EDFT to enter into LNG optimisation joint venture2017/12/14

JERA Co., Inc. (“JERA”) and EDF Trading Limited (“EDFT”), today announced the signing of a non-binding agreement for an LNG optimisation joint venture through JERA Trading Pte. Ltd. (“JERAT”). JERA Trading International Pte. Ltd. is a wholly-owned subsidiary of JERA and holds 67% of the shares in JERAT. EDFT is a wholly-owned subsidiary of EDF S.A. (“EDF”) and holds 33% of the shares in JERAT. The shareholders in JERAT will have joint responsibilities in managing the business.

This new step in the partnership between JERA and EDFT would build on the successful completion on 4^th April 2017 of the collaboration on coal and freight trading through JERAT. With demand for LNG in Japan becoming increasingly variable and difficult to predict and the ramp up in US LNG liquefaction, Europe has become a key balancing market for excess global LNG. As a result, JERA and EDFT believe that there is significant room for optimising LNG on a global basis, establishing a more liquid market, and over time developing a clear pricing signal for LNG in Asia.

In this context, JERA and EDFT have been in discussions regarding an LNG optimisation joint venture. Both parties have significant positions in the LNG market and bring important resources to this new partnership. JERA has been focusing on developing flexible LNG supply sources and creating new LNG demand globally. EDFT has a successful third party LNG trading business and access to the European LNG and gas markets to enable the unloading, reloading and storage of LNG in-tank, and is one of the largest financial JKM traders in the market. By bringing together their resources, the parties will be in a better position to respond to uncertainties of LNG demand in Japan and Europe and supply JERA and EDF’s wider global portfolio, to optimise their operations and improve the competitiveness of LNG in the market, as well as supporting the development of deeper, more liquid LNG markets.

Subject to the completion of binding agreements and approval by the respective corporate governance bodies of both parties, JERA and EDFT would combine their LNG trading activities through JERAT, and JERAT would become the exclusive LNG optimiser for JERA and the EDF Group, managing their collective short-term optimisation activity in the LNG markets. Following the transaction, JERAT would become one of the largest utility-owned seaborne energy optimisers, with activities in the LNG, coal and freight markets spanning Asia, the Pacific and the Atlantic Basins. Around 300 people will be involved in the energy optimisation activities with offices in Japan, Singapore, the UK, the United States and the Netherlands.

As part of the transaction, JERA and EDFT are in discussions regarding collaboration on the optimisation of gas and power supplies for JERA’s US liquefaction position at the Freeport LNG terminal, so that they are better able to coordinate global LNG optimisation with gas and power optimisation in the United States.

Discussions will continue towards a final agreement which is expected to be reached in 2018.

JERA

JERA is an energy company with global reach that has strength in the entire energy supply chain, from participation in LNG and other fuel resource projects and fuel procurement, through fuel transportation to power generation. Established in 2015, JERA is an equal joint venture of two major Japanese electric companies, TEPCO Fuel & Power Incorporated and Chubu Electric Power Company. JERA’s mission is to supply power and energy on a globally competitive basis, by effectively developing and managing its portfolio of energy chain assets and continuously optimising its business.

EDFT

EDFT is a leader in the international wholesale energy markets. The company manages a portfolio of assets which give it the ability to source, supply, transport, store, blend and convert physical commodities around the world. These capabilities enable EDFT to deliver essential asset optimisation services, risk management and wholesale market access to the EDF Group and its third party customers, helping them to realise the value inherent in their asset portfolios. EDFT is a 100% owned subsidiary of EDF, one of the world’s biggest electricity generators. EDFT has around 800 employees with key offices in London, Paris, Singapore, Houston and Calgary.