JERA Beefs Up Into Asian Trading Giant With EDF's LNG Business



Reuters

TOKYO/SINGAPORE, July 3 (Reuters) - Japan's JERA has bulked up into one of Asia's biggest energy traders with its second acquisition of a key team from France's EDF Trading - its LNG business - a deal aimed at making the utility more savvy and nimble, as well as gaining better access to European markets.

The signing of the deal, which follows the purchase of EDF Trading's coal business last year, brings a further infusion of the French company's more aggressive trading style into a traditional power firm. And together they plan to put together a large trading operation.

"There are no other utilities in Japan that trade both coal and LNG," Yuji Kakimi, president of JERA, a venture between Tokyo Electric Power and the Chubu Electric Power , told Reuters in an interview.

"Altogether, we're a 300-strong team whereas other Japanese utilities have just a few," he said.

That number for JERA Trading, a unit based in Singapore, represents an increase of about 100. That includes 10 people from EDFT, 60 LNG-related staff in Tokyo while the rest will be a mix of current JERA employees and new hires. Trader numbers will be "a few dozen", a company official said.

Competitors say the combination of JERA, the world's biggest importer of LNG and a leading buyer of thermal coal, with EDF's highly regarded coal and gas teams could herald big changes for the industry.

"They have plentiful cash, they have global positions to allow them to move fast, and they have the personnel to act," said a senior trader with a major commodity merchant, declining to be identified as he was not authorised to speak to media.

"The question is, whether Japan's conservative utility culture can or wants to keep western gung-ho traders on their books," he added.

Addressing the concern that the two disparate business cultures might not work well, Kakimi acknowledged "there are differences in about how much risk we take in various trades."

But he said he had no plans to change the way EDFT traders did business and that JERA Trading would have a lot of autonomy. He added the two firms have been doing business for 10 years and shared the same purpose: ensuring their parent firms' fossil fuel plants had cheap fuel.

JERA Trading is two-thirds held by JERA with EDF Trading holding the rest and will handle spot trades. Long-term supply deals would remain under the parent firms in Japan. The deal is likely to be finalised by early 2019.

Kakimi also said JERA Trading could in the future look at collaborating with EDFT's team for liquefied petroleum gas, though he added no concrete discussions were taking place.

Drastic Market Changes

The move comes amid booming LNG demand in which China will soon overtake Japan as the world's biggest buyer. The market is also moving away from its established model - dominated by Japan - of receiving the fuel under fixed volumes and prices towards one in which cargoes are bought and sold at short notice in the spot market.

Trade data shows spot market volumes this year have already exceeded those of all of 2016 fivefold, and they will likely double between 2017 and 2018.


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