January 2012 Energy Index - Bord Gáis Energy

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THE BORD GÁIS ENERGY INDEX INCREASES 1% IN JANUARY — INDEX 8% HIGHER THAN IN JANUARY 2011 …

THE BORD GÁIS ENERGY INDEX INCREASES 1% IN JANUARY — INDEX 8% HIGHER THAN IN JANUARY 2011

Despite reduced demand and unseasonably mild weather across Europe for most of January, the Bord Gáis Energy Index rose 1% in the month as oil prices increased by $4 US Dollars. The possibility of military engagement should Iran attempt to close the Straits of Hormuz in response to international embargoes put upward pressure on oil prices.

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  • 1. Bord Gáis Energy Index JANUARY 2012
  • 2. Bord Gáis Energy Index JANUARY 2012 THE BORD GÁIS ENERGY INDEX INCREASES 1% IN JANUARY — INDEX 8% HIGHER THAN IN JANUARY 2011 — Bord Gáis Energy Index (Dec 31st 2009 = 100) OVERALL SUMMARY: Energy 12 Month Rolling Average Despite reduced demand and unseasonably Index Graph Data 31 October 2009 87.80 31 January 2009 92.10 Bord Gáis Energy Index 30 November 2009 87.15 12 Month Rolling Average mild weather across Europe for most of 180 28 February 2009 87.77 31 December 2009 88.29 31 March 2009 30 April 2009 76.86 77.63 31 January 2010 88.92 January, the Bord Gáis Energy Index rose 1% in the month as oil prices increased by 31 May 2009 84.37 28 February 2010 90.20 30 June 2009 90.81 31 March 2010 92.51 31 July 2009 88.62 31 August 2009 30 September 2009 88.35 85.76 30 April 2010 31 May 2010 95.31 97.49 $4 US Dollars. The possibility of military 31 October 2009 92.39 30 June 2010 99.22 engagement should Iran attempt to 140 30 November 2009 94.82 31 December 2009 31 January 2010 100.00 99.62 31 July 2010 31 August 2010 101.09 102.82 close the Straits of Hormuz in response 28 February 2010 103.17 30 September 2010 104.97 to international embargoes put upward Points 31 March 2010 104.57 31 October 2010 106.66 30 April 2010 31 May 2010 111.22 110.49 30 November 2010 108.89 pressure on oil prices. 30 June 2010 111.64 31 December 2010 111.88 31 July 2010 111.05 31 August 2010 109.16 31 January 2011 114.76 100 30 September 2010 111.50 28 February 2011 117.91 31 October 2010 112.64 31 March 2011 121.41 30 November 2010 121.67 31 December 2010 135.86 30 April 2011 124.45 31 January 2011 134.21 31 May 2011 126.97 28 February 2011 140.96 30 June 2011 128.88 31 March 2011 146.51 30 April 2011 147.76 31 July 2011 131.18 31 May 2011 140.73 31 August 2011 133.64 60 30 June 2011 134.54 30 September 2011 135.59 31 July 2011 138.57 31 August 2011 138.69 31 October 2011 137.54 30 September 2011 134.89 Jan-09 31 November 2011 Apr-09 Jul-09 139.53 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 31 October 2011 136.14 31 November 2011 143.88 31 December 2011 140.15 31 December 2011 143.22 31 January 2012 141.01 31 January 2012 144.43 1 Mth  1% 3 Mth  5% 12 Mth  8% In January, uncertainty around the health of the global economy continued following the release of lower than expected Q4 GDP numbers for some major economies, reduced growth forecasts for 2012, and numerous ratings downgrades for many European countries. Despite this, improved economic sentiment started to emerge tentatively as some major economies appear to be producing more goods, jobs are being created and confidence is growing. This improved sentiment was underpinned by comments from the ECB President indicating that there are now tentative signs that the euro zone economy is stabilising and from the US Federal Reserve Chairman that the US economy is expanding moderately. This sentiment is feeding through to oil prices. Oil Index OIL Oil prices continued to be supported by the 180 Oil Graph Data ongoing tensions between the West and 31 January 2009 28 February 2009 65.78 67.03 Iran over its nuclear programme. Following the EU’s decision to ban oil imports from 31 March 2009 68.43 30 April 2009 70.72 Iran’s from 1 July 2012, there was increased 31 May 2009 85.34 30 June 2009 90.70 140 31 July 2009 92.57 31 August 2009 30 September 2009 89.31 86.74 speculation that Iran would retaliate by 31 October 2009 93.84 attempting to close the Straits of Hormuz, Points 30 November 2009 96.36 31 December 2009 31 January 2010 100.00 94.62 an important transit point through which approximately a fifth of the world’s daily oil 28 February 2010 104.90 31 March 2010 112.38 30 April 2010 121.16 requirement passes. The possibility of supply 100 31 May 2010 111.65 30 June 2010 112.54 31 July 2010 31 August 2010 110.19 108.17 v disruptions of oil to the globe put upward 30 September 2010 31 October 2010 111.13 109.88 pressure on prices. 30 November 2010 121.18 Despite ongoing negotiations between 31 December 2010 130.36 31 January 2011 135.62 60 Greece and its investors and fears of a credit 28 February 2011 149.07 31 March 2011 152.09 30 April 2011 156.15 31 May 2011 30 June 2011 149.41 142.55 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 event if an agreement is not reached, in 31 July 2011 31 August 2011 149.27 146.57 general, economic releases in January were *Index adjusted for currency movements. 30 September 2011 31 October 2011 140.51 144.47 Data Source: ICE positive. On top of the political tensions, positive investor sentiment also supported31 November 2011 151.0531 December 2011 152.2531 January 2012 155.87 oil prices as tentative signs of improving 1 Mth  2% 3 Mth  7% 12 Mth  15% economic growth took shape. As a result, oil price rose 2% in January.
  • 3. Bord Gáis Energy Index JANUARY 2012 Natural Gas Index Natural Gas Graph 250 NATURAL GAS Data 31 January 2009 195.04 The January average Day-ahead gas price 28 February 2009 31 March 2009 156.23 99.24 was lower than its December equivalent by 3%. Despite very cold weather at the 30 April 2009 92.78 31 May 2009 30 June 2009 31 July 2009 87.00 87.56 76.34 200 end of January across Ireland, Britain and 31 August 2009 69.43 30 September 2009 31 October 2009 61.72 77.55 continental Europe, temperatures during Points 30 November 2009 83.21 the month were generally mild and gas 150 31 December 2009 100.00 demand was relatively low for the time of 31 January 2010 125.88 28 February 2010 114.44 the year. 31 March 2010 101.67 30 April 2010 106.04 31 May 2010 130.73 30 June 2010 145.29 31 July 2010 157.48 Low demand resulted in UK storage 100 31 August 2010 145.96 30 September 2010 31 October 2010 132.67 148.57 facilities being at around 73% full at the end 30 November 2010 31 December 2010 167.11 204.87 of January compared to 38% the previous year. High storage levels after 4 months of 31 January 2011 188.31 28 February 2011 179.74 50 31 March 2011 194.03 30 April 2011 31 May 2011 181.39 184.99 winter put downward pressure on prices. 30 June 2011 31 July 2011 183.36 179.36 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Reduced gas demand was also seen in 31 August 2011 30 September 2011 172.82 180.07 *Index adjusted for currency movements. Europe as evidenced by data released by Societe General, stating that European gas 31 October 2011 180.16 Data Source: Spectron Group31 November 2011 191.5331 December 2011 189.9431 January 2012 184.35 demand slumped 9.5% in 2011. 1 Mth  -3% 3 Mth  2% 12 Mth  -2% Colder conditions toward the end of the month caused an increase in storage withdrawals and a spike in natural gas prices. Coal Index COAL 260 European coal prices fell 8% in January. Low Coal Graph Data 31 January 2009 28 February 2009 102.58 93.02 demand for coal in Europe due to relatively 31 March 2009 82.80 mild winter weather (reducing demand 205 30 April 2009 78.58 for coal to generate electricity to produce 31 May 2009 76.19 30 June 2009 76.68 power to heat homes) and already high 31 July 2009 81.48 31 August 2009 84.15 30 September 2009 83.00 inventory stocks, as well as an oversupply Points 31 October 2009 86.26 150 30 November 2009 88.54 31 December 2009 31 January 2010 100.00 105.77 of alternative for power generation such 28 February 2010 31 March 2010 95.28 95.51 as natural gas, put downward pressure on prices. High wind levels in January, 30 April 2010 108.11 31 May 2010 125.06 particularly in Germany, also meant that 30 June 2010 132.03 95 31 July 2010 121.85 31 August 2010 123.28 30 September 2010 31 October 2010 121.29 121.83 power plants that run on coal and other 30 November 2010 31 December 2010 150.34 159.48 fossil fuels received less running time and 31 January 2011 148.31 stock piles of coal were not depleted. 40 28 February 2011 149.34 31 March 2011 153.91 30 April 2011 31 May 2011 148.29 145.75 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 In addition to reduced European demand, lower Chinese and Indian buying as well 30 June 2011 144.90 31 July 2011 147.62 *Index adjusted for currency movements. as projected negative economic growth in 31 August 2011 149.65 30 September 2011 156.20 Data Source: ICE 31 October 2011 145.04 31 November 2011 31 December 2011 142.82 145.65 Europe in 2012 also weighed on the market. 31 January 2012 134.66 Coal price did receive some support from a 1 Mth  -8% 3 Mth  -8% 12 Mth  -9% stronger euro versus the US Dollar (making coal cheaper for European buyers and potentially boosting demand), and higher Electricity Index oil and German power prices. Electricity 180 ELECTRICITY Graph Data 31 January 2009 127.36 Irish wholesale electricity prices were 2% 28 February 2009 31 March 2009 117.38 89.56 lower in January compared to December. 30 April 2009 31 May 2009 88.58 82.33 Unseasonably mild weather for most of the month and consistently high winds put 30 June 2009 91.74 31 July 2009 31 August 2009 30 September 2009 83.00 89.26 87.28 140 downward pressure on wholesale prices. Points 31 October 2009 91.82 30 November 2009 93.65 31 December 2009 31 January 2010 100.00 105.32 High wind levels meant that the electricity 28 February 2010 31 March 2010 98.50 90.42 produced by more expensive thermal 100 plants was substituted with cheaper 30 April 2010 93.24 31 May 2010 105.19 30 June 2010 104.88 31 July 2010 31 August 2010 106.05 105.66 electricity from wind farms over extended 30 September 2010 31 October 2010 109.05 112.69 periods in January. The consistent nature of the wind generation also meant that fossil 30 November 2010 115.75 31 December 2010 136.21 fuel generators were started less often 31 January 2011 123.78 60 28 February 2011 120.12 31 March 2011 129.24 30 April 2011 31 May 2011 127.27 118.10 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 which helped to keep wholesale prices low. 30 June 2011 112.46 31 July 2011 112.53 31 August 2011 118.86 Data Source: SEMO 30 September 2011 117.61 31 October 2011 114.14 31 November 2011 123.77 31 December 2011 119.63 31 January 2012 117.47 1 Mth  -2% 3 Mth  0% 12 Mth  -5%
  • 4. Bord Gáis Energy Index JANUARY 2012 FX Rates 31 January 2009 EUR/USD 1.283 31 January 2009 EUR/GBP 0.887 FX RATES 1.60 28 February 2009 31 March 2009 1.272 1.323 28 February 2009 31 March 2009 0.886 0.925 Increasing hopes that Greece and 30 April 2009 1.321 30 April 2009 0.894 31 May 2009 1.412 31 May 2009 0.874 its creditors were getting close to an 1.40 30 June 2009 1.405 30 June 2009 0.853 31 July 2009 1.424 31 July 2009 0.853 agreement in the latter part of January, that would allow it to receive a second 31 August 2009 1.434 31 August 2009 0.88130 September 2009 1.464 30 September 2009 0.914 31 October 2009 1.474 31 October 2009 0.896 round of international aid, stabilised the 1.2030 November 200931 December 2009 1.498 1.433 30 November 2009 31 December 2009 0.913 0.888 euro and improved market sentiment 31 January 2010 1.389 31 January 2010 0.867 28 February 2010 1.360 28 February 2010 0.893 toward the region. This improved 1.00 31 March 2010 1.353 30 April 2010 1.327 31 March 2010 30 April 2010 0.891 0.868 sentiment was also reflected in what was 31 May 2010 30 June 2010 1.230 1.226 31 May 2010 30 June 2010 0.846 0.819 perceived to be successful debt sales by 31 July 2010 1.305 31 July 2010 0.831 European countries which resulted in 0.80 31 August 201030 September 2010 31 October 2010 1.269 1.362 1.392 31 August 2010 30 September 2010 0.827 0.866 falling European borrowing costs. 31 October 2010 0.869 Despite the euro hitting a 16 month30 November 2010 1.304 30 November 2010 0.83731 December 2010 1.337 0.60 31 December 2010 0.857 31 January 2011 28 February 2011 1.370 1.379 31 January 2011 28 February 2011 0.854 0.849 low of 1.27 versus the US Dollar on the Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 31 March 2011 30 April 2011 1.419 1.483 31 March 2011 0.883 16th of January following downgrade announcements, the euro appreciated by 30 April 2011 0.888 31 May 2011 1.437 31 May 2011 0.874 30 June 2011 1.451 31 July 2011 1.438 30 June 2011 31 July 2011 0.903 0.875 1% in the month. Improved confidence in 31 August 201130 September 2011 1.441 1.345 31 August 2011 0.885 the prospects of global economic stability 1 Mth  31 October 2011 1% 1.395 3 31 October  -6%0.8615 12 Mth  -4% Mth 2011 30 September 2011 0.860 EURUSD may have also encouraged investors to31 November 2011 1.3446 0.8562 reverse some of the safe haven flows into 31 November 2011 31 December 2011 1.2961 1 Mth  31 January 2012 0% 1.3084 3 31Mth  -4% December 2011 0.8334 12 Mth  -3% EURGBP 31 January 2012 0.8302 US Dollar denominated assets. The euro was unchanged versus the Pound Sterling in January. MARkET OUTLOOk: There are a number of variables at play which have the potential to increase or decrease commodity fuel prices in the coming months. The outcome of the ongoing discussions between Greece and its bondholders on cutting the nation’s debt burden has the potential to stabilise or destabilise the fragile European and global economy. Despite some positive economic releases and improving investor sentiment, confidence is at this stage very tentative and will be influenced heavily by releases which will provide further evidence about the true state of the global economy in the months ahead. Continuing cold weather in continental Europe has the potential to deplete heavy stocks of coal and gas and this could put some upward pressure on prices. Finally, Iran’s reaction to the embargoes being imposed and the West’s attitude toward its nuclear programme has the potential to escalate tensions in a region that is vital to global oil supplies. RE-wEIGHTING OF BORD GÁIS ENERGY INDEX: Following the SEAI’s 2009 review of energy consumption in Ireland, released in Q4 2010, there was a 9.3% drop in overall Oil 64.93% energy consumption. The most notable drop of 1.39% was in oil consumption in the form of gasoline and diesel. This reflects the economic downturn experienced at the time. The share of natural Gas gas and electricity increased by 0.63% and 0.57% respectively. An 13.52% increase in the use of renewables and peat, at the expense of coal in electricity generation was also observed. As a result the Bord Gáis Energy Index has been reweighted to reflect the latest consumption Electricity Coal data. This has had a minimal effect on the overall shape of the Index, 18.40% 3.16% but may indicate future trends. For more information please contact: Fleishman-Hillard — Aidan McLaughlin — 085 749 0484 Bord Gáis Energy — Christine Heffernan — 087 050 5555 Disclaimer: The contents of this report are provided solely as an information guide. The report is presented to you “as is” and may or may not be correct, current, accurate or complete. While every effort is made in preparing material for publication no responsibility is accepted by or on behalf of Bord Gáis Eireann, the SEMO, ICE Futures Europe, the Sustainable Energy Authority of Ireland or Spectron Group Limited (together, the “Parties”) for any errors, omissions or misleading statements within this report. No representation or warranty, express or implied, is made or liability accepted by any of the Parties or any of their respective directors, employees or agents in relation to the accuracy or completeness of the information contained in this report. Each of the Parties and their respective directors, employees or agents does not and will not accept any liability in relation to the information contained in this report. Bord Gáis Eireann reserves the right at any time to revise, amend, alter or delete the information provided in this report.