EDF unveiled an agreement on Tuesday to sell its coal trading business to Japan’s Jera, as the French utility seeks to strengthen its strained balance sheet and burnish its low carbon credentials.
The operations are poised to be subsumed into Jera Trading Singapore, a subsidiary of Jera, which is a joint venture between Tokyo Electric Power and Chubu Electric Power, two of Japan’s biggest utilities.
EDF Trading is less well known than rivals such as Glencore and Vitol but is one of the world’s largest and most profitable commodity trading businesses, specialising in coal, gas and electricity.
The company last year traded 845m tonnes of coal and related derivatives: a volume equivalent to the annual US consumption of the fossil fuel.
This has made EDF Trading’s coal business an attractive asset. Jera, meanwhile, is looking to expand its coal and natural gas trading businesses following increased competition at home stemming from the liberalisation of Japan’s electricity market.
“We’ll be able to create a truly global trading operation by integrating EDF’s coal trading platform and expertise in Europe and Jera’s operation in Asia,” said Izumi Kai, general manager at Jera.
EDF said: “Coal remains an important part of the fuel mix in the global energy markets and demand is expected to increase in Asia as it reduces in Europe.”
Both EDF and Jera declined to disclose the value of the transaction because talks on a final sale agreement are ongoing.
For EDF, which is 85 per cent owned by the French state, the sale of its coal trading business should help with efforts to shore up its stretched balance sheet.
EDF’s €37.4bn of net debt dwarfs its €20.6bn market capitalisation, and the company is promising to sell assets worth up to €10bn by 2020.
EDF is also preparing to embark on a series of major infrastructure projects, including plans for an £18bn nuclear power station at Hinkley Point in the UK. There are also proposals for an overhaul of France’s 58 existing nuclear power stations, which the country’s state audit office has estimated could cost €100bn.
Last year EDF flagged a possible sale of its coal trading business when it launched a strategic review of its “fossil fuel production and marketing activities”.
The company is attempting to highlight its environment-friendly credentials amid pressure from the French government to invest in renewable energy.
The proposed deal between EDF and Jera will include EDF Trading Australia, which owns 7.5 per cent of the Narrabri coal mine in Australia, and Amstuw BV, which operates the Rietlanden coal terminal in the Netherlands.
EDF Trading is an established coal supplier to Jera, and the two companies have a joint venture that started in 2008.
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