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Q3 Report: King coal makes return amid Europe’s record gas prices

Record gas prices across Europe saw coal and lignite make up a greater share of Europe’s fuel mix than gas in the third quarter of 2021.
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This article was originally published by Power Engineering International

Record gas prices across Europe saw coal and lignite make up a greater share of Europe’s fuel mix than gas in the third quarter of 2021.

That was one of the key standouts from the latest report from energy market data analyst EnAppSys, European Electricity Generation Summary Q3-2021.

European coal and lignite plants produced 110TWh during the quarter compared with 92TWh generated by gas-fired plants.

Image credit: EnAppSys

Gas-fired generation output was 21TWh (18%) down on the previous quarter and 55TWh (37%) lower than in the same quarter last year. Meanwhile, coal generation in Q3 2021 was 21TWh (24%) greater than the previous quarter and 19TWh (21%) up on the same quarter last year.

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Jean-Paul Harreman, director of EnAppSys BV, said: “The sustained trend of increasing gas prices across Europe was driven by several factors, including the need to replenish low levels of storage resulting from a long cold winter last year, high levels of global LNG demand and limited flows of Russian gas into Europe as Russia reportedly sought to replenish its own storage stocks.

“The high price levels flipped the economics of coal/lignite versus gas-fired generation, despite the high price of EU Emissions Trading Scheme (ETS) allowances resulting from the increased demand caused by such fuel-switching.”

Image credit: EnAppSys

The third quarter of 2021 saw electricity demand reach 653TWh, slightly below levels in most previous years although 2% higher than in the COVID lockdown-affected Q3 last year.

Renewable output contributed more than 40% of total generation in Q3, as increasing levels of installed wind capacity offset the impact of reduced wind speeds throughout the period. After low levels of output in Q3 last year, nuclear output of 184TWh returned to levels more typically seen in the same period in previous years. 

The EnAppSys report, GB Electricity Market Summary Q3-2021, shows that in the United Kingdom, record-breaking power prices were seen in the third quarter as margins of generation over demand were squeezed due to very low wind output. 

System prices, day-ahead prices and within-day off-peak prices all increased dramatically from the previous quarters – and hit record highs towards the end of the quarter.

EnAppSys said the record prices were due to several factors, including lower wind generation, low nuclear utilisation and unfavourable conditions for solar, higher imports and low European gas storage levels following a long winter last year, which led to extreme gas prices.

Paul Verrill, director of EnAppSys, said: “High wholesale electricity prices throughout the quarter were driven by gas prices, which were already high at the start of the quarter at £31.37/MWh and continued to rise further as the quarter progressed. The price passed £50.00/MWh on September 13 and closed the quarter at £72.01/MWh, showing no signs of easing. A major contributor to this is the global gas shortage, with total European stored gas reserves not yet replenished after a long winter and being around 25% lower than the same period last year. Indeed, these reserves were lower than in any Q3 since 2015.

“Carbon allowance prices were also at an all-time high, rising consistently from August onwards and peaking at £75.57/te on the penultimate day of the quarter. This also fed into the high level of wholesale electricity prices seen throughout the quarter.

“The break-even cost of gas generation increased to such a degree that by mid-September, at times it became cheaper to generate using the least efficient coal units than the most efficient gas units.

“The record prices were also driven by lower wind output, which was 28% down on levels seen in the same period last year, while low nuclear utilisation and unfavourable conditions for solar further reduced supply margins.

“Looking ahead to Q4, if levels of renewable generation remain low, trends of high prices are likely to continue into the winter.”

Due to the low levels of renewables and nuclear, interconnectors from the continent saw record level import volumes, although a fire at the IFA interconnector in September reduced capacity in the last two weeks of the quarter.

Gas and coal made up the majority of the generation (42.5%), while renewables accounted for 29.1%. Imports (12.4%) and nuclear 16.1%) made up the rest of Britain’s power mix during the quarter.

Paul Verrill continued: “Average APX prices reached £128.59/MWh, a 78.1% increase from Q2. System prices peaked at a record £4,037.80/MWh on September 9. This was the highest imbalance price seen since the £5,003.33/MWh in June 2001, shortly after NETA Go-Live, breaking the next highest for this year that had been set on January 8 2021 at £4,000.00/MWh at 19:00 and 19:30.

System Summary – System Prices. Credit: EnAppSys

“The average system price was £126.14/MWh, the highest of any quarter back to the start of our dataset in Q4 2011, with the next highest being an average of £74.85/MWh in the previous quarter.

“Auctions for the UK Emissions Trading Scheme allowances launched in May 2021, with clearing prices initially higher than those for the EU scheme that it replaced, amounting to £48.01/te for GB compared with £42.37/te for EU. They had converged to within around £2.00/te from June until September, but then diverged with GB prices peaking at £75.57/te on September 29, while EU remained under £55.00/te.”

The third quarter of 2021 also saw ten energy suppliers cease trading amid the surge in wholesale gas prices, most notably Avro, Green and People’s Energy. In total, more than 1,840,000 customers were affected.

All reports are available online.

The post Q3 Report: King coal makes return amid Europe’s record gas prices appeared first on Power Engineering International.

Energy & Critical Metals

3 Rare Earth Stocks on Watch as Talk of a Chinese Mega-Merger Grows

At a time when both the global supply chain crisis and U.S.-China relations hang hotly in the balance, China has announced an important decision that threatens…

At a time when both the global supply chain crisis and U.S.-China relations hang hotly in the balance, China has announced an important decision that threatens to affect both matters significantly. Today, the Wall Street Journal reports that China is planning to create a new rare earth mining company that will be owned by the state. While there’s no question that the forming of such a company will directly affect rare earth stocks, so far the reactions from the sector have been mixed.

Source: LuYago / Shutterstock.com

What’s Happening With Rare Earth Stocks

The rare earth sector has been an interesting one to follow this year, particularly as the electric vehicle (EV) boom has highlighted a new market for its companies. The news out of China today hasn’t done much to affect Nevada-based MP Materials (NYSE:MP), a company that has seen more than its fair share of turbulence this past year but has remained overall in the green for most of it. As of this writing, MP stock is up 2.16% for the day, although it has declined slightly from the peak it saw this morning. While it’s down more than 6% for the week, the stock is in the green for the month by more than 2%.

In a state not too far away, though, things aren’t looking so rosy. Texas Mineral Resources Corp (OTCMKTS: TMRC) has seen its shares fall by more than 4% today, demonstrating a fairly turbulent pattern. Despite being up by more than 12% for the week, TMC is down for the month by almost 19%.

Many miles away in Australia, a similar company is experience similar patterns. Lynas Rare Earths (OTCMKTS:LYSCF) is down by more than 2% for the day with losses for the week just shy of that figure. For the month, though, the small stock has seen shares rise by more than 18%.

Why It Matters

China’s new firm, titled China Rare Earth Group, will be based in the country’s southern province of Jiangxi, an area rich in resources. It will be built through the merging of assets of several prominent state-owned mining firms. According to WSJ, part of the mindset behind this massive industry consolidation is the goal of gaining the clout necessary to “undercut Western efforts to dominate critical technologies.”

For a company like MP Materials, there will very likely be negative implications if the firm is indeed constructed. The company has emphasized that its goals involve helping restore the rare earth supply chain and helping reduce the sector’s heavy dependence on China. The international economic superpower that MP has focused on challenging is about to get considerably stronger and more powerful. That’s bad news for MP and most other rare earth stocks.

While some reports have framed it as a company well-positioned to accomplish an important task, the picture painted for investors hasn’t always been so positive. In October 2021, a report from Grizzly Research staked the claim that the company had issued unattainable projections. While the stock was down during that month, it’s been rising fairly steadily since. Earlier this year, InvestorPlace’s Joseph Nograles touted the upside potential he saw in MP stock as a key component of the emerging EV market.

What It Means

As TRMC and LYSCF trade at much lower levels than MP, it’s hard to gauge just how much they stand to be affected. What is clear, though, is that China is clearly furthering its quest to dominate the section of the global supply chain that concerns strategic metals. The construction of a state-owned giant to help the country gain further control of highly valuable rare earth materials certainly won’t do any favors for the U.S.

This story is certainly worth watching as it unfolds, but this is likely not the time for a bullish play on rare earth stocks.

On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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Author: Samuel O'Brient

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Energy & Critical Metals

Dear NIO Stock Fans, Mark Your Calendars for This Potential Catalyst on Dec. 18

Fans of electric vehicle (EV) stocks are anxiously awaiting Nio Day, which has been confirmed to take place on Dec. 18 in Suzhou, China. Nio (NYSE:NIO)…

Fans of electric vehicle (EV) stocks are anxiously awaiting Nio Day, which has been confirmed to take place on Dec. 18 in Suzhou, China. Nio (NYSE:NIO) is expected to debut at least two new vehicle models and possibly a brand new vehicle brand. During Nio Day 2020, the EV maker unveiled the ET7 sedan to much fanfare. Deliveries for the ET7 sedan are expected to start in 2022 for most countries, although confirmation for this timetable will likely be answered at Nio Day.

Image showing a Nio store with a glowing logo on the front.Source: Andy Feng/Shutterstock.com

Nio also impressed shareholders after releasing its November delivery numbers. The company reported that it had delivered 10,878 vehicles, up nearly 106% year-over-year (YOY). This brings total year deliveries to 80,940 vehicles, up more than 120% YOY. The November numbers were much needed after Nio reported disappointing October deliveries. Those numbers came in lower due to supply-chain issues and chip shortages. InvestorPlace contributor Vandita Jadeja notes that Nio’s expected fourth-quarter deliveries of 23,500 to 25,500 vehicles will be difficult to accomplish.

Without further ado, let’s dive right in to what investors should know about Nio’s most exciting day of the year.

Nio Day: What NIO Stock Investors Should Know

  • Rumors are flying around that one of the new vehicles to be released during Nio Day is the ET5, a mid-sized sedan. The ET5 will reportedly compete with the BMW (OTCMKTS:BMWYY) 3-series and the Audi A4 at a lower price (Audi is owned by Volkswagen (OTCMKTS:VWAGY)).
  • The ET5 will likely be priced below the ET7, which has a base cost of around $69,000.
  • According to a research note from Deutsche Bank, the second mystery EV is expected to be similar to the Toyota (NYSE:TM) Alphard, a luxury multi-purpose vehicle (MPV) that “sold 20,000 units in China last year.” Deutsche’s second guess is a high-performance sports coupe.
  • Nio recently filed a trademark registration for the name EF9, according to ElectricVehicleWeb. This has led many to speculate that the new vehicle will be a convertible version of the EP9.
  • CEO William Li confirmed that Nio plans on adding three new models to the Nio Technology Platform 2.0 in 2022. One of the models will be the new ET7 sedan. The other two are still unknown.
  • Fans of NIO stock are also waiting for an update on overseas delivery times and availability, especially in European countries. The company will likely answer this question at Nio Day.
  • Li confirmed during a Q2 conference call that Nio had assembled a team to work on a new vehicle brand. In regards to the possible new vehicle brand, Li commented, “The relationship between Nio and our new mass-market brand will be like that of Audi-Volkswagen and Lexus-Toyota.”
  • On the date of publication, Eddie Pan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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    Author: Eddie Pan

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    Energy & Critical Metals

    Nubank IPO: When Does Nubank Go Public? What Is the NU Stock IPO Price Range?

    “Finally, you’re in control of your money,” promises Nubank. The Brazilian-based company is the largest fintech institution in Latin America, but…

    “Finally, you’re in control of your money,” promises Nubank. The Brazilian-based company is the largest fintech institution in Latin America, but its reach expands as far as Berlin, Germany. Operating completely digitally with no physical headquarters, the neobank has a list of investors that includes Warren Buffett’s Berkshire Hathaway (NYSE:BRK-A) investment fund, which took a $500 million position earlier this year. Now, as this year winds to a close, Wall Street is bracing for the Nubank IPO (initial public offering). Indeed, this could be the last in a long line of exciting debuts that investors have seen this year.

    A Nubank sign outside of an office building.Source: Jo Galvao / Shutterstock.com

    What to Know About the NuBank IPO

    There’s plenty that investors should be keeping in mind as markets prepare for the Nubank IPO. Let’s discuss the specifics.

    As of tomorrow, Nubank will begin trading on the New York Stock Exchange under the symbol NU. However, it doesn’t stop there. Additionally, Nubank will be trading on Brazil’s San Paolo Exchange. In late November, the company updated the price range to between $8 and $9 per share. Assuming that the price stays at $9, the IPO will raise roughly $2,859,497,856. It’s worth nothing, though, that this price range is a downgrade from where it previously stood, between $10 and $11.

    InvestorPlace’s William White recently reported that the company claims to have a commitment from “certain investors to purchase an aggregate amount of at least $1.3 billion of Class A shares in the IPO.” While the term “certain investors” carries ominous undertones, it may just be an unconventional choice of wording. The offering will also include a 30-day option from underwriters that will allow for the  purchase an additional 28,571,429 shares set at the IPO price point. As of now, the company is valued at slightly over $40 billion, also a downgrade from its original valuation of $55 billion.

    Founded in 2013, Nubank was built by three entrepreneurs, David Velez of Colombia, Edward Wible of the United States and Cristina Junqueira of Brazil.

    What Can We Expect?

    As of Sept. 30, the neobank reported an active user count that totaled 48 million. As the company operates primarily in Latin America, where many lean toward an unbanked lifestyle, that statistic is impressive.

    That said, the aforementioned decrease in Nubank’s valuation certainly raised some questions — and not without reason. While some have made arguments that it is indicative of a diminishing market or troubling sector, the fact that Warren Buffett maintains his position in the company shouldn’t be discounted.

    It’s also worth noting that this season has brought some highly impressive IPOs, such as electric vehicle (EV) producer Rivian (NASDAQ:RIVN), which rocked Wall Street in the best way possible in its debut. By comparison, most of the IPOs that followed haven’t looked so good. But that certainly doesn’t mean they don’t have the potential to take off.

    The Nubank IPO is happening a time when markets are still reeling in reaction to the omicron variant. Plus, there still may be darker days ahead. However, if that proves to be the case, completely digital banking institutions like Nubank could certainly stand to benefit. Even at the current lowered valuation, its IPO is worth watching.

    On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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