IW2EB International W2E Market Bulletin · Swedish state-owned utility Vattenfall is to sell two waste to energy plants in Germany to Steag for an undisclosed sum. Vattenfall will

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Issue 26 – 22 November 2016

About IW2EB: The global energy complex is a mixed basket of power and heat generation, supply networks and logistics and distribution systems existing in both regulated and de-regulated environments fed by various fuel sources enabling power trading and the integration of carbon credits and renewable tax incentives. For RDF and SRF to be recognised as a sustainable source of energy to feed into the global complex requires transparency and standardisation of product. This in turn enables market participants to manage the risks associated with global power and heat generation, distribution and supply by using hedges, swaps, futures, and other financial instruments. The W2E/AEI © Price Index produced by International W2E Market Bulletin enables the market to function cohesively, and to forecast and plan ahead and include RDF and SRF in the fuel mix. Benefits include all market participants being able to comply with their national waste hierarchy schemes and adhere strictly to CSR and environmental policies. W2E/AEI © can be found on Pages 11 & 12 in this issue. IW2EB provides comprehensive market coverage, information and price analysis to promote the development of a liquid and transparent SRF/RDF/AF global market.

IW2EB International W2E Market Bulletin Trade in Global Waste-to-Energy (W2E) Markets and the Alternative Energy Index (W2E/AEI ©)

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IW2EB Market Commentary Page 2

The RDF/SRF energy sector volatility continue caused by a lack of available spot tonnes and increasing demand in key markets. For RDF, shipments to Rotterdam are still seeing enquiries for extra material. Traders are indicating that AEB’s Amsterdam plant is still building up stocks. Contract tonnes are being called and its leaving suppliers with limited room for spot deals. Gate Fees are lower and the short-term outlook favours suppliers. Potential downsides are the over-supply in the German market; if material can be exported to neighbouring countries due to rising gate fees of up to €185.00 pmt, it could change the game. Italian suppliers continue to knock on doors to offload its millions of off-spec RDF/SRF, but fees will have to be drastically re-examined to undercut in –spec traditional suppliers. For SRF prices into southern Europe (Portugal), prices are about $67.00 pmt CIF, while prices in some Scandinavia and Baltic countries are also improving (see price table). For other Alternative Fuels, used tyre prices (TDF) into Turkey are increasing. A lack of thermal coal and petroleum coke is encouraging some industrial buyers to widen their fuel portfolio. TDF is assessed on average at $37.00 pmt CIF Marmara, up $5.00 pmt on the last W2E issue. Securing a reliable supply is the main challenge. In Egypt, alternative fuels continue to be scarce, as internal logistics create issues. But prices are also strong at $55.00-60.00 pmt. At this level, solid fuels are more competitive, as is natural gas.

IW2EB European Physical RDF & SRF Price Markers (Weighted) Page 3

Gate Fees Paid / A positive (+) indicates price paid by Receiver / W&B *** Weighted – Contract & Spot / Previously Contract Only ***

UK Loadports (handysize) Freight (€) CFR (RDF) CFR (SRF) Rotterdam 10.00 81.00 67.00 Amsterdam 10.10 81.25 67.10

Antwerp 9.75 81.50 68.00 Terneuzen 10.50 81.90 69.00

Dunkirk 9.25 85.00 70.00 Hamburg 9.75 79.00 69.00 Esbjerg 14.00 83.00 70.00 Inkoo 14.00 83.25 70.00

Gothenburg 13.50 84.00 71.00 Riga 16.00 78.00 60.00

Aveiro 12.50 82.00 67.00 Mundra 42.00 NA +42.00

Casablanca 38.00 NA +38.00

IW2EB Logistics / Freight – Land & Sea Page 4

North Sea rates are increasing across all vessel sizes. Larger vessels are on longer routes, across most dry bulk commodities (wheat, fertilizers and coal) which is increasing vessel utilisation and helping to push up rates. Previously, handymax and supramax vessels were taking lighter loads in order to stay employed. Container rates from Immingham to Gothenburg are assessed at €40.00 pmt, while routes to Rotterdam are assessed at €36.00 pmt, broadly unchanged on the last issue. UK trucking costs to the continent are slightly higher at €38.00-42.00 pmt.

IW2EB International Projects & Supply Deals Page 5

EU – Industry

Industrial majors, LafargeHolcim, ArcelorMittal, Evonik and Solvay joined have formed a Low Carbon Technology Partnerships Initiative across the steel, cement and chemicals industries. They are looking at manufacturing processes at the three energy intensive sectors in order to reduce emissions.

Germany

Swedish state-owned utility Vattenfall is to sell two waste to energy plants in Germany to Steag for an undisclosed sum. Vattenfall will offload the Lauta and Ruedersdorf facilities which can each burn 475,000 tonnes of waste a year. Steag held some 25% of Lauta prior to the deal. Vattenfall said it is “taking a further step in its strategic redirection, focusing in Germany on the expansion of wind power, heat in Berlin and Hamburg, on distribution networks and on local energy services”. The transaction has already been cleared by German antitrust authorities and it is expected to close during the first half of 2017.


Guam Guam Power Authority has been asked to analyse the potential monetary value of developing a waste to energy facility on the island, which could take waste from neighbouring islands. But first there would have to be a settlement on a previous agreement to build a waste to energy facility, which has fallen foul of a legal dispute. Guam Economic Development Authority is being sued for $20 million in damages over breach of contract following the granting of a licence 20 years ago that has been prevented from being used to build a power plant.

India Tests for solid recovered fuel at ACC Indian cement kilns had positive results. The material had a heat value of 4,000 kcal/kg NAR. It is hoped that >50% of dry municipal solid waste will be get fully utilised. An ambitious target, as waste-to-energy plants do not have much political or business support and there are no SRF waste handling facilities in the country right now.


India The National Green Tribunal has asked the Delhi Government and civic bodies for information about the total amount of municipal solid waste generated daily. The NGT expressed concerns about the functioning of waste to energy plants in the city and said authorities needed to understand how much waste is being generated and used. It has also asked waste to energy companies to plant a green cover around the sites so that harmful gases are trapped and do not enter residential areas. A tribunal has been inspecting sites to understand how much fly ash is generated.

Morocco The European Investment Bank has approved up to €20 million of finance to develop solid waste management sector investments by private promoters. EIB said that the project will contribute to reducing environmental, health and climate impact from waste disposal and to creating a circular economy in Morocco. Morocco banned the import of Italian SRF in Q3 16 after a public outcry, following a spillage at the port of Casablanca.


Pakistan Pakistan’s Cement Manufacturers Association (APCMA) is concerned about volatile international coal prices which have nearly doubled for its users since May this year. Cost of coal contributes more than 30% to the total production cost of cement manufacture. The government has also imposed stricter local rules on coal transportation in Pakistan. Pakistan’s Alternative Fuel use is mainly limited to used tyres but securing a reliable supply, means coal is the default fuel of choice.

Sweden The port of Gothenburg opened a new RDF import terminal which handles waste arriving from the UK’s Immingham port this month. The terminal is operated by Norwegian-owned waste fuels specialist Geminor and has the capacity to handle about 200,000 tonnes of RDF each year which is consumed by local power stations.


Thailand

A consortium comprising Glow Energy, Suez and WHA Utilities and Power – Chonburi Energy – will develop an industrial waste to energy plant in Chonburi Province, Thailand. Total investment is estimated at $43 million with commercial operation due to commence at the end of 2019. The plant will have capacity of 9 Megawatts and will operate under the feed-in tariff scheme.

United Kingdom

Veolia has officially opened its Leeds Recycling and Energy Recovery Facility on 15 November. Built under contract with Leeds City Council, the plant can process in excess of 200,000 tonnes a year of residual waste and can generate 11 MW of electricity. Veolia estimated the cost of designing, building and operating the facility would cost £460 million in 2012, when it was awarded the contract. Construction began in 2013. Veolia will operate the facility for the remainder of its contract with the council.


United Kingdom Waste to energy operator Impetus Waste Management have gone into administration with the loss of 73 jobs. The company’s waste transfer stations in North Tees and Leeds have ceased trading. But parts of the business have been taken over by new owners. Two landfill and composting facilities at Cowpen Bewley and Teesport have been sold to Highfield Environmental Limited. Impetus’s waste to energy plant could handle in excess of 600,000 tonnes of waste a year.

IW2EB W2E/AEI © – RDF & SRF – About The Index Page 11

•W2E/AEI© is a benchmark index for Alternative Fuels (AF), currently RDF and SRF, representing different specifications (semi-processed, processed) in accordance with standardised regulations. •W2E/AEI indices currently cover the visible geographic trading hubs. Expanding Global Supply v Demand requires an index to be used as a benchmark for trade in developing the expanding regions and countries. •W2E/AEI indices can be used for valuations of assets and trading; the index creates price transparency enabling investment in infrastructure. •RDF & SRF are Commodities. No different than oil, coal, gas. The index assists valuing the commodity as an asset facilitating trades by allowing exposure to AF fuel prices and enabling correlation to other similar asset classes or commodities, such as carbon fuels (liquid, solid, gas). •Energy Markets function by measuring gas or coal carbon value against Power values and Spark Spreads. W2E/AEI indices enable spread trading and risk management for AF’s. •Methodology used to report the index is based on reported trades for the delivery hub, global supply v demand and, freight costs. The basket of tonnage-weighted information is topped and tailed providing a robust index. •W2E/AEI adopts similar principles to other indexes; W2E/AEI will not influence AF pricing; it reflects value and provides a standardised trading instrument (SWFTA) for AF’s (currently RDF & SRF) providing market driven opinion on the current and future direction of AF prices. Like other indices W2E/AEI has no influence over prices, compared to Futures where physical delivery is used as a settlement.

IW2EB W2E/AEI © – RDF & SRF Page 12

Indices CV (NAR) Delivery Price

W2E-RDF1 12 – 15 Mj/Kg DAP ARA €102.38

W2E-RDF2 16 – 18 MJ/Kg DAP ARA €81.25

W2E-SRF1 14 – 18 Mj/Kg DAP ARA €67.37

W2E-SRF2 18 - 22 Mj/Kg DAP ARA €53.90

Detailed SSP (Standard Specification Parameters) for each quality are available to the International W2E Market Bulletin subscribers.

Quality variance from the SSP is reflected in the penalty/premium value (+/-) in the standard contract price clause (Euros).

IW2EB Thermal Coal Page 13

Coal markets corrected on news that China will aggressively increase its domestic coal production. The policy U-turn also triggered a collapse in swaps markets. China has increased its coal output by 30% already this month. Closer to home, Russian DAP ARA prices have fallen to $75.00 pmt down from $77.00 pmt in the last issue. Australian prices have dropped to below $85.00 pmt FOB after trading at $116.00 pmt FOB earlier in the month. South African prices are down over $20.00 pmt to $78.00-79.00 pmt FOB. There is more lower spec Colombian and Russian coal being offered. Stocks at ARA ports are also decreasing. Water levels on the River Rhine are improving and dry bulk barges can lift more at the import terminals.

IW2EB Petroleum Coke Page 14

Prices remain firm for loadings in the next 45 days, as short positions support the market. Tenders by oil refiners in the USA are closing at $72.00-75.00 pmt FOB for November and December loads (see price table). CIF prices into India are $98.00-99.00 pmt, while in Turkey they are about $100.00 pmt CIF. Supramax shipping costs are about $26.00 pmt and $16.00 pmt respectively. For the USA west coast, prices for 3% grades are very high, with a deal closing at $120.00 pmt FOB. Demand from Japan, China and South Korea is supporting sentiment on the west coast. The collapse in coal prices will feed through to the market.

IW2EB Solid Fuel Prices Page 15

Delivery Period 2016

Thermal Coal 6000 net kcal/kg

1% S CIF ARA - Ex Russia

Pet Coke 7000 net kcal/kg

5.0 - 7.0 % S FOB US Gulf

Pet Coke 7000 net kcal/kg

4.5 - 5.0 % S FOB US Gulf

January $45.00 $23.50 $31.00

February $44.00 $22.00 $29.00

March $44.90 $21.95 $27.00

April $45.75 $28.00 $32.00

May $44.80 $29.90 $42.00

June $48.00 $36.00 $45.00

July $53.00 $47.00 $52.50

August $55.00 $52.00 $55.00

September $57.00 $59.00 $65.00

October $74.00 $63.00 $76.00

November (MTD) $77.00 $73.50 $82.00

Monthly Averages

IW2EB Regulatory Page 16

Canada

Canada is planning to completely phase out coal-fired electricity production by 2030. Its provinces will only burn coal if plants are equipped with carbon capture and storage technology. This is an unlikely scenario given the low take up and high investment costs associated with this option. Alberta province adopted this plan in 2015 and will introduce a carbon tax in 2017; it is home to five of the six biggest coal plants in Canada. Ontario, phased out coal-fired electricity in 2014.

France

President Hollande of France announced that coal-fired electricity generation will be phased out by 2023 at the annual UN World Climate Change Conference (COP22) last Tuesday. France generates about 5% from its power from coal. France has four active coal-fired plants. France will adopt a carbon tax which will penalise coal-fired generation.

IW2EB International W2E Bulletin & W2E/AEI – Terms of Use Page

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IW2EB International W2E Market Bulletin · Swedish state-owned utility Vattenfall is to sell two waste to energy plants in Germany to Steag for an undisclosed sum. Vattenfall will