Gasum Annual Report 2010

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BUSINESS ENERGY TRADE Natural gas sales in Finland increased by 10% on the year before. Gas consumption during the year was characterised by major seasonal ﬂuctuation. Experiences gained from Gasum’s Natural Gas Pricing System launched at the beginning of the year were mainly positive. Developments in the risk management and short-term product markets were positive. Energy Trade is Gasum’s largest business area in terms of net sales. Energy Trade is concerned with the wholesale trade in natural gas. Sufﬁcient access to natural gas is ensured on the basis of a supply contract that is valid until 2026. The wholesale price of natural gas in Finland is determined on the basis of Gasum’s Natural Gas Pricing System. The price of natural gas comprises the energy charge and the transmission charge. The energy charge is based on the price of imported natural gas. The price is indexed to the price of heavy fuel oil and coal as well as to the domestic energy index calculated by Statistics Finland. Customers place annual orders for natural gas and have the option of conducting monthly capacity reviews. If necessary, they can supplement their order by acquiring extra gas or short-term products available from the Gas Exchange. Efforts are being made to develop pricing ﬂexibility mechanisms for a variety of usage situations. MARKET REVIEW Developments in Gasum’s Energy Trade followed general developments seen in the energy market in 2010: energy consumption increased as industrial utilisation rate began to return to normal. Particularly cold winter months increased energy consumption in heating, while a very warm summer reduced the need for energy. Natural gas consumption increased by around 10% on the year before in 2010. The year saw new consumption records at the hourly and monthly levels as well as usage periods with consumption rates remaining clearly below the long-term average. Gasum sold a total of 44.6 TWh of natural gas during the year. Natural gas sales are affected by weather, price development in the electricity and fuel markets and industrial utilisation rate. The fuel market saw the price of oil increase rapidly in the spring, drop a little in the summer and then increase slightly during the autumn. The price of coal increased steadily throughout the year. Electricity market prices rose clearly on the year before in the Nord Pool Spot exchange. There were no new major natural gas-fuelled sites introduced by our customers during the year. Fortum’s natural gas-fuelled Suomenoja power plant in Espoo saw its ﬁrst full year of operation in 2010. The highest spikes in natural gas consumption took place in early and late 2010, while in the summer consumption was considerably lower than in 2009. The very ﬁrst week of 2010 broke a new record in natural gas consumption: Friday 8 January from 10:00 to 11:00 am saw the highest hourly consumption in Finnish history: 9,100 MWh.That Friday also got very close to record levels in terms of daily consumption, reaching the second-largest consumption ever at 20.3 million m³, while June saw an all-time low in natural gas consumption. WELCOME RENEWALS IN PRICING SYSTEM Gasum’s new M2010 pricing system for the wholesale supply of natural gas was introduced at the beginning of 2010. Experiences gained during its ﬁrst year in use were mainly very positive, and expectations set during the system’s development were met from the perspective of customers and Gasum alike. More detailed customer feedback regarding changes made in the new pricing system has also been quite positive, although the efﬁcient utilisation of the M2010 required taking new factors into consideration when forecasting the need for gas and planning annual orders of natural gas. The option of monthly capacity reviews for increased ﬂexibility was received particularly well among customers during the year and was utilised quite extensively. The distribution of natural gas sales under the M2010 system between annual product, monthly product, small consumption tariff, extra gas and short-term products was in line with the expectations placed on the pricing system. The M2010 also generated increased activity in secondary market trading during the summer as had been hoped for. SHORT-TERM MARKET INCREASED In addition to annual and monthly products, Gasum’s customers can buy short-term products via the Gas Exchange. The online trading site provides access to gas offered by natural gas users and to the Gasum Plussa product. There was a considerable increase in the share of short-term products in energy trade in 2010, with a total of 3.1 TWh of Gasum Plussa sold and the number of Plussa transactions reaching 74,400 − more than triple the 2009 ﬁgure. Plussa trading was busy during the natural gas consumption peak periods as cold weather and price development in the electricity market increased natural gas consumption beyond the amounts estimated by customers in their annual orders.The share of Plussa in the total of natural gas consumption increased from 2.2% to 6.9%. HEDGING SERVICES POPULAR Hedging products and their combinations are available for the hedging of 55−100% of the energy charge used in natural gas energy trade up to 1−3 years in advance, while speciﬁc products 12 ANNUAL REPORT 2010

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