Jera, EDF To Form 'Jera Global Markets' JV
Jera, the 50-50% LNG joint venture of Tokyo Electric and Chubu Electric set up in 2015, and EDF Trading (EDFT) announced July 3 they have signed binding agreements to form an LNG optimisation and trading joint venture. It will involve Jera and EDFT's LNG optimisation and trading activities being merged into Jera Trading (Jerat), owned 66.67% by Jera and 33.33% by EDF's wholly owned EDFT.
Jerat will be renamed 'Jera Global Markets' when the transaction is completed, expected early 2019.
EDFT and Jera, which is Japan's largest LNG importer, in late 2017 signed a non-binding agreement to set up Jerat as a joint venture, saying its definitive formation would follow this year. Now Jera and EDFT will now have joint responsibility and joint control in managing the new and expanded business and each will have two executive directors. The CEO will be appointed by Jera.
This follows the successful completion of the acquisition of EDFT’s coal business by Jerat on April 4 2017.
"With demand for LNG in Japan becoming increasingly variable and difficult to predict and the ramp up in US LNG liquefaction, Europe has become a key balancing market for excess global LNG. As a result, Jera and EDFT believe that there is significant room for optimising LNG on a global basis, establishing a more liquid market, and, over time, developing a clear pricing signal for LNG in Asia," they said.
"Jera and EDFT have significant positions in the LNG market and this new business will bring important resources including risk management capabilities to this new partnership which will better position Jerat to respond to the uncertainties of LNG demand in Japan and Europe. Jera has been focusing on developing flexible LNG supply sources as flexible procurement is more important than ever before due to the large scale introduction of renewable power generation globally. EDFT has a successful third party LNG trading business and access to the European LNG and gas markets to enable the unloading, reloading and storage of LNG in-tank, and is one of the largest financial JKM traders in the market," their statement continued. Standard & Poors' Japan Korea Marker is the main index for spot LNG trade in northeast Asia.
Jerat will manage both parents' collective short and medium term LNG optimisation activity and have about 300 staff based in Japan, Singapore, UK, US and the Netherlands.
This new agreement will bring more flexibility and scope to both parent companies, without affecting Jera’s and EDF’s long-term procurement, the statement added.
As part of this transaction, EDF Trading North America will be responsible for supplying electricity and natural gas to meet Jera’s capacity requirements at the Freeport liquefaction terminal, while EDFT in Europe will become the exclusive market interface for Jerat with respect to the European natural gas markets.
EDF-run Italian firm Edison's gas midstream chief Pierre Vergerio had told NGW during the Flame conference in mid-May that EDF was in talks with a major LNG buyer on a new joint venture.
“We look forward, through Jera Global Markets, to optimising our global LNG portfolio with more flexible LNG sources and associated shipping positions amid the uncertainties of LNG demand in Japan and global LNG market developments,” said Jera president Yuji Kakimi.
EDFT CEO John Rittenhouse said this marked "another important step in our relationship with Jera, which started in 2005 and has significantly grown over the years." Two years ago EDFT contracted to buy 1.5mn mt LNG from Jera spread over two and a half years, starting June 2018, for delivery to unspecified European terminals.
EDF announced June 29 it had agreed to divest its 65.01% stake in the 13bn m3/yr Dunkirk LNG terminal, France's largest. EDF is expected to retain its large 8bn m3/yr capacity position there. A major new 1.2mn mt/yr long-term contract from the planned Mozambique LNG venture was contracted in February 2018 for import at Dunkirk; deliveries under that contract may start as soon as 2023.