Revenue growth and large amounts ahead: Energoatom-Trading demonstrates sales strategy effectiveness
Owing to SS «Energoatom-Trading» sales strategy improvement in December 2020 – January 2021 both the amounts and electricity sales revenue increased significantly. According to recent reports, this March the Energoatom’s sales revenues reached UAH 5,303 bln excluding sales to the Guaranteed Buyer, while, for example, last November the Company's energy market sales revenue amounted to UAH 3,407 bln.
The updated strategy key point
The main changes in Energoatom-Trading's sales strategy are that Energoatom was the first to sell «basic» and «night» electricity at electronic auctions not for a month or two, but for a much longer period. Namely, in December 2020 the «basic» schedule provided for delivery for six months, in March 2021 «night» schedule provided for delivery for 9 months. Furthermore, Energoatom now conducts more electronic auctions, including for night products, which are the most difficult to sell.
Successful innovation primarily contributes to sales growth under bilateral contracts and improves sales in the day-ahead market and intraday market. 2 million 839 thousand MWh of electricity was sold under bilateral contracts this March on 708 thousand MWh sold in August 2020.
Electronic auctions and sales in the day-ahead market and intraday market
The growing number and frequency of e-auctions conducted by Energoatom-Trading allowed involving more bidders. Thus, in October 2020, on average only six bidders participated in the Energoatom-Trading auctions (except for PSO), as against 22 companies in March 2021.
Energoatom's sales in the day-ahead and intraday markets are growing as well. The specificity of this area lies in its situationality, given that it is necessary to make prompt decisions by choosing a sales strategy daily. Deepening the processes analysis in the day-ahead and intraday markets allowed Energoatom-Trading, in particular, to increase the percentage of successful bids. As the seller receives the proceeds from such transactions during the day, Energoatom gets the opportunity to increase cash flow significantly.
In January 2021, 42% of the amounts declared by Energoatom-Trading were accepted in the day-ahead and intraday markets compared to 68% in February and 76% in March. At the same time, the acceptance in the day-ahead and intraday markets in August 2020 amounted to 32%, in September – to 21%, in October – to 24%, whereas in November – to 50% and in December – to 40%.
Drop in imbalances
An active and more efficient electricity sales in the day-ahead market along with the sales growth in the bilateral contracts market expectedly made for a considerable «slump» in the so-called imbalances, implying that electricity is sold at a significant discount and substantial payment delays. Thus, in 2020 the amount of imbalances ranged from 9 to 17% of the total electricity sales, whereas in January 2021 this rate dropped to 8%, in February – to 4%, for two decades in March – to 2%.
Long-term contracts practice
During the long-term auction held on March 19, 2021 the Company's specialists used their successful experience in electricity sales for 6 months ahead gained at the auction conducted in December 2020. For the first time since the beginning of its work in the «new» market, Energoatom-Trading sold electricity for 9 months ahead.
As the results of bidding, Energoatom-Trading sold 1,100,500 MWh of «night» electricity that was 100% of the exhibited amount of electricity to be supplied in the period April 1 – December 31, 2021 at a weighted average price of UAH 851,94/MWh (excluding VAT). The total cost of production sold on the Commodity Exchange «Ukrainian Energy Exchange» amounted to almost UAH 938 million (excluding VAT). The buyers of Energoatom’s electricity were 16 companies. At the same time, buyers' bids nearly doubled the amount exhibited by the seller.
Such sales «for a long time» are in line with European and global practice, implying that nuclear companies sell their products for the next few years and have the opportunity to plan their own activities more carefully. In the near future, Energoatom-Trading intends to start selling electricity under contracts concluded for two and three years ahead.
Hartmut Jakob, Head of Energoatom-Trading, Energoatom Vice President, is convinced: «Intensified work on bilateral contracts has made it possible to improve all trading indicators in the first quarter of 2021, namely the acceptance in the day-ahead and intraday markets, drop in imbalances and, most importantly, growth of liquid cash flow for the Company. This, in turn, mitigated the negative unbalanced PSO model consequences for Energoatom.»
New approach advantages
Energoatom-Trading is aimed at sales efficiency upgrading, moreover, sales strategy improvement has yielded tangible results already for three months:
1. The Company's electricity sales revenue has increased. In January 2021, they amounted to UAH 4423 million (excluding sales to the Guaranteed Buyer), in February – UAH 4081 million, in March, according to recent reports – UAH 5303,3 million. In the previous six months, this rate was: in August 2020 – UAH 2961,9 million, in September – UAH 3544,5 million, in October – UAH 3837,7 million, in November – UAH 3407,1 million and in December – UAH 3986,1 million.
2. Due to the revenue growth in all market segments, reliable and prompt payments increased as well, thus the Company’s cash flow structure has improved.
3. Auction sale improvement made for rising competition and expansion of demand specifically for nuclear energy.
4. The successful Company’s activity in the day-ahead and intraday markets contributed to the increase of prompt cash inflows and settlements for sold products along with drop in imbalance while long-term contracts guarantee the predictability of Energoatom's incomes.