Czech traders bullish for Q3 ’17 on nuclear outages and Hungary

Traders have bullish expectations for the Czech Q3 ‘17 contract based on overlapping nuclear maintenance and tight Hungarian and Balkan markets.

With scheduled maintenance planned at both Temelin and Dukovany nuclear power plants during July and August, supply will be limited during the third quarter.

On the demand side, a dry spring means the Hungarian market, usually dependent on Balkan reservoir stocks to prevent summer price spikes, may look to the Czech Republic and Slovakia as an alternative source of electricity imports.

Nuclear maintenance

Both Dukovany and Temelin nuclear plants will have one unit each in planned outage throughout July and another unit at Dukovany is planned to go into maintenance on 14 July. The Temelin outage will end on 11 August, while both the Dukovany outages will continue into September.

These outages will halve Czech nuclear generation capacity to around 2GW for almost four weeks during the summer and output will be reduced for the entire third quarter.

As the Czech nuclear plants have such a large capacity, they are hugely influential on price expectations.

Market participants watch the nukes closely, said one market source.

“The Czech system is generally tighter than in the last few years… and when outages are concentrated in one period it causes a shortage,” said a second trader.

There is also always the risk that maintenances could overrun, a common occurrence in recent years.

Neighbouring markets

Other regional markets will also have a strong impact on the Czech Republic during the summer months.

The Czech Republic is linked with Slovakia, Hungary and Romania on the day-ahead exchange market via the 4M market coupling.

A tight summer in Romania and Serbia, which are main sources of electricity imports for Hungary, could prompt greater exports from Slovakia to Hungary, and in-turn from Czech Republic to Slovakia.

Reservoir levels in Romania measured last Sunday rose by 4% week on week, according to information from grid operator Transelectrica, but remained below the volumes recorded at this time of year over the last three years.

Serbian reservoir stocks were stable week on week according to the most recent data from the ENTSO-E transparency platform.

The second market source said the bullish outlook was mainly down to Czech maintenances, but that Hungary could have some influence.

“Hungary does not play much of a role in the Czech market…unless demand from Hungary goes down due to a rainy summer, then the flow to Slovakia from the Czech Republic will also decrease.”

“If Hungary skyrockets this might pull up the Slovakian price and via the market coupling mechanism spot prices will move up in the Czech Republic as well.”

Outlook

With almost two months to go before Q3 ‘17 starts to deliver, there is time for the outlook to change, at least in terms of tightness in the Hungarian and Balkan markets.

If there is a rainy summer, this could weigh on regional prices. Heavy precipitation could turn the situation around quickly by replenishing reservoirs, cushioning the market against price spikes.

“We are beginning to see some precipitation and better flows on the Danube,” said one source active in Hungary.

But it is unlikely that the outlook regarding Czech nuclear maintenances will improve and this seems to be what most traders are basing their bullish outlook on. ellie.chambers@icis.com