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© 2018 Aurora Energy Research Limited. All rights reserved.27/05/2020© CONFIDENTIAL: NOT FOR EXTERNAL DISTRIBUTION

Impact of Coronavirus on European energy markets

CONFIDENTIAL: NOT FOR EXTERNAL DISTRIBUTION

Weekly tracker for week ending 24th May 2020

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Executive Summary

1. Comparisons to previous week unless stated otherwise

Update for week ending 24th May:1

▪ The number of new reported COVID-19 cases and deaths continues to decline across Europe. Lockdown measures were eased across Europe, with Italy emerging from lockdown rapidly during May.

▪ Crude oil futures increased across the curve driven by production cuts and expectations of rising demand as the lockdown is eased.

▪ NBP Gas futures fell further for 2020 delivery, but increased slightly from 2021 onwards

▪ EUA Carbon prices increased to over €21/tonne – around 10% below pre-COVID levels.

▪ Power demand fell across Europe due to warmer weather and continued lockdown restrictions

▪ Power prices fell across much of continental Europe, remaining on average 12% - 40% lower than pre-COVID levels. Average prices fell by nearly 80% in GB last week, compared to the previous week. This was largely driven by a sharp increase in the number of negative price periods. Over the May Bank holiday weekend GB experienced an extended period of negative prices (over 6 hours) in the day ahead market for the first time.

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About Aurora

Aurora provides data-driven intelligence for the global energy transformation

Source: Aurora Energy Research

4CONFIDENTIAL: NOT FOR EXTERNAL DISTRIBUTION

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COVID-19 Forecast ReportScenario analysis for European power markets

▪ COVID-19 impact on power prices, generation mix, capacity additions and retirement, asset profitability and carbon emissions

▪ Asset valuation impact compared to stock market declines

o How will individual assets perform?

▪ Industry and technology winners and losers

▪ Implications for security of supply

▪ Risk of stranded assets

▪ All forecast data available in Excel

Recent impact of COVID-19 on European power markets

▪ Analysis of impacts on global economies

o What is the impact on recent growth?

▪ Analysis of impacts on global financial markets

o How are utility stocks performing?

▪ Analysis of impacts on power markets across Europe

o How are power prices developing?

o How is power demand evolving?

Drivers and assumptions of changes and scenario design

Forecast and implications of COVID-19 impact

We are pleased to offer a reduced rate for Aurora subscribers

In addition, we offer bespoke services, including portfolio stress testing, transaction support and board briefings

▪ Detailed description of framework and scenario design

▪ Economic Scenarios:

1. Mild Global and European Recession

2. Severe Global and European Recession

3. Severe Global Recession and European Depression

4. Global and European Depression

▪ Forecast and scenario drivers include demand, supply, commodity prices, lockdown duration, and investment/financing

Comprehensive scenario report and forecast dataset for

1 2 3

clientsupport@auroraer.com +49 (0) 30 120 84969 | +44 (0) 7741 909078

For more information, please contact Client SupportTo pre-order, please use the form on our web page

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1. COVID-19 reported cases

2. COVID-19 impact on European crude oil, gas and carbon markets

3. COVID-19 impact on European power markets

Contents

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Total cases per 1 million population12

Total number of COVID-19 infections decreased by 40% compared to the previous week

Sources: EDCD, Worldometer

1. Chart is in log scale. 2. Data to 25h May

10,000,000

100

1,000

10,000

100,000

1,000,000

Ireland

10th April

France

16th March

30th March

Germany

13th April

27th April

25th May

Spain

Italy

UK

Netherlands

Poland

EU-27 + UK

6,042

5,007

3,849

3,806

2,803

2,716

2,653

2,158

Ireland

France

Spain

UK

Netherlands

Italy

EU27+UK

Germany

571Poland

Total number of reported cases12

7CONFIDENTIAL: NOT FOR EXTERNAL DISTRIBUTION

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Daily increase in reported cases1

The rate of new COVID-19 cases and deaths continues to decline

Sources: EDCD

1. Chart is in log scale. Rolling 7 day average.

100

1,000

10

10,000

100,000

10th May

15th March

29th March

12th April

26th April

24th May

Daily increase in COVID-related deaths1

Italy

Spain

UK

Germany

France

Netherlands

Ireland

Poland

EU-27 + UK

1.0

10.0

10,000.0

0.1

100.0

1,000.0

24th May

10th May

12th April

15th March

29th March

26th April

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COVID restrictions have been loosened in many European countries with Italy having unlocked rapidly during May

Sources; Oxford COVID-19 Government Response Tracker

Country Changes to restrictions

France Schools, shops & public amenities reopened

Germany Shops and schools allowed to reopen already

Ireland Construction sites reopened from 18th

May; shops from June

Italy Shops & factories reopened from 4th

May; bars, restaurants and leisure facilities from 18th May

Netherlands Primary schools and some shops reopened 11th May; bars/restaurants reopen 1st June

Poland Retail & leisure premises reopened on 4th May; schools reopen 24th May

Spain Some small businesses, bars and restaurants reopened; schools reopen 26th May

UK Construction activity resumed; primary schools and markets to open from 1st

June; shops open in June/July

COVID stringency Index,Index (0-100)

50

55

60

65

70

75

80

85

90

95

1st April 1st May 16th May 26 May

France

UK

Ireland Poland

Germany

Italy Spain

Netherlands

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1. COVID-19 reported cases

2. COVID-19 impact on European crude oil, gas and carbon markets

3. COVID-19 impact on European power markets

Contents

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Oil futures have seen a further rise, with a continued bullish sentiment in global oil markets

Sources: Aurora Energy Research EOS, Reuters

Prompt crude oil futures1,$/bbl

Brent crude oil futures,$/bbl

WTI Brent

10

Jan-24

20

15

0Jan-23

30

Jan-22

40

45

Jan-21

5

25

50

35

Jan-20 Jan-25

A significant drop in U.S. rig count has supported the recovery in oil futures. In addition to this, Russia announced that it will continue

production cuts throughout June, helping to further push futures up

26/05/2020

20/04/2020

04/05/2020

11/05/2020

-40

-30

-20

-10

0

10

20

30

40

50

60

28th April

2nd March

30th March

27th May

Prompt futures maintain the bullish trend, backed

by oil production cut and a rise in fuel demand

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NBP gas futures after 2021 have slightly rebounded expecting demand recovery after lifting lockdowns

Sources: Aurora Energy Research, Reuters

Note: 1. Futures are a rolling 7 day average.

▪ Average NBP futures in 2020 hit a new low on continued LNG oversupply amid weak demand, seeing an 8% decrease

▪ After 2021, NBP slightly recovered by 2%, supported by an improving demand forecast from power and industry after easing lockdown restrictions across Europe

Average monthly NBP gas futures,1

pence / therm

Average monthly NBP gas futures,

€/MWh

0

5

10

15

20

25

0

5

10

15

20

25

30

35

40

45

50

55

60

65

Jan-20 Jan-23Jan-21 Jan-22 Jan-24 Jan-25

26/05/2020

27/04/2020

11/05/2020

14/04/2020

30/03/2020

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European gas demand is under pressure amid economic slowdown and warmer weather

Sources: Aurora Energy Research EOS

Notes: 1) Envelopes for monthly NW Europe gas storage inventory are calculated by taking the maximum and minimum monthly values from December 2014 until February 2019.

Monthly NW Europe gas consumption,bcm

0

100

200

300

400

500

600

700

800

900

22nd March

5th April

19th

April3rd May

17th May

-18%

Daily NW Europe gas consumption,mcm

France

Germany Netherlands

GB

0

20

5

10

15

25

30

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40

Apr-19

Jun-19

Aug-19

Oct-19

Dec-19

Feb-20

Apr-20

Min-max envelope(Dec 14–Feb 19)1Total Consumption

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Strong LNG influx has increased gas storage injection, causing gas inventories to rise by 4% from last week

Sources: Aurora Energy Research EOS

Notes: 1) Storage data is based on net daily flows. 2) Envelopes for monthly NW Europe gas storage inventory are calculated by taking the maximum and minimum monthly values from December 2014 until February 2019. 3) Envelopes for daily NW Europe gas storage inventory calculated by taking the maximum and minimum daily values from March 2015 until May 2019.

Monthly NW Europe gas storage inventory,bcm

55

0

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5

10

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25

30

35

40

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60

15th March

29th March

12th April

26th April

10th May

24th May

Daily NW Europe gas storage inventory,bcm

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0

15

5

55

10

25

30

45

60

35

Oct-19

Jun-19

Apr-19

Aug-19

Dec-19

Apr-20

Feb-20

Total inventory Min-max envelope (Dec 14-Feb 19)2,3

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EU ETS increased above €21/tonne – around 10% below pre-COVID levels

Sources: Aurora Energy Research, Eikon

Lower Aviation demand: Global flight volumes fell by 2/3rds during March. Easyjet grounded its entire fleet. UK cancelled auction for EUA Aviation allowances .

Increasing Industrial demand: Factory production ramps up after COVID shutdowns; increasing demand for metals and cement across Europe compared to March/ April.

Lower Power market demand: Lower power demand (explored in next slides) reducing permit demand from coal and gas generators.

MSR Mechanism: will gradually remove excess permits from the market.

ETS reforms: European Commission remains committed to tighten ETS as part of Green Deal, but looks likely to be delayed; Poland challenging logic of tightening ETS at this time.

10

15

20

25

30-Mar

16-Mar

27-Apr

13-Apr

9-May

21-May

-10%

Spot EUA price,€/tonne

Downward pressure on price in short term

Upward pressure on price in medium term

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1. COVID-19 reported cases

2. COVID-19 impact on European gas and carbon markets

3. COVID-19 impact on European power markets

Contents

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European power demand sees setback despite easing COVID restrictions, due to warmer weather

Sources: ENTSO-E, Aurora Energy Research

Data excludes self-generation and embedded renewables consumption

1

6-Apr0

9-Mar 23-Mar 20-Apr 4-May 18-May

2

3

4

5

6

7

8

9

10

11

Spain

Poland

France

Ireland

Germany

Italy

Netherlands

UK

Weekly sum of power demand in 2020,TWh

Change in demand versus same week last year:

w.c. 18May

w.c. 11May

ES: -13%

PL: -9%

IE: -5%

FR: -8%

IT: -12%

UK: -11%

DE: -9%

NL: +6%

Lockdown introduced

-15%

-13%

-16%

-10%

-9%

-8%

+2%

-8%

Week commencing

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European power demand sees setback despite easing COVID restrictions, due to warmer weather

Sources: ENTSO-E, Eurostat, Aurora Energy Research

COVID-19 cases1

Per 1 million population

2,803 6,042 3,8493,806

Power demand by end user2

40 28 33 45 31

32 31 31 27 31

22 36 31 25 35446 3 3

1) Data to 25th May 2) Data for 2018 calendar year

Hourly loadduring sample weeks(% of same week in 2019)

60

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110

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:00

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:00

w.c. 11 Mayw.c. 18 May

Italian demand increases slightly as lockdown is eased.

CommercialOther Household Industrial

2,158

GB demand declines due to warmer weather and continued lockdown

18CONFIDENTIAL: NOT FOR EXTERNAL DISTRIBUTION

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Day-ahead prices decreased across much of Europe, whilst Poland and Spain saw an increase

Sources: ENTSO-E, Aurora Energy Research

56-Apr9-Mar 23-Mar 20-Apr 18-May

30

4-May

10

15

20

25

35

40

45

50

Netherlands

Italy

Spain

Poland

France

Germany

UK

Ireland

Weekly average day-ahead power prices in 2020,EUR/MWh

Change in prices versus previous week:

w.c. 18May

w.c. 11May

ES: +9%

PL: -4%

IE: +13%

FR: -5%

IT: -9%

UK: 0%

DE: -11%

NL: -7%

-39%

-30%

-78%

+15%

-8%

+8%

-18%

-48%

Week commencing

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GB: Negative prices have reached record levels due to low levels of demand caused by COVID-19

Sources: Aurora Energy Research, EPEX, Nordpool

1) The category 6 hours + includes all negative price periods that consecutively have a duration longer than 6 hours.

▪ Negative prices occur when the generation from low/negative marginal cost plants (subsidised renewables and plants with high ramping costs) is higher than demand.

▪ Negative prices in both the intraday and day ahead markets have reached record high levels due to the COVID-19 linked demand slump

▪ When prices are negative for 6 consecutive hours in the day ahead market, CfD supported renewables plants will not receive top-up payments for any generation in those periods. This occurred for the first time in May 2020.

10

0

20

30

40

Jan 19

Apr 19

Jul 19

Oct 19

Jan 20

Apr 20

Fewer than 6 hours Over 6 hours1

Instance of negative prices in the intraday market,Negative half hours per month

80

0

20

40

60

Jan 19

Apr 20

Apr 19

Jul 19

Oct 19

Jan 20

Instance of negative prices in the day ahead market,Negative hours per month

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Aurora continues to help you navigate the impact of COVID-19 on European energy markets

Source: Aurora Energy Research

COVID-19 Special report Consultancy & Bespoke Analytics

How do our market intelligence subscribers stay up-to-date on COVID-19 implications?

▪ Power Market Forecast reports incorporating COVID impacts on commodities and demand

▪ Group Meetings will explore sensitivitieson the impact of COVID on European power markets and asset economics

▪ Podcasts with industry leaders

▪ Coronavirus tracker email assessing the impacton European power and commodities markets

▪ Comprehensive exploration of the range of scenarios from the fallout of COVID-19

▪ Impact on power prices, spreads, viability of investments, carbon emissions

▪ Differences in impact amongst technologies

▪ Implications on asset values vs stock market

▪ Bespoke scenarios for business planning and transaction support

▪ Stress testing portfolios

▪ Defensive/opportunistic portfolio optimisation

▪ Board/Management briefing

For more information contact Felix.Chow@Auroraer.com for GB, Ireland, France and Iberia and Hanns.Koenig@Auroraer.com for Germany, Poland and BeNeLux

May Jun Jul

GB FRDEGroup Meeting

Market ForecastReport

GBIberia