(Oct 1): Marubeni Corp. plans to strengthen its presence in Japan’s power market by establishing a new trading venture, joining a wave of companies seeking to capitalize on the sector’s expansion.
The company’s power retail arm and its UK-based energy trading unit SmartestEnergy Ltd. will each hold a 50% stake in the newly-formed venture, called Marubeni Power Trading, according to people with direct knowledge of the matter. The joint venture will trade spot power and futures, as well as fuel futures products, the people said, asking not to be identified as the discussions aren’t public.
Japan’s power market has steadily expanded since fully liberalizing in 2016, drawing overseas traders such as Gunvor Group and Vitol Group, which are attracted by its price volatility from seasonal shifts to uncertainty over restarting nuclear reactors. Long-stagnant power consumption is expected to rise on the back of artificial intelligence and data center use, giving new momentum to what could emerge as one of the largest traded power markets.
A spokesperson for Marubeni declined to comment.
Companies are also looking to hedge this price volatility with futures contracts. Japanese contracts are the fastest-growing offering under the European Energy Exchange AG, the world’s biggest electricity bourse. While trading volume is still much smaller than mature markets, like Germany, Japanese derivatives contracts quadrupled last year, according to the exchange.
The joint venture will enable Marubeni to combine its strength as the fourth-largest power retailer in Japan with SmartestEnergy’s trading experience, tools and risk management capabilities, the people said.
The venture will also allow for more complex trading strategies to hedge the market, they added. Among possible services to cater to its clients, the venture will consider selling fixed-price power products in areas outside of the Tokyo and Kansai regions.
Marubeni first entered the power retail business in 2000, when Japan’s market was partially liberalized for large-scale electricity consumers. Its unit, Marubeni Power Retail, was then established in 2011. SmartestEnergy was founded in the UK in 2001 and has since expanded into the US and Australia.
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AloJapan.com