ESB Annual Report 2012 - (Page 26)

26 ESB Annual Report 2012 - Energy for connecting you ESB GENERATION AND WHOLESALE MARKETS ESB GENERATION AND WHOLESALE MARKETS (G&WM) COMPRISES ESB’S GENERATION, TRADING AND ASSET DEVELOPMENT ACTIVITIES. INVESTMENT AND GROWTH G&WM’s investment strategy is to build a balanced low carbon generation portfolio of scale in the All Islands market. The generation and trading business manages, operates and trades ESB’s electricity generation portfolio in Ireland and abroad, subject to licence obligations with respect to ring-fencing. This portfolio includes 4.3 GW of generation in the Single Electricity Market (SEM) and 0.4 GW in Great Britain (GB). In addition, ESB has 50% joint ventures in Marchwood (GB) and Amorebieta (Spain) with a cumulative capacity of 1.6 GW. Asset development activities comprise identifying and developing opportunities to enhance and expand the generation portfolio to achieve ESB growth targets. Our projects are managed from development through construction to commercial operations. OPERATING ENVIRONMENT Total SEM demand declined by almost 3% in 2012, the fourth consecutive year of demand contraction. Continued high natural gas prices and relatively competitive coal prices resulted in increased coal plant running throughout 2012. These factors also resulted in reduced gas fired plant running and significantly reduced margins, which constitute the majority of capacity on the system. G&WM’s balanced portfolio, with a mix of fuels including coal, gas, peat, wind and hydro, has helped ESB to weather these market trends. In 2012, ESB welcomed the decision by the SEM Regulatory Authorities which provided for the removal of ring-fences which historically segregated ESB’s regulated and unregulated generation portfolios. The licence changes required to give effect to this decision are expected in early 2013. This will allow ESB to implement organisational and IT system changes to realise the benefits of greater integration of its generation businesses, which will result in costs savings and improved risk management. 881 MW THE SIZE OF THE CARRINGTON POWER PLANT (GB) – ASIGNIFICANT GENERATION INVESTMENT IN THE REGIONAL ENERGY MARKET The government announced in October 2012 that ESB would be required to sell some non-strategic generation assets to provide an extraordinary dividend of up to €400 million by 2014. The government reaffirmed its commitment that ESB would remain a financially strong, vertically integrated utility, that it would maintain its credit rating, and that it would retain significant scale to compete in the All Islands (SEM and GB) market while continuing to move to an appropriate market share in Ireland. The implementation of this strategy was advanced significantly in 2012 with the successful financing of the Carrington power plant near Manchester, GB. Construction commenced on this 881 MW combined cycle gas turbine project in late 2012 and it is expected to reach commercial operations in early 2016. This project has been funded on a ringfenced basis so that it does not displace any of our investment in electricity infrastructure on the island of Ireland. ESB’s investment in a low carbon portfolio continued with the construction of the Myndd y Betwys wind farm (35 MW) in Wales and the Carrickatane wind farm (21 MW) in Northern Ireland. These assets are expected to be operational in early 2013, and will bring ESB’s operational wind portfolio to over 380 MW. In total G&WM generated approximately 1.3 TWh of electricity from renewable sources (wind and hydro) during 2012 – enough to supply the electricity requirement of around a quarter of a million households. Refurbishment of the hydro portfolio also continued in 2012 with the upgrade of Erne and Turlough Hill units. Major overhauls were also successfully completed in 2012 at the Moneypoint and Synergen power stations. These two plants generated approximately one quarter of the entire electricity requirement in the SEM in 2012. As the generation cost of electricity from these plants is amongst the lowest in the SEM, their continued high availability benefits all electricity customers. STRATEGY AND RESPONDING TO CHANGE The planned evolution of the SEM over the next five years will result in a fundamentally different competitive environment, as ESB’s home market expands, becoming the Regional Electricity

Table of Contents for the Digital Edition of ESB Annual Report 2012

ESB Annual Report 2012
Contents
Business Overview
Chairman’s Statement
Chief Executive Review
Our Strategy and Business Model
Operating and Financial Review
Operating Environment
Finance Review
Business Unit Sections: ESB Generation and Wholesale Markets
ESB Networks
NIE
Electric Ireland
Corporate Social Responsibility
Introduction from Executive Director, People and Sustainability
Sustainability Charter
Energy Usage 2012
ESB Innovation
Equality and Diversity
Our People
Our Community
Corporate Governance
Chairman’s Corporate Governance Statement
The Board
Executive Team
Board Members’ Report
Risk Management Report
Statement of Board Members’ Responsibilities
Independant auditor’s report to the stockholders of Electricity Supply Board (ESB)
Statement of Accounting Policies
Financial statements
Prompt Payments Act

ESB Annual Report 2012

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