London — Japanese utility JERA and energy company EDF Trading have signed a binding agreement to merge their short- and medium-term LNG trading and optimization arms, the companies said Tuesday, a move that will enhance their global portfolio flexibilities and risk mitigation capabilities.
The new joint venture, JERA Trading or JERAT, will inherit EDFT's third-party access to the European LNG and gas markets, which will continue to play a key balancing role for excess global LNG, as US LNG continues to ramp up and Japanese demand becomes more difficult to predict.
The new venture will also have access to JERA's annual procurement portfolio of about 35 million mt/year of LNG, the world's largest, as well as growing demand from emerging Asian buyers, which JERA has actively supported as part of Japan's initiative to develop new demand centers in the region.
As one of the largest traders of the Platts JKM Swap, EDFT's financial expertise will also provide JERAT with access to vital risk management capabilities to respond to the uncertainties emerging from a commoditizing sector, rising liquidity in the spot market and growing exposure to the Asian LNG benchmark.
The joint venture will also allow value chain integration, where EDF Trading North America, one of the leading marketers of gas and power in the region, will be responsible for supplying electricity and natural gas to meet JERA's capacity requirements at the Freeport LNG export plant in the US.
The agreement, which is subject to customary regulatory approvals and is expected to be completed by early 2019, will not affect JERA's and EDF's long-term procurement activities.
JERA will hold 66.7% of the equity in JERAT and EDFT the remaining 33.3%. Each company will have two executive directors. The chief executive will be appointed by JERA.
"We look forward to optimizing our global LNG portfolio with more flexible LNG sources and associated shipping positions amid the uncertainties of LNG demand in Japan and global LNG market developments", said Yuji Kakimi, President of JERA.
"LNG is an important fuel for EDF and this joint venture will combine EDFT's wholesale market optimization capabilities with JERA's offtake volumes," said John Rittenhouse, chief executive of EDFT.
