Source: El Economista
Interview by Rubén Esteller
What is your assessment of these ten years of MET in Spain?
Our success has been in transforming ourselves into an energy partner for our clients. Over the past ten years, we have evolved from a traditional gas supplier, focused on industrial and large-scale industrial consumers, to a multi-product and multi-commodity platform, with a strong presence in the electricity market and increasingly complex products and services.
We are proud to bring solutions to market in a complex environment, both from a regulatory and market perspective. This evolution will continue. One of MET's successes has been talent management: attracting young, motivated talent that makes a difference.
What size has the Group reached in the Spanish market?
We achieved a 3% market share in gas. Nowadays MET Group is highly diversified. We continue to maintain a significant presence in the gas sector, focusing primarily on the retail segment and small and medium-sized enterprises.
In the electricity sector, we have grown significantly over the last three years, both in terms of generation and generator representation, as well as in terms of end customers. And then we have our assets. The Group has invested in traditional technology, cogeneration, and renewables, and we continue with that approach.
We have also grown in the trading sector and bring in LNG shipments, which contributes to security of supply and improves competitiveness. MET Group's presence in Spain is quite extensive and has grown steadily in recent years.
How does it affect you that the Last Resort Gas Tariff is cheaper than the offers on the free market?
If I put myself in the shoes of the end consumer of the regulated tariff, it's a more competitive rate than current market prices. That's good for the consumer, and what's good for the consumer is good for us, energy companies.
However, there is a mismatch between the actual supply costs and the regulated costs. Right now, the residential segment under the regulated tariff is not attractive for a supplier because it implies negative returns. We have a retail gas portfolio. We have had up to 18,000 residential customers. In addition, the group is exploring other lines of business. Outside of Spain, we acquired Mega, a very successful supplier in Belgium with more than half a million customers. That also demonstrates the Group's appetite for exploring the residential segment.
Could it be a path to growth in Spain when the conditions are right?
Yes. Maybe not with gas, but with electricity. With the current generation infrastructure, you can bring a range of much more sophisticated products to market: solar hours are cheaper, and other hours are more expensive.
We are offering products in the SME segment, where we are focused on organic, recurring, and continuous growth. We target companies with consumption patterns linked to work activity, to whom we can offer more competitive solutions by tailoring consumption patterns and bringing the benefits of energy generation closer to demand.
Are you noticing increased competition to attract SMEs?
As energy retailers, we want to build customer loyalty, and to do that, we have to innovate and be very agile. If you stray from that path, there's competition. I think all segments are highly competitive in Spain.
This is a good sign for the market and for the customer. It forces us to innovate, to rack our brains, and to consider how to offer a value proposition within what is essentially a commodity.
Are limitations on sales channels making it harder to reach customers?
Regulations are increasing, and compliance is becoming more difficult. This means higher costs, more services, and increased expenses for energy suppliers, which they may or may not pass on to the customer. Ultimately, it creates more barriers to entry.
But that's not our main niche right now. We're more of a wholesaler and we're more focused on proposals and solutions for counterparties, industrial gas clients, and electricity customers.
How are you dealing with rising gas prices and their impact on industry?
The calculations we make at MET suggest that if we had allocated the cost overruns we had during the war in Ukraine to solving Europe's energy problems, we could have solved them.
We have come from periods of fairly stable gas prices. We detect the volatility and risks that exist in international markets, but our exposure to LNG is significant. Europe has much greater exposure, and ultimately, competition is global and supply shocks are inevitable.
That's why we offer products, especially in the gas market, that mitigate this volatility. We index to the Henry Hub. We believe that the American LNG supply is the natural one for Europe and that its index is considerably less volatile than the TTF.
TTF is a great index because it has created a European gas market around it. However, as we shift towards a supply much more reliant on US LNG, with more secure trade routes, the Henry Hub makes sense. It's one of our flagship products and would have performed exceptionally well in this situation.
What position is the Group taking in the international LNG market?
At Group level, we are positioning ourselves to be a key player in the international LNG market. This contributes to security of supply in Europe.
We have a presence in almost all European plants and terminals and significant activity in the marketing, supply, and import of LNG in Europe. Spain, with its extensive gas infrastructure and the flexibility it offers, is a very important country for the group in the LNG sector.
We have noticed that Europe is significantly more exposed to spot LNG and lacks sufficient long-term contracts. We are working to secure stable, long-term contracts that will also allow us to contribute to becoming the independent European energy champion we aspire to be. That's the Group's guiding principle. We operate in 24 countries.
How much gas do you buy in the United States?
We have long-term contracts that come into effect in 2027 and another new one we signed with Shell. Right now, we are also active in the spot market, taking positions, but I couldn't give you a specific figure.
How do you assess the diversion of cargoes and the competition to attract LNG ships?
Spain also acts as a market of last resort. The flexibility of our contracting system makes it easy for agents to bring in ships immediately. The contracting of capacity and slots through auctions, along with available storage, has made the Spanish market more economical than other European markets over the past two years.
It is true that there are times when the disruption caused by Qatar's production losses leads to Asian competition. The LNG market is a highly international market.
Would a recovery in Qatari production alleviate the situation?
That would be great news. It affects us because of the price. It's not so much about physical exposure: we're doing quite well, especially in Spain, and Europe has also done its homework. It's exposure to the index.
From the perspective of a group present in so many countries, what position does Spain occupy?
We have a very privileged position due to the number of terminals and agents present. Liquidity in Spain is higher, and the volume is also much greater.
Do you reexport gas from Spain?
That falls under the trading desk's purview, and I am not involved in that area. I have no record of any reexports. Spain serves as a hub, but I have no knowledge of those transactions.
Would it be necessary to update the references used to calculate the regulated gas tariff?
Yes, updates are necessary. Some references become obsolete very quickly, and keeping regulations in line with rapid market changes is a challenge.
How would an intervention like the Iberian exception, with a cap on the price of gas used to generate electricity, affect you?
We have the capacity to pass on those changes. If it's advantageous and limits potential exorbitant price increases, we'll pass it on directly to our customers through our contracts.
We have risk management systems, both regulatory and physical, that allow us to operate in scenarios where there are sudden regulatory changes that affect the markets. Our clients in Spain are usually indexed to the market to a high degree, so these effects are passed on through the contracts.
I previously pointed out that the additional costs of the energy crisis could have been used to address Europe's structural problems. What is the Group's position?
The Group's message is that the extra cost paid in 2022 for gas and electricity —we're talking about two hundred and some billion— could have been used to solve current problems.
The idea would be to dedicate those economic resources to guaranteeing security of supply, increasing electrification, integrating more renewables, and providing more firm power. Fewer wasted electrons and more useful ones.
How can we move forward in that direction?
This is an idea we can develop quite a bit. If we talk about Europe, our exposure to international geopolitical problems is obvious, with 90% of our gas being imported.
We have mechanisms to mitigate that risk through hedging, and clients have also learned a great deal. There are two examples of products that we believe are a very good fit for the current situation.
One is indexation to the Henry Hub, which provides significant long-term stability and is part of our supply contracts. We believe this should be of great interest to large industrial consumers, and we are seeing this trend. The other is mixed or hybrid products, with cap and floor, which allow movement within a range, with an upper and a lower limit.
Is the industry showing increasing interest in hedging against further price increases?
Yes. Since June, or even before, we could already see winter coming.
Since March, we have seen an international situation where everyone expected a quick resolution. Prices rose sharply and have since been heavily influenced by political commentary. This introduces uncertainty that makes navigating these volatile scenarios difficult. It's hard to know how to react.
To what do you attribute the disappearance of energy retailers? Are financial and guarantee requirements a factor?
I couldn't give a specific explanation about those companies. Personally, I think the electricity sector is very complex and requires specific technical and financial resources. Given the high levels of uncertainty and volatility we are currently experiencing, many companies may not be financially prepared to withstand it. You may come from very stable price scenarios and not be equipped to handle such a change.
Thanks to our global portfolio, we didn't experience the same financial difficulties as other companies, even during the war in Ukraine. We were able to withstand the financial strain, particularly margin calls and collateral requirements.
Regarding smaller energy retailers, I imagine there's a wide range of situations. Some will explore the market and then realize it's not viable. It's a highly competitive market with hidden costs and complex portfolio management. Trading energy in Spain is a challenge.
In what areas is the Group growing in Europe?
We acquired Mega in Belgium and are making significant investment in batteries. We have hybridized our combined cycle plant and will have over 100 MW of battery storage capacity, also including Comax, our French flexible asset subsidiary, where we have seen strong growth.
We are supporting the energy transition. We believe in cost-effective decarbonization. One of the Group's key messages is that the energy transition must be competitive and take into account all stakeholders, including demand.
Is regulation progressing at the necessary pace?
We don't comment on regulation. Ultimately, it's a dynamic market, and regulation introduces additional dynamism. We adapt.
This also allows us to leverage our strengths to understand what we can learn from regulations to offer solutions to our clients and continue being that close partner, even co-investing with them. We are also seeing this in energy efficiency solutions. We have a strong presence in the energy efficiency certificate market.
Are you already working on flexible services?
Yes. We have a control centre here from which we manage generator portfolios in real time and, at the same time, optimize final demand. This allows our client to participate in the various electricity markets.
How do you deal with changes such as the shift to the fourth time slot market and the need to adapt to customers?
The fourth time slot market was a challenge. We are a very agile company and very customer-focused commercially. That agility is our advantage: quickly transforming changes in the environment and circumstances into solutions that the market will then tell us whether they are right or not.
MET Group has a very dynamic DNA. We have considerable local autonomy and, at the same time, the strength of having a large group behind us, sufficient financial muscle, and a very sophisticated trading desk that makes many structured products available to countries.
Our commitment to being an independent energy champion, with a very local and close presence in all countries, allows us to work from the customer up the value chain. We can offer gas and electricity solutions from the customer's perspective. We want to be very close to them and, throughout the life of the contract, be the partner that manages uncertainty and competitiveness, and that helps with electrification and decarbonization.
How would you describe the current situation of the international market?
We are in a period of volatility where shipments are being directed towards Europe or Asia. Who receives them ultimately affects price trends. That is the scenario we are in right now.
Are you considering seeking new sources of supply?
We firmly believe in the relationship between Europe and the United States. Europe sources a large percentage of its supplies from the United States, and before seeking new sources of supply, in my opinion, more long-term contracts are needed to guarantee security of supply in Europe. We are overly dependent on spot shipments.
How do these long-term contracts fit with European decarbonization?
In any case, it's an international market and you can operate in numerous destinations. Natural gas is poised to replace other fuels in other regions, so its global consumption is expected to grow. It will continue to be a key player in the energy transition, more so than I think we realize.
What growth targets are set for the coming years?
The main focus of the Group's future strategies is on LNG and becoming a major player in that market. Spain plays a role in this.
We are also seen as a powerful player in the decarbonization and electrification of all sectors and of Europe. Spain, thanks to our advantages and its renewable energy production, is once again playing a key role. This is further complemented by the retail and storage sectors.
Spain plays a key role in all the major pillars of the group's global strategy. This allows us to be very dynamic and to envision scenarios for sustained growth. We have experienced significant growth in the electricity sector over the past three years. Our wholesale market solutions allow us to anticipate continued growth, with a higher growth rate for electricity than for gas.
We are now more focused on electricity and flexibility solutions, also to bring those mechanisms to demand, such as the active demand response service.
Can the electricity business overtake the gas business?
It's already been done. We are more electricity than gas-dependent.
Since when? What does this increased reliance on electricity translate to?
Since last year. In terms of volume, they are similar, but in electricity we offer more services and provide access to the market. We are generation market agents and can incorporate a much more turnkey solution, with wholesale products, hedging, physical PPAs and options. We have a range of products that makes our value proposition in the electrical business quite well-rounded.
Which technologies have the most weight in your representation activity?
We now believe we are generating more value for renewable energy. We are experiencing significant growth in representation and also in driving demand to the market.
Are zero-price electricity prices a risk or an opportunity? Can batteries solve this problem?
There are zero-price tolls, but the toll rates for non-zero-price hours have skyrocketed to 200. And the toll structure isn't driving demand towards the zero-price hours.
I think the market will adjust. A lot of batteries are coming in, and as soon as we can get those excess electrons to work when they're needed, we'll have competitive renewable energy. That's the ultimate goal. We have to achieve it, even though it won't be easy.
Where are you installing batteries?
In France and Hungary.
And in Spain?
We are exploring, yes.
What alternatives do you see in the face of the difficulties in developing large storage facilities?
Ultimately, those are large-scale batteries. There are other types of solutions that can be more granular, smaller.