may 2012 energy index - bord gáis energy

Bord Gáis Energy IndexMAY 2012

12 Month Rolling Average

31 October 2009 87.80

30 November 2009 87.15

31 December 2009 88.29

31 January 2010 88.92

28 February 2010 90.20

31 March 2010 92.51

30 April 2010 95.31

31 May 2010 97.49

30 June 2010 99.22

31 July 2010 101.09

31 August 2010 102.82

30 September 2010 104.97

31 October 2010 106.66

30 November 2010 108.89

31 December 2010 111.88

31 January 2011 114.76

28 February 2011 117.91

31 March 2011 121.41

30 April 2011 124.45

31 May 2011 126.97

30 June 2011 128.88

31 July 2011 131.18

31 August 2011 133.64

30 September 2011 135.59

31 October 2011 137.54

31 November 2011 139.53

31 December 2011 140.15

31 January 2012 141.01

31 February 2012 142.38


DROP IN OIL PRICES PUSHES ENERGY INDEX LOWER IN MAY

OILThe price of a barrel of oil fell steadily during May from $119.47 to $101.87 (nearly $18) under the combined weight of political uncertainty in Europe, global economic weakness, increased oil supplies from OPEC and easing concerns over Iran’s nuclear programme.

Despite some positive economic releases from Germany and the US, the global economic picture that strongly emerged during May is one of weakness following releases indicating that globally, retail sales are falling, business activity is slowing, jobs are not being created in the amounts expected and manufacturing is contracting. Because of the fragile economic situation, and high prices, demand for oil in the US, Europe and China is soft. At the same time, oil supplies remain healthy, particularly from OPEC countries, who have collectively increased output for seven months running and who are producing 3 million barrels a day more now than a year earlier. This increased supply and soft demand helped to push Brent crude prices lower.

Talks between Iran and the UN P5+1 group in Baghdad on May 23rd helped to continue to ease tensions despite not reaching any agreement. However, a report from the UN reminded the world that this issue remains unresolved following its claim that Iran has doubled its stock of enriched uranium and that the UN cannot give assurances that Iran is not concealing nuclear activity at sites which their inspectors have not been allowed access to.

OVERALL SUMMARY:The Bord Gáis Energy Index fell 7% in May with falling oil, gas and wholesale Irish electricity prices.

As the markets nervously assess the future of the European Union and the uncertain global economic and political repercussions of the current regional crisis, money managers have begun channelling funds away from commodities whose strength is determined in part by a positive global economic outlook.

1 Mth -7% 3 Mth -10% 12 Mth 1%

1 Mth -9% 3 Mth -11% 12 Mth 2%

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Bord Gáis Energy Index 12 Month Rolling Average

Apr-12Jan-12Oct-11Jul-11Apr-11Jan-11Oct-10Jul-10Apr-10Jan-10Oct-09Jul-09Apr-09Jan-09

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Bord Gáis Energy Index (Dec 31st 2009 = 100)

Oil, in US Dollar terms, fell 15% in May, the largest monthly price fall in 2 years, as the markets suffered major stress under the political and economic uncertainties in Europe, speculation that growth in the US could slow and on further evidence of the evolving Chinese slowdown. These stresses and concerns eroded market estimates of future oil demand in May and prices subsequently fell. Tellingly, money managers and other large funds appeared to have lost their confidence in the global recovery story as they have reportedly reduced their bullish US oil bets to a 20 month low. Although talks between Iran and the UN P5+1 in Baghdad during the month failed to make any progress, tensions over the disputed Iranian nuclear programme did ease in May. However, a UN report reminded the world that the issue has not gone away given that Iran is reportedly still actively enriching uranium and engaged with its nuclear programme.

Oil Index

*Index adjusted for currency movements.Data Source: ICE

Natural Gas Graph

Data

31 January 2009 195.04

28 February 2009 156.23

31 March 2009 99.24

30 April 2009 92.78

31 May 2009 87.00

30 June 2009 87.56

31 July 2009 76.34

31 August 2009 69.43

30 September 2009 61.72

31 October 2009 77.55

30 November 2009 83.21

31 December 2009 100.00

31 January 2010 125.88

28 February 2010 114.44

31 March 2010 101.67

30 April 2010 106.04

31 May 2010 130.73

30 June 2010 145.29

31 July 2010 157.48

31 August 2010 145.96

30 September 2010 132.67

31 October 2010 148.57

30 November 2010 167.11

31 December 2010 204.87

31 January 2011 188.31

28 February 2011 179.74

31 March 2011 194.03

30 April 2011 181.39

31 May 2011 184.99

30 June 2011 183.36

31 July 2011 179.36

31 August 2011 172.82

30 September 2011 180.07

31 October 2011 180.16

31 November 2011 191.53

31 December 2011 189.94

31 January 2012 184.35

31 February 2012 221.68

Coal Graph Data

31 January 2009 102.58

28 February 2009 93.02

31 March 2009 82.80

30 April 2009 78.58

31 May 2009 76.19

30 June 2009 76.68

31 July 2009 81.48

31 August 2009 84.15

30 September 2009 83.00

31 October 2009 86.26

30 November 2009 88.54

31 December 2009 100.00

31 January 2010 105.77

28 February 2010 95.28

31 March 2010 95.51

30 April 2010 108.11

31 May 2010 125.06

30 June 2010 132.03

31 July 2010 121.85

31 August 2010 123.28

30 September 2010 121.29

31 October 2010 121.83

30 November 2010 150.34

31 December 2010 159.48

31 January 2011 148.31

28 February 2011 149.34

31 March 2011 153.91

30 April 2011 148.29

31 May 2011 145.75

30 June 2011 144.90

31 July 2011 147.62

31 August 2011 149.65

30 September 2011 156.20

31 October 2011 145.04

31 November 2011 142.82

31 December 2011 145.65

31 January 2012 134.66

31 January 2012 125.54


ELECTRICITYIrish wholesale electricity prices were 5% lower in May compared to April. As the majority of power produced on the island of Ireland is generated by burning gas, a 3% fall in the average monthly wholesale Day-ahead UK gas price in euro terms put downward pressure on the cost to produce electricity in Ireland in May.

In addition to falling wholesale gas prices, relatively cheap coal (in USD terms, the monthly coal futures price has fallen 30% since September 2011) and carbon prices put additional pressure on Irish wholesale electricity prices as coal plants on the island of Ireland produced relatively cheap power in good quantities.

Finally, wholesale prices are under a little pressure with the arrival of summer and peak power demand is starting to erode slowly with warmer weather and extended periods of daylight.

NATURAL GASIn euro terms, the average monthly Day-ahead UK gas price in May was 3% lower than its April equivalent.

UK gas prices were supported at the start of May and traded at about 61p a therm due to the erosion of high stock levels during April, processing plant outages which reduced gas supplies from Norway to the UK, and a cold start to the month.

However, prices started to decline mid month as healthy supplies of gas were dispatched from the LNG terminals and Norwegian gas flows resumed after scheduled maintenance. Warmer weather and falling demand also weighed on wholesale Day-ahead gas prices.

Despite fears that seaborne gas supplies to the UK would dry up, it is estimated that May will record the highest level of LNG imports since last October. Despite this rise, the volume of LNG gas delivered in May 2012 is estimated to be 30% lower than in May 2011. The UK is currently benefiting from the seasonal decline in gas demand in Japan and South Korea.

1 Mth -3% 3 Mth -8% 12 Mth 10%

1 Mth 4% 3 Mth -2% 12 Mth -16%

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Natural Gas Index

Coal Index

Electricity Index

*Index adjusted for currency movements.Data Source: Spectron Group

*Index adjusted for currency movements.Data Source: ICE

Data Source: SEMO

COALIn US Dollar terms, European coal prices continued to fall in May. However, because of the weakening euro, in euro terms, the front month coal price increased 4% month on month.

Coal is finding some support from the power generation sector as healthy European dark power spreads means that it is economical to burn coal across Europe to produce cheaper electricity. However, warmer weather, increased renewable generation capacity (which is displacing thermal generation such as coal) and weakening economic activity have been moderating factors.

The Atlantic basin continues to be well supplied by healthy Columbian and US imports. Incremental supplies from South Africa and Russia are also pushing down European benchmark prices. With abundant shale gas displacing coal in the US, coal demand to fuel electricity generation is set to tumble to levels not seen since 1984 and the displaced US coal is finding its way to the European markets.

EUR/USD

31 January 2009 1.283

28 February 2009 1.272

31 March 2009 1.323

30 April 2009 1.321

31 May 2009 1.412

30 June 2009 1.405

31 July 2009 1.424

31 August 2009 1.434

30 September 2009 1.464

31 October 2009 1.474

30 November 2009 1.498

31 December 2009 1.433

31 January 2010 1.389

28 February 2010 1.360

31 March 2010 1.353

30 April 2010 1.327

31 May 2010 1.230

30 June 2010 1.226

31 July 2010 1.305

31 August 2010 1.269

30 September 2010 1.362

31 October 2010 1.392

30 November 2010 1.304

31 December 2010 1.337

31 January 2011 1.370

28 February 2011 1.379

31 March 2011 1.419

30 April 2011 1.483

31 May 2011 1.437

30 June 2011 1.451

31 July 2011 1.438

31 August 2011 1.441

30 September 2011 1.345

31 October 2011 1.395

31 November 2011 1.3446

31 December 2011 1.2961

31 January 2012 1.3084

31 January 2012 1.3325

EUR/GBP

31 January 2009 0.887

28 February 2009 0.886

31 March 2009 0.925

30 April 2009 0.894

31 May 2009 0.874

30 June 2009 0.853

31 July 2009 0.853

31 August 2009 0.881

30 September 2009 0.914

31 October 2009 0.896

30 November 2009 0.913

31 December 2009 0.888

31 January 2010 0.867

28 February 2010 0.893

31 March 2010 0.891

30 April 2010 0.868

31 May 2010 0.846

30 June 2010 0.819

31 July 2010 0.831

31 August 2010 0.827

30 September 2010 0.866

31 October 2010 0.869

30 November 2010 0.837

31 December 2010 0.857

31 January 2011 0.854

28 February 2011 0.849

31 March 2011 0.883

30 April 2011 0.888

31 May 2011 0.874

30 June 2011 0.903

31 July 2011 0.875

31 August 2011 0.885

30 September 2011 0.860

31 October 2011 0.8615

31 November 2011 0.8562

31 December 2011 0.8334

31 January 2012 0.8302

31 February 2012 0.8372


FX RATESDuring May, the euro continued to weaken versus the US Dollar and British Pound as political uncertainty in Greece and the vulnerability of the European financial system weighed heavily on the currency.

The euro performed badly versus the British Pound despite weaknesses in the UK as evidenced by poor retail sales and industrial production numbers, less optimistic growth forecasts and revisions to the depth of the current UK recession. Versus the British Pound, the euro has weakened to levels not seen since Sept 2008.

During the month, the US Dollar strengthened against nearly all of its most-traded peers as market stress increased the appeal of safe haven investments such as the US Dollar, and US and German government bonds. This came at the expense of commodities, global equities and so-called peripheral European bonds. A stronger US Dollar tends to reduce the appeal of oil and puts additional pressure on the commodity.

MARkET OUTLOOk:With oil production from OPEC countries at elevated levels not seen since October 2008 and demand destruction in Europe and the US, and with muted oil demand growth in China, it is estimated that the oil market is currently oversupplied by around 500,000 barrels a day. As a result, OECD oil stocks are now rising and some of the nervousness which drove price to record highs in March is receding.

However, geopolitical risks are still a cause of concern and the markets will pay close attention to the scheduled talks between Iran and the UN P5+1 in Moscow on the 18th and 19th of June to see if progress can be made on Iran’s disputed nuclear programme. The precise impact on physical oil supplies once the expected European embargo on Iranian crude takes effect on 1 July is also very much unknown and has the potential to keep oil prices high. The spate of unplanned stoppages currently afflicting non-OPEC supply is also a concern as are the recent events in Argentina where the government expropriated a Spanish oil and gas company’s assets. The Japanese nuclear moratorium and the summer crude burn in exporting countries add another layer of uncertainty as does the ongoing economic situation in Europe and whether China experiences a hard or soft landing.

For more information please contact: Fleishman-Hillard — Aidan McLaughlin — 085 749 0484 Bord Gáis Energy — Christine Heffernan — 087 050 5555

RE-WEIGHTING OF BORD GáIS ENERGY INDEX:Following the SEAI’s 2009 review of energy consumption in Ireland, released in Q4 2010, there was a 9.3% drop in overall energy consumption. The most notable drop of 1.39% was in oil consumption in the form of gasoline and diesel. This reflects the economic downturn experienced at the time. The share of natural gas and electricity increased by 0.63% and 0.57% respectively. An increase in the use of renewables and peat, at the expense of coal in electricity generation was also observed. As a result the Bord Gáis Energy Index has been reweighted to reflect the latest consumption data. This has had a minimal effect on the overall shape of the Index, but may indicate future trends.

Disclaimer:The contents of this report are provided solely as an information guide. The report is presented to you “as is” and may or may not be correct, current, accurate or complete. While every effort is made in preparing material for publication no responsibility is accepted by or on behalf of Bord Gáis Eireann, the SEMO, ICE Futures Europe, the Sustainable Energy Authority of Ireland or Spectron Group Limited (together, the “Parties”) for any errors, omissions or misleading statements within this report. No representation or warranty, express or implied, is made or liability accepted by any of the Parties or any of their respective directors, employees or agents in relation to the accuracy or completeness of the information contained in this report. Each of the Parties and their respective directors, employees or agents does not and will not accept any liability in relation to the information contained in this report. Bord Gáis Eireann reserves the right at any time to revise, amend, alter or delete the information provided in this report.

1 Mth -7% 3 Mth -7% 12 Mth -14% EURUSD

1 Mth -2% 3 Mth -4% 12 Mth -8% EURGBP

Apr-12Jan-12Oct-11Jul-11Apr-11Jan-11Oct-10Jul-10Apr-10Jan-10Oct-09Jul-09Apr-09Jan-090.60

0.80

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1.20

1.40

1.60

FX Rates

Electricity 18.40%

Coal3.16%

Gas 13.52%

Oil 64.93%

may 2012 energy index - bord gáis energy

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