The Japan Times WORLD EYE REPORTS SWITZERLAND
©THE JAPAN TIMES	Thursday, August 2, 2001

Swiss base for Europe's crosscurrents
Europe's premier power trader is also a major producer of clean electricity

Switzerland is a landlocked country with no oil or gas reserves. It is also a mountainous country, with 58 percent of its electric power supply generated from dams, 40 percent from nuclear energy, and only 2 percent from fossil fuels.

Rather than import coal or fossil fuel from neighboring countries, the local transport industry remained self-sufficient by using the country's extensive hydrological resources, which locals still call "white coal." Later rises in demand meant power resources had to be augmented, and five nuclear power stations were subsequently built.

Amid this climbing demand, EGL (Elektrizitaets-Gesellschaft Laufenburg) launched its operations in 1956 in the German town of Laufenburg along the Rhine. At that time, both France and Germany had base-load power available, while Switzerland could export peak power from its plants. Laufenburg was the ideal location for a high voltage transmission switchyard that linked power grids in France, Germany, Switzerland and -- later -- Italy and Austria.

EGL's switching facility in Laufenburg is a connection point for grids in France, Germany, Austria, Italy and Switzerland

Electricity trading Europe-wide remains EGL's core competency and its main source of revenue. The EGL group also manages its own power production facilities for its energy. Currently, the power trading company operates five large high-pressure hydropower storage plants and one of the biggest and most modern nuclear power plants in Switzerland. It also has shares in another 30 power generating plants. Between 20 to 30 percent of the power traded in Europe is generated by EGL's own resources. However, its chief executive Emanuel Hoehener does not see any clash between the businesses of producing and trading power.

"For technical reasons, it is important for a wholesaler to also be a producer," he explains. "You need power to be in a position to trade according to short- and mid-term contracts. For example, spot trading is very short-term. This means we need to be able to supply a large amount of peak energy within a very short time. Owning and managing our own high-pressure hydropower plants is technically the only way one can do so."

"Having our own power generation facilities gives us a competitive edge in terms of timely advantage and freedom in comparison with some pure traders," adds Hoehener. Spot trading, which involves much higher profit margins compared to standard trading, has seen rapid growth and now represents over 10 percent of EGL's total trading revenue.

Although the power industry may be firmly associated with the "old economy", a closer look at EGL reveals how much the sector has changed. EGL recently expanded its business activities to physical and financial trading of electricity products and its derivatives.

"It is far too early to analyze the importance and benefits of that function but we believe this type of business will expand further," comments Hoehener. EGL has also expanded its activities to Central and Eastern Europe as these markets liberalize their power sectors and make a push for rapid development. "We want to trade locally from a local source to a local consumer. But, in order to do that, we need to acquire local power generation facilities to produce locally. In order to do so, we can either build our own plants or join a producer and provide the know-how for managing and trading the excess energy," the EGL chief points out.

Emanuel Hoehener, EGL's chief executive, is expanding activities to include Central and Eastern Europe.

"Our overall goal is to be in the leading position not only in terms of volume but also in terms of quality of services, quality of portfolio and margins to be achieved," he adds.

In various ways across the globe, power and utility companies have been reinventing themselves to meet the unprecedented challenges in their industry. As the global sector leaders grow increasingly flexible and adopt a clearer view of their core competencies and customer requirements, EGL is definitely still at the forefront of change.

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