Commodities house Gunvor to buy gas-fired power plant

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Commodities house Gunvor has agreed to buy a Spanish gas-fired energy plant from BP in the latest sign of Europe’s independent traders seeking to expand profitable gas and power activities.

Gunvor, which is majority owned by Swedish billionaire Torbjörn Törnqvist, described the purchase of the 75 per cent stake in the 785MW Bahía de Bizkaia Electricidad plant in Bilbao, Spain as a “landmark acquisition” as it is the company’s first investment in power generation.

Gunvor, like its privately held rivals Trafigura and Vitol, has seen profits from trading gas and power increase substantially due to increased price volatility, most recently driven by the disruption of Russian gas supplies into Europe following the invasion of Ukraine in 2022.

Trafigura last week said gas and power trading had emerged as a “third pillar” for the company, alongside oil trading and metals trading, as it announced record net profits of $7.4bn for its latest financial year.

Prices for gas and power have eased in the past 12 months as European governments have found alternative sources of supply, but volatility is expected to continue as the region’s fossil fuel dominated electricity system moves to one powered by renewable energy.

However, some gas-fired power stations are expected to play a continued role in Europe’s electricity grid, even as its decarbonises, as a back-up for intermittent supply from renewable sources such as solar and wind.

Shahb Richyal, Gunvor’s head of portfolio, said the acquisition was “an important step as we continue to expand our presence in gas and power trading”.

The terms of the deal were not disclosed. BP paid €135mn for an additional 25 per cent stake in the plant in 2013. 

Much of the profits in gas and power trading in the past 18 months have come from dealing in seaborne cargoes of liquefied natural gas, which have been used in Europe to cut the continent’s dependence on piped gas from Russia.

The Bahía de Bizkaia plant is linked to the Bilbao LNG import terminal, which has been the main source of gas for the power plant, although it also has access to piped supply.

Gunvor is betting that its extensive LNG trading activities will enable it to use the plant as a profitable, flexible source of electricity for the Spanish grid.

BP said it had decided to exit the business as part of its plans to reduce its carbon emissions and “reorient” its investments in Spain to areas including electric vehicle charging, bio energy, renewable power and hydrogen.

Gunvor has committed to reduce the emissions from its own operations — which would include future emissions from the power plant — by 40 per cent by 2025, compared with 2019 levels. Once the contractual terms of the acquisition are finalised, Gunvor’s emission reductions baseline and trajectories will be reviewed, it said.

The sale is expected to complete in the first quarter of 2024.