Koch to Start EU Power Trading as It Plans LNG Expansion

Koch Supply Trading, a unit of

Koch Industries Inc., will start buying and selling European

electricity and expand its liquefied natural gas business to

take advantage of a globalizing market for the fuel.

The trading unit of the second-largest closely held U.S.

company by revenue is hiring one or two power traders in Geneva

and plans to be ready for trading next year, Stephen Cornish,

director of Koch Supply Trading, said in a telephone interview

from London. The company will expand into Turkey and the Caspian

region in 2015 and open an office in Tokyo for its LNG business

this year, he said by phone.

Koch is expanding in power as companies from Bank of

America Corp. to Cargill Inc. pull out of the market as prices

trade near a nine-year low after the euro region’s longest

recession cut demand. As many as 120 European power and gas

traders lost or changed their jobs last year in the biggest

shakeout of the industry since the collapse of Enron Corp. more

than a decade ago.

“We don’t build our business based on whether the markets

are up or down,” Cornish said. “There are a lot of

counterparts out there that are re-evaluating their business

models and are looking for high quality counterparts to do deals

with. In that scenario we think we can add value.”

German year-ahead power, a European benchmark, fell to the

lowest since 2005 in April and settled at 34.50 euros ($46.89) a

megawatt-hour yesterday, according to data from European Energy

Exchange AG. Thirty-day volatility fell to 4.4 percent on June

12, its lowest in at least 10 years.

Gas, LNG

Koch is looking to expand into mainland European power

markets from Geneva, its base for gas trading and origination in
Europe, the Middle East and Africa, after a separate London-based business focused on the U.K. exited the market in 2011,

Deanna Altenhoff, a spokeswoman for Koch, said June 23 by e-mail. Koch Energy Europe Ltd. traded natural gas, power and

emission credits, according to a company statement in 2010.

Koch started trading crude oil in 1969 and added global gas

and LNG to its portfolio in 2012, according to the company’s
website. As part of a large industrial conglomerate, which

itself is a gas consumer, Koch benefits from dealing with

industrials, which “want to talk to like-minded companies,”

Cornish said.

“When it comes to power, we believe there should be an

opportunity for us there too,” Cornish said by telephone from
London on June 13. “We are getting requests to get involved in

that market to map over the success that we have had in European

natural gas.”

Koch Supply Trading plans to enter Turkey and the Caspian

region next year, he said. In addition to Geneva, the company

has an Amsterdam office for its gas sourcing needs and a

presence in Dusseldorf, Germany, for some of its marketing

activity, he said.

‘Natural Need’

The company’s LNG business is based in London with trading

and origination operations in Singapore and Houston and

satellite offices in Rio de Janeiro and Dubai. The company may

expand further in the Far East and in South America, if

opportunities arise, he said.

Renewables, shale gas, the 2008 economic crisis and the

Fukushima nuclear disaster in Japan have all impacted the

market, Cornish said. While the global LNG market will remain

tight through next year, trade will start to increase in 2016 as

Australian projects now under construction start producing the

super-chilled fuel and U.S. exports begin, the International

Energy Agency said in its medium-term natural gas market outlook

on June 10.

Koch has done LNG deals in both the Atlantic and Pacific

regions, according to Cornish.

“We have a natural need to be in the market,” he said.

“If you are a natural market participant with a global reach, a

great balance sheet, and lots of physical activity, you have a

significant role to play.”

To contact the reporter on this story:

Anna Shiryaevskaya in London at

ashiryaevska@bloomberg.net

To contact the editors responsible for this story:

Lars Paulsson at

lpaulsson@bloomberg.net

Rob Verdonck, Dan Weeks

Koch to Start EU Power Trading as It Plans LNG Expansion