Monthly Report

Sumitomo Mitsui and enechain join forces to provide fuel hedging services to power companies

November 12, 2024
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Japan’s power generation is still heavily reliant on fossil fuels.

Sumitomo Mitsui Financial Group (SMBC Group) and enechain will establish a joint venture, which will provide fuel hedging services to power companies. The new company will be named eXstend, the two companies announced on November 7, 2024.

According to SMBC Group and enechain, both of which will own 50% of the joint venture, while Japan is working toward increasing the share of renewable energy in its power generation mix, over 70% of generation relies on mostly imported fossil fuels. While enechain previously facilitated similar hedges, the scale of its activities was limited due to the required operational capabilities and capital. The joint venture is expected to help alleviate the two hurdles.

“eXstend’s role is not to take a position and trade with the risk of fuel price fluctuations, but to arrange the flow of trades so that transactions between hedgers and optimal counterparties participating in the market operated by enechain can proceed smoothly, and to provide trading opportunities,” said enechain’s statement.

Enechain, established in 2019, is a start-up company developing an energy marketplace and related tools. It raised funds from companies including major Japanese power market players such as JERA, Kansai EPCO’s K4 Ventures, Chugoku EPCO, and Chubu Electric Power Miraiz, and processed approximately 2 trillion yen ($13.4 billion) in wholesale power transactions through its platform to date.

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