BY KARL H. YSTANES
PHOTO: STATKRAFT ARCHIVE

Statkraft is expanding as an energy provider in Europe. Its trading offices in Amsterdam and Düsseldorf were set up six years ago. This autumn work started on the construction of two gas-fired power plants in Germany. A third gasfired power plant is being built in Kårstø, in southwest Norway in cooperation with Norsk Hydro. Why is Statkraft doing this and what is it like to challenge Europe’s energy giants? We asked EVP Ingelise Arntsen, head of Statkraft’s New Energy business area.

“What is Statkraft doing to establish a foothold in the European energy market?”
“Our most important asset is our combination of flexible production facilities and knowledge of how physical and financial energy market mechanisms work,” explains Ms Arntsen, before continuing: “Statkraft’s hydropower portfolio enables us to store water in our reservoirs until we want to produce electricity with it.

“Compare this with wind power, for example, where we have to generate electricity when the wind blows. We can produce electricity and offer it to the market when demand is strong and prices high. Gas power has some of the same advantages. The plants we are building in Norway and Germany can be turned up and down relativelyquickly, and can follow fluctuations in the market more rapidly than coal-fired power plants, which require more time to adjust.”

Ms Arntsen adds that further expansion outside Norway is also necessary to comply with Norwegian competition legislation. “Statkraft aims to be a European leader in environment-friendly energy. The Norwegian Competition Authority has said that we are already too dominant in Norway. So we have to look elsewhere for expansion.”

“Why choose Germany?”  
“In principle we could have set up facilities in a number of European locations. Germany was a natural choice for several reasons. The opportunity arose to become involved in projects, at Herdecke and Knapsack, that suited us well, and where the surrounding infrastructure and market access were already in place. Another important reason was that Statkraft has got to know the German and Dutch energy markets well over the past six years through its trading offices in those two countries. Once we have production facilities here as well, we will have both sides of the equation in place and can fully optimise our trading and generation operations.”

Changing attitude to gas
“Gas power is polluting. How does that square with Statkraft’s environmental profile?”
“In Europe and other parts of the world natural gas is considered one of the most environment-friendly energy sources in existence. In Norway, on the other hand, there has been scepticism about the use of gas for power generation. Perhaps that is because Norway has based most of its electricity consumption on renewable energy sources such as hydropower and wind power.
“An important point, however, is that gas power is as environment-friendly in Norway as it is elsewhere. Even though we have a lot of hydropower in Norway, we are not self-sufficient in electricity.
It is a fact that we export gas, some of which is used to produce electricity in other countries. We import electricity which may have been generated in a coal-fired power plant. The environmental ethics of such a practice are questionable.

“In the Norwegian debate about gas power the impression is sometimes given that the country has no carbon dioxide emissions. In actual fact emissions from a power plant like the one in Kårstø account for around two per cent of Norway’s total carbon dioxide emissions. Technological advances also benefit the environment. We have to assume that in the future we will be able to solve the pollution problems associated with this kind of electricity generation.”

“Do you feel the Norwegian view of gas power is fixed in stone?”
“Attitudes to gas in Norway seem to be changing. The idea of using natural gas as a raw material to be processed within the country, rather than it just being an export item, is becoming more
widely accepted,” says Ms Arntsen.

David and Goliath
“What is it like to be an outsider coming in and challenging the status quo?”
“It is an exciting period that we have been looking forward to. The importance of actually building production facilities in addition to trading on the power markets, which we have done up to now, cannot be overestimated. Our consequence increases when we show we are willing to invest billions of kroner. Both the market and the public authorities have more confidence in us, and we
are considered a more reliable and trustworthy player.”

“Have you met any resistance from competitors?”
“Our competitors were probably not particularly pleased. We were not met with open arms when we were negotiating for grid access and gas supplies. We went a few rounds in the ring, but we did not find it that difficult to reach the agreements we needed.”

“What is it like to go from being too big a fish in a small pond to being a small fish in a big pond?”
“It does not necessarily have to be a disadvantage at the outset. You have to remember that there are large, dominant companies in Germany. And then little Statkraft comes along and challenges
them. I think people like that.” 

“The same mechanisms that prevent further growth at home open doors in Europe, then?”
“Yes, you could say that. We may have something to gain from being relatively small and ‘non-threatening’. But it is difficult to say how long that will last.”

Quick but thorough
“Boldness is one of Statkraft’s core values. With the parallel construction of three gas-fired power plants within a two-year timeframe, with two of the plants being built abroad, wouldn’t you say that this quality is being demonstrated to its full extent, not least when you consider that Statkraft has never done anything like this before?”
“We are facing a whole new area of technology for us. A completely new organisation must be built up, and new working partnerships established. We certainly have enough to be getting on with. But we do not feel that we are in over our heads. The decision to go ahead with the construction of these plants was carefully considered and rests on meticulous planning and analysis undertaken throughout the organisation. 

“It has involved a lot of hard work, and our staff – both in Germany and Norway – have really shown what they are made of. “The processes ahead of the various decisions reveal an organisation that
is capable of making quick decision and taking decisive action. Gas power is relatively new in Norway, but gasfired power plants are ten a penny in Europe. Siemens, which is our power plant supplier, has extensive experience and we trust their judgement. A less important, though not completely irrelevant, point is that we can achieve certain tax advantages in Germany if we get the plants into operation within the specified deadline. The Kårstø plant in Norway is being built by Naturkraft with assistance from Norsk Hydro’s project organisation. We hope to play a role in the operation of the completed power plant. The license says that the Kårstø plant must be completed by the end of 2007.”
 
“Such large-scale international projects can come up against unexpected challenges in terms of cultural differences. How is Statkraft handling this aspect?”
“It is decisive for a company with international ambitions to show respect and humility with respect to how things are done in the different countries and societies. The processes surrounding Knapsack and Herdecke are being led by a German team. The project management and organisation are also German. The process is also followed up by a combined team from both countries. It looks as though we have been successful in our organisational choices so far.”

“Now that things are so well underway, are there plans for more plants?”
“Obviously, we will be assessing any opportunities that may arise, but we feel that we have got quite a lot on our plates at the moment. Gas power gives us a new leg to stand on for the future. We
are establishing ourselves as a producer and supplier of electricity in Europe. It might perhaps be wise to demonstrate that we can finish what we have started first,” says Ms Arntsen.