London (Platts)--22Feb2012/818 am EST/1318 GMT

Prompt contracts on the UK power market firmed slightly Wednesday morning following Tuesday's late gains on NBP gas, but strong selling and a lower outturn on the N2EX exchange due to healthy supply margins capped potential gains, a market source said.

On the OTC market, day-ahead baseload power changed hands midday at GBP43/MWh, a modest 25 pence increase from the previous day's midday close.

"The day-ahead price tried to push above these levels, but N2EX [day-ahead power auction] outturned at GBP43.30/MWh which kept a lid on gains," a trader said.

In addition, the trader cited "aggressive selling" by a large nuclear generator as another cap on potential prompt price gains.

Market commentary continues below...

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"Nuclear generation has remained strong over recent days and all reactors seem to be performing well," he added.

According to National Grid data, UK nuclear power generation stands at 8.6 GW Wednesday morning, almost 18% of the country's total generation mix.

Meanwhile, wind power generation remains healthy at 3.2 GW (or 6.7%) and will reach peak generation levels of 3.6 GW Thursday, while demand continues to ease back on warming temperatures.

In addition, the UK is sending flows of just below 2 GW to France, "limiting losses", said one market source.

Wednesday peak power demand is set at 51.7 GW and will ease back further to 50.50 GW over peak Thursday hours, from Monday's 54.3 GW and Tuesday's 51.5 GW. As a result supply margins are set to swell from 14.3 GW in block 37 Wednesday to 17.7 GW for the same time Thursday.

Milder than average weather has dampened demand for power, with London set to experience temperatures 5 degrees Celsius over the seasonal norm Thursday while Birmingham reaches highs 7 degrees C over the average, according to forecaster CustomWeather.

Weekend temperatures will fall roughly in line with the seasonal average of 3-9 degrees Celsius in London but will turn milder again at the start of next week.

Baseload power for delivery this weekend traded up 35 pence in line with modest gains on the day-ahead to change hands at GBP42.15/MWh midday, while power for next week delivery firmed 65 pence to reach GBP43.75/MWh.

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