German Uniper Raises 2020 Guidance

German utility Uniper reported August 11 positive earnings in Q2 and has raised its mid-point guidance for the year to $900mn following a better-than-expected first half. It posted a pre-tax profit (Ebit) of €691 ($815)mn, more than double last year's €308mn, and said that the much larger revenues expected in Q4 this year would more than offset the possibly negative result of Q3.

Adjusted net income, which largely tracked adjusted Ebit, stood at €527mn, almost three times last year's €189mn. Economic net debt rose by €646mn from the figure at year-end 2019 to just under €3.3bn owing to the dividend and slightly higher provisions for pensions. It expects to pay out €500mn in dividends this year.

Uniper CFO Sascha Bibert said: “Our positive performance from the first quarter continued, albeit, as anticipated, not at the previous pace. Against this backdrop, we can narrow our forecast range for adjusted Ebit and adjusted net income and even raise its midpoint slightly."

The first half benefited in particular from the optimisations achieved in the gas business in the first quarter, but also from the UK capacity market payments, which were suspended for most of last year but have been flowing this year.

At the European Generation segment, Uniper’s hydro and nuclear power stations generated less, but sold the output at higher prices. Earnings at the Russian power segment Unipro were lower year on year, owing to lower day-ahead demand from oil and gas companies and from neighbouring countries, depressing prices.  

Beryozovskaya 3's return to service has been delayed by Covid-19 restrictions among other problems and is now not expected until the first half of 2021. However, CEO Andreas Schierenbeck told analysts that the Russian business contributed a third of Uniper's income and was very stable and helped to ensure its BBB credit rating.

When asked if Unipro might be disposed of, to suit Fortum's lower carbon ambitions. he replied that Russia was signatory to the Paris Agreement and it was up to Russia to decide how to reach those agreement's targets. Fortum and Uniper are working on their strategic alignment, following the Finnish state concern's acquisition of a large majority stake earlier this year.

The upper and lower houses of parliament have put the country’s phase-out of coalfired power generation into law but more consents are needed, including from the European Union, he said. Uniper however reaffirmed its Empower Energy Evolution decarbonisation strategy, which calls for its entire power generation business in Europe to be carbon-neutral by 2035. 

Schierenbeck said that this strategy is making progress. In the last few months it has "forged and expanded strong partnerships, such as with Siemens Gas and Power and with General Electric, to help establish the urgently needed sustainable hydrogen economy.” 

He told analysts that green hydrogen would be very expensive and wasteful if used in power generation, although the few billion euros paid to renewable generators not to generate each year, he said, showed there was some spare capacity in the system. But that blue hydrogen could be used in industry initially, with the carbon either pyrolised (turquoise hydrogen) or captured and sequestered or used (blue hydrogen). At present, industry is only using grey hydrogen, where the CO2 is emitted into the atmosphere as a waste product.

As an asset owner and commodity trader, transporter and storer, the company is still examining options for entering the hydrogen business, while not doubting it would become a very important commodity both nationally and at a European Union level.

The Russian Nord Stream 2 pipeline, yet to be completed, is generating interest payments, he said. The company made its final payment to Gazprom in March, and he expects to continue collecting. However, the US sanctions have impacted its progress. The worst-case scenario would be if sanctions halted the pipeline's construction indefinitely, in which case the loan repayment scheme might not continue. "But we are not expecting that," he said. Nord Stream 1 (pictured) was completed under a different regulatory context.