Uniper Back In Red (Update on Gazprom Arbitration)
Update on details of ongoing Gazprom arbitration at end in italics
Germany's Uniper returned to the red in its 1H results, reported August 7. It also cited an ongoing arbitration case involving Gazprom over contractual gas imports but defended its right to partner Gazprom in the Nord Stream 2 pipe project against "outside political interference."
The German energy firm, which is 47%-owned by Finland’s Fortum, reported a €522mn ($603mn) net loss, contrasting with its €1.06bn profit in 1H2017; the loss was primarily from "non-cash-effective marking to market of commodity derivatives." Earnings at Uniper’s gas business though recovered during April to June after a comparatively weak start to the year, it noted, and was now well-positioned.
“We’re looking for new growth opportunities at all stages of the global gas value chain. Gas is a growth market worldwide. And Uniper is well positioned,” added CFO Christopher Delbruck.
Adjusted earnings before interest and tax (Ebit) in 1H2018 declined by 35% year on year to €601mn. Of those, Uniper's European generation contributed €372mn, up 31%; its commodities business €186mn, down 29%; while international power yielded €142mn, down 70%.
CEO Klaus Schafer was absent from the call; the company disclosed a week ago that he is being treated for cancer, and this would take several months; his colleagues wished him well.
'No outside political interference, please'
Delbruck warned against further fragmentation of European energy policy, whereby each EU state pursued its own narrow national objectives, but also criticised US 'interference'.
The Nord Stream 2 pipe project, of which Uniper is one of Gazprom’s five western financing partners, would represent an important gas transport route, he said. Uniper makes, or will make, use of gas supplies from the Netherlands, Azerbaijan, Qatar and the US because it couldn’t afford to over-rely on a single gas source: “Europe’s decision about where it wants to procure its gas certainly won’t benefit from outside political interference," he said.
“Relations with Russia are obviously not always harmonious. You probably know that we’re now again in arbitration proceedings with Gazprom to renegotiate the terms of our long-term procurement contracts. Here, we’re helped by the fact that we ourselves are an independent, confident gas company that negotiates with our partners as an equal,” said Delbruck.
In late July, Uniper decided to completely redesign an existing coal-fired power plant at Scholven, near Gelsenkirchen in Germany's Ruhr industrial heartland, to a combined heat and power plant (CHP) fuelled with natural gas in stages between now and end-2022. An exit from coal in Germany would not be cost-free, added the CFO, but compensation could be spread over a long time and would present a real contribution to CO2 reduction.
'Don't force us from France'
But he urged France not to push through plans to make the country's power plants coal-free by end-2021, saying that was too short a transition. Delbruck said that Uniper has two 600 MW coal-fired plants in France with 250 staff, with a further 900 MW of other plants: "If the government pushes through its plans without reaching a consensus with the companies affected, the commercial existence of our entire business in France would be endangered.... In this case, we’d have to think seriously about Uniper’s future in France."
Compared with the prior-year period, Uniper no longer had some €500mn of earnings in 1H2018 that it had in the prior-year period, due to its divested stake in the Yuzhno-Russkoye gas field and from the generating units decommissioned at Maasvlakte 1 and 2 in the Netherlands and Oskarshamn 1 in Sweden in summer 2017; it also benefited from an insurance payment from fire damage at its Berezovskaya 3 power plant in Russia in 1H2017 which did not recur this year.
Uniper’s outlook for full-year 2018 adjusted Ebit of between €0.8bn and €1.1bn is unchanged. Meanwhile Fortum CFO Markus Rauramo joined Uniper’s supervisory board, effective July 30.
Regarding the ongoing Gazprom arbitration case, a Uniper spokesperson told NGW around midday August 7: "The topic that an arbitration has been triggered by Gazprom is not new. We had already communicated this on occasion of our annual press conference in March 2018. In principle, our long-term contracts stipulate the right for arbitration, so it is not unusual for Gazprom to make use of this right. At the same time Uniper is entitled to pursue counter-claims. At this early point of time in the process we cannot go into detail on the points under discussion."