Uniper Suffers from Loss of UK Capacity Market

German energy group Uniper has reported a slump in adjusted pre-tax earnings (Ebit) to €203 ($224) mn in the first nine months of 2019, down from €386mn a year before.

The gas and electricity firm said in its quarterly report on November 12 that the decline was anticipated, citing the loss of earnings from the UK capacity market, suspended a year ago, as well as lower power output.

The capacity market, which pays utilities for making capacity available regardless of whether it is used, is now set to be revived, however, after getting the all clear from the European Commission following a probe into whether it had put some demand response operators at a disadvantage. Funds withheld pending the outcome of this investigation can now be distributed to Uniper and others.

On the back of this development, Uniper has revised its full-year projection for Ebita to €750-950mn, up from €550-850mn previously. It has also reaffirmed plans to pay €390mn in dividends for 2019.

“In our business, the third quarter is usually the weakest,” CFO Sascha Bibert said. “But a strong fourth quarter lies ahead, one that will have a number of positive developments for our business.”

Beyond the capacity market’s revival, Uniper expects to gain from price and volume effects at its hydroelectric and nuclear power plants, and optimised earnings from its gas business. “We also expect our cash flow to be significantly positive and therefore our debt to be lower,” Bibert said.

Fortum takeover nears

Finland’s Fortum is looking to acquire an extra 20.5% of Uniper for $2.5bn, raising its ownership to 70.5%. But the takeover was opposed by Uniper’s management, and the top brass has left or is leaving. Fortum told NGW November 11 that only two approvals were needed: one from Russia and one from the US.

In Russia, Uniper owns a gas-fired power plant in Siberia which also has a "strategic" water distribution business supplying a small number of customers in the community. That is worth about €70,000 yr and could theoretically be outsourced to a Russian entity. The power plant itself is nt considered strategic, in Russian law.

In the US, Uniper is a trader. The US approved Fortum's minority acquisition of 47% from EON and some minority shareholders in 2017 and so this is likely to be just a matter of time.

Fortum said that the Finnish state backed company fully supported Uniper's gas strategy, which includes its investment in the Nord Stream 2 gas pipeline, as European gas production declines. "We fully understand the rationale: the importance for natural gas will increase. It will be the main provider of flexibility as the share of intermittent renewables increases, especially where there is not enough hydro." The spokesperson added that Fortum knew the challenges that NS2 posed, particularly the hostility to the project in eastern Europe.

On November 8, the Polish anti-trust agency said November 8 it was not finished investigating the five European gas companies, of which Uniper is one, for their financing of the Russian-owned venture. It imposed a €40mn fine on one of them, the Swiss subsidiary of French Engie, which Engie has said it will not pay.