Dusseldorf The Düsseldorf-based energy group Uniper is coming under a lot of pressure in the Ukraine crisis. On Wednesday, the share lost around eleven percent, despite strong figures for the past financial year. As one of the largest European gas suppliers, the company is heavily dependent on Russian supplies. Uniper is also involved in the construction of the Nord Stream 2 gas pipeline, which has been suspended for the time being.
“The situation on the Russian-Ukrainian border worries us deeply,” said CEO Klaus-Dieter Maubach on Wednesday in Düsseldorf when the annual figures were presented.
On Wednesday, Maubach spoke of four areas in which the current political crisis could affect Uniper. The temporary stop of Nord Stream 2 is particularly acute: Uniper is one of five Western companies that have invested in the new Baltic Sea pipeline together with the Russian energy group Gazprom. Gazprom has assumed 50 percent of the costs, the other companies around ten percent each.
Since Tuesday, it has been more questionable than ever whether this investment will ever pay off: the federal government stopped the certification of the finished pipeline on Tuesday. Economics Minister Robert Habeck said in a television interview that evening that a complete end to the project was quite possible.
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This means that Uniper has to worry about a loan of 950 million euros – not to mention the return that the company had hoped for from the project. Apparently there have been no repayments of the loan so far.
Nord Stream 2 as a significant individual risk
The oil company OMV, which is involved in Nord Stream 2 financing with a similar amount as Uniper, announced on Tuesday that it did not see any need to write off the invested amount so far. OMV already received the first loan repayments last year.
Uniper boss Maubach was irritated by this statement from OMV on Wednesday. “I don’t know what OMV meant by the repayments,” he said. “If that related to an actual loan repayment, that would surprise me.” If it were about other payments that OMV was demanding, then he could only say that one was treated in the same way as OMV.
It is still unclear how Uniper will deal with the possible default on repayment. For the past financial year, the company has not recognized any impairment on its balance sheet. “We are currently evaluating what yesterday’s decision means for our claims on Nord Stream 2,” Maubach said on Wednesday. It may also be about depreciation. Uniper wants to be more specific when presenting the next quarterly figures.
In the risk report for the half-year balance sheet for the 2019 financial year, Uniper had already announced that if Nord Stream 2 failed, the company “may have to write down the loan provided for Nord Stream 2” and “would not be able to realize the planned interest income”. The pipeline is a significant individual risk for the Uniper Group.
The former Eon subsidiary Uniper does not want to complain for the time being. Maubach said that the question of whether the Nord Stream 2 decision could trigger legal consequences is not currently being addressed. They are counting on an early diplomatic solution and on the fact that the certification process for the pipeline will then be resumed.
A gas delivery stop could hit Uniper hard
Another area where Uniper could suffer from the current crisis is in the company’s gas imports from Russia through the pipelines it already has in place. Should Russia turn off the gas tap in the course of the dispute, Uniper could be hit hard, because the company buys large quantities of gas from the Russian energy giant Gazprom.
Uniper needs this gas to operate its power plants, but also to fill its gas storage facilities. According to Maubach, in the event of a supply stop, the company could be forced to store gas from other sources in its storage facilities in order to be able to continue to ensure deliveries to its customers, despite the currently high gas prices. That could be expensive for the group.
The high energy price fluctuations of the past few months, which could now continue due to the conflict, are also difficult for Uniper. Maubach said: “A further escalation could lead to more volatile prices and thus to high liquidity requirements for us.” Already at the turn of the year, Uniper had to take out high credit lines in order to be able to deposit the necessary security payments to its customers in its trading business in view of the high electricity prices. According to Maubach, however, the company does not expect to need further credit lines for the time being.
The past fiscal year shows how hard the company is already struggling with the volatile energy markets. Accordingly, adjusted earnings before interest and taxes (EBIT) rose to 1.2 billion euros, an increase of 19 percent over the previous year. Adjusted net income was 906 million euros, after 774 million euros in the previous year. Nevertheless, the bottom line is a loss of 4.1 billion euros, because Uniper has had to provide increased security for its business in recent months due to the sharp rise in electricity and gas prices.
A longer-term delivery stop would of course be even more problematic. However, Uniper has not yet assumed that things will go that far. “Over the past 50 years, Gazprom has always been a reliable partner for us, who delivered as promised,” said Maubach.
In addition, political statements from both Russia and Europe did not indicate that there would be any interruptions in delivery. Russian President Vladimir Putin said on Tuesday that Russia wanted to continue supplying raw materials to world markets.
Controversy about the right path to security of supply
Against the background of the low German gas reserves and the threat of a delivery stop scenario this winter, mandatory gas reserves have recently been discussed more and more frequently. The federal government should think about obliging companies with gas storage facilities to keep certain minimum amounts of gas available, the Bloomberg news agency recently reported. And the European Commission is also developing plans for strategic gas reserves.
However, without a political obligation or a gas supply stop, Uniper is unlikely to start feeding gas into its storage facilities again any time soon. A spokesman for the company said: “There is little incentive to start feeding in now. This is a rational, economic question. These storage systems only work based on supply and demand – they are not tasked with ensuring supply.”
However, the recently particularly empty storage facilities have reignited the discussion about Germany’s dependence on Russian natural gas. In a colder winter, a gas supply stop from Russia could not have been compensated for from other sources.
Economics Minister Robert Habeck said on Tuesday evening that Germany must learn the lesson that last winter had taught the country and announced: “We will take further measures to increase energy independence and security of supply in Germany.” Habeck emphasized that a faster Expansion of renewable energies contribute to exactly this goal.
Uniper boss Maubach, however, imagines security of supply differently. He said on Wednesday: “Ambitious climate goals are one thing, the realities of our energy system are another.” It’s good that Germany is getting out of coal-fired power generation. This requires all the more flexible and reliable energy sources. Natural gas is an important technology in this context.
Maubach demanded that Germany determine the important framework conditions for investments in gas-fired power plants, which are urgently needed for the energy transition, as quickly as possible. Only then can the goals of the federal government be achieved.
Sanctions against Uniper’s trading partners
However, the risks posed by the current Russian conflict do not only affect Uniper domestically. The group also has a large business in Russia. The group announced that sanctions against Russian companies could possibly also affect business partners of Uniper or the Russian utility Unipro, which belongs to Uniper. Also, some sanctions targeting the Russian financial system could affect cross-border payment flows.
Above all, however, it is becoming increasingly difficult to maintain good relations with Moscow. Until recently, Uniper and other German companies had held on to a planned annual meeting with Russian President Vladimir Putin on March 3, which was primarily about economic relations between the two countries. On Tuesday, the Eastern Committee, which organizes the meeting, announced that the meeting would not take place “due to deadlines”.
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