According to the group, significant interruptions in gas flows would endanger the stability of the German gas system.
(Photo: Reuters)
Dusseldorf Uniper hesitated longer than other members of the industry – now the Düsseldorf-based energy company is also drawing tangible consequences from the Ukraine war. Uniper will not make any new investments in Russia, the company announced on Monday evening. Uniper does not intend to transfer any further funds to the Russian power plant subsidiary Unipro. The process to sell Unipro, which was initiated at the end of last year, will be stopped for the time being and will be resumed as soon as possible.
At the same time, Uniper announced that it would write off the money that the company had invested in the Nord Stream 2 Baltic Sea pipeline. Uniper granted the operating company Nord Stream 2 AG, which now appears to be insolvent, a loan of EUR 695 million, and interest of EUR 292 million was also expected. Now Uniper is making an impairment of the total amount of 987 million euros. According to Uniper, this impairment will have an impact on consolidated earnings in the first quarter of this fiscal year.
In addition, Uniper announced that it would not conclude any new long-term gas supply contracts with Russia. However, they want to stick to existing long-term gas import contracts.
For the company, which emerged from the Eon Group in 2016 and has focused particularly on the gas business, these are drastic steps. However, other major energy companies have already made similar decisions in the past week in light of the Ukraine war. For example, the Wintershall Dea group and the British Shell group have already written off their respective investments in the Nord Stream 2 project. In addition, the British oil multinational BP had announced that it would sell its shares in the Russian oil company Rosneft.
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Now Uniper is following suit. CEO Klaus-Dieter Maubach emphasized: “I feel deep sympathy for all people who are directly or indirectly affected by a war in Ukraine for which there is no justification.” He was particularly against the background of Uniper’s long-standing business relationship with Russia shocked by the unprecedented developments.
Emergency plans for gas delivery stop
Uniper had been under massive pressure in the past few weeks. The stock has lost around 55 percent of its value within a month. Because Uniper is dependent on good relations with Russia in several important business areas and has been hit hard by the country’s war of aggression against Ukraine. On Tuesday morning, however, Uniper shares rose by eight percent after the new announcements.
Uniper’s gas midstream business comprises a portfolio of around 370 terawatt hours (TWh) of long-term gas supply contracts, around 200 TWh of which come from Russia. Uniper and previously Eon have longstanding contractual relationships with the Russian gas giant Gazprom. Uniper has always emphasized that Gazprom is extremely reliable in delivering the agreed gas quantities.
However, should there be a political gas supply stop from Russia, this situation would change for the first time. Such a scenario seems more and more likely: In a speech broadcast on Russian state television on Monday evening, Deputy Prime Minister Alexander Nowak openly threatened for the first time with a gas supply stop through the Baltic Sea pipeline Nord Stream 1. At the same time, the USA are pushing ahead with plans to boycott Russian oil , which is likely to further escalate the crisis.
Uniper states: “In the event of a limited and short-term disruption in gas flows from Russia, Uniper is expected to be able to use its flexible assets, including gas storage facilities, in a way that largely compensates for the disruption.”
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According to the group, significant interruptions in gas flows would endanger the stability of the German gas system and “most likely lead to a declaration of a state of emergency by the Federal Ministry for Economic Affairs and Climate Protection”. The Federal Network Agency would then give all market participants instructions on how to balance the system in good time, and Uniper would support it with its assets in order to stabilize the system. It is assumed that such measures and events would replace the existing contractual agreements.
The latter is extremely important for Uniper. Because the company has long-term gas supply contracts with companies in Germany. However, Uniper has to pay security deposits – so-called margins – in advance for the promised gas deliveries. In other words, it transfers as much money to its customers as they need to buy the agreed amount of gas at the current spot market prices. The transferred money only comes back when Uniper delivers as promised.
Since the spot market gas prices have been extremely high for months, the security deposits that Uniper has to transfer have also increased. The company therefore had to secure around 12 billion euros in credit options at the turn of the year, including from the Kreditanstalt für Wiederaufbau (KfW). Uniper has now announced that it intends to extend the previously unused credit facility.
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