Reduced gas deliveries from Russia led to Uniper recording a major drop in adjusted EBIT to –€564mn in the first half of 2022.
The decline is in sharp contrast to the €580mn recorded in the first half of 2021. In a statement, the German utility said it doesn’t expect to return to profit until 2024.
As part of new stabilisation measures, Uniper has secured a €9bn credit line from KfW to secure short to medium-term liquidity, seen the German government take a 30% ownership stake, increasing capital by around €267mn, and Fortum will hold a 56% stake.
Uniper has been forced to buy gas on spot market at high prices during the crisis, and extremely cold weather in the prior-year period also adversely affected the international portfolio in the first half.
Earnings at the European Generation segment were likewise significantly below the prior-year period.
As in the prior year, this is particularly attributable to an increase in the fair value measurement of provisions for carbon allowances, which are offset by hedges that will not be settled until the fourth quarter.
In addition, the Nordic hydropower business recorded significantly lower earnings owing to price discrepancies between Sweden’s system prices and the delivery prices in the relevant price zones.
Lower income from the UK capacity market, higher delivery, and procurement costs for hard coal as part of the Dusseldorf-based company’s transitional strategy to diversify its coal procurement, and the disposal of Schkopau power station in the fall of 2021 likewise adversely affected adjusted EBIT.
Earnings at the Russian Power Generation segment were significantly above the prior-year level, as a result of the recommissioning of unit 3 at Beryozovskaya power station in May 2021 and the associated income from the capacity mechanism along with higher sales volume and prices in the Siberian price zone.
The expiration of long-term capacity payments for two generating units at Surgutskaya power station was an adverse factor.
Adjusted net income, which largely tracks adjusted EBIT, stood at –€359mn after six months, significantly below prior-year adjusted net income of €485mn.
The IFRS net result amounts to a loss of more than €12bn. Slightly more than half of it (€6.5bn) is related to anticipated future impact from gas curtailments.
Additionally, the IFRS Net result reflects impairments of total €2.7bn allocated to Nord Stream 2 loan and goodwills of the segments Global Commodities and Russian Power Generation. The remaining part is related to fair value valuation of hedge derivatives, which will be later on offset by positive gains on the underlying assets.
Economic net debt rose significantly from €324mn to €2,057mn. The main reason was negative cash flow in conjunction with a reduction in Russian gas deliveries along with measures to improve liquidity in the gas and emissions-allowance businesses in late 2021. Operating cash flow was also adversely affected by changes in working capital that resulted mainly from higher prices on commodity markets.
An earnings forecast for the current financial year still cannot be issued within an adequate range because of the volatile environment. However, Uniper expects to record negative earnings owing to the significant reduction in Russian gas deliveries.
Uniper CEO Klaus-Dieter Maubach said Uniper has for months been playing a crucial role in stabilising Germany’s gas supply, at the cost of billions in losses resulting from the sharp drop in gas deliveries from Russia.
On July 22, the federal government, Uniper, and Fortum agreed to a package of measures to stabilise Uniper. ”This will prevent a chain reaction that would do much more damage. Our top priority now is to swiftly implement the stabilisation package,” he said.
Uniper CFO Tiina Tuomela said despite the adverse impact from Russian gas supplies, the business was solid, and power output at the prior-year level.
”This demonstrates that our power plants are playing an important role in supplying people and industry. The volatile environment doesn’t currently permit an earnings forecast within an adequate range for the current financial year. However, we expect to record negative earnings owing to the significant reduction in Russian gas deliveries. We expect an earnings improvement in 2023 and aim to leave the loss zone beginning in 2024.”
Uniper said it will significantly reduce remaining risks from 2024 onward by adjusting its gas portfolio on the supply and sales side over time.
Gas futures have soared to €234.50Mwh, a 10-fold increase on 2021. The prospect of an unprecedented total shutoff is fueling concern about gas shortages, still higher prices, and economic impacts.
The IMF believes a reduction of up to 70% in Russian gas could be managed in the short term by accessing alternative supplies and energy sources and given reduced demand from previously high prices.
”Governments must boost efforts to secure supplies from global LNG markets and alternative sources, continue to alleviate infrastructure bottlenecks to import and distribute gas, plan to share supplies in an emergency across the EU, act decisively to encourage energy savings while protecting vulnerable households, and prepare smart gas rationing programs,” it notes.
”This is a moment for Europe to build upon the decisive action and solidarity displayed during the pandemic to address the challenging moment it faces today.”