Uniper says it will overcome Russian gas issues by 2024

Bloomberg

Germany utility Uniper SE said it will overcome the problems generated by Russian gas cuts by 2024 at the latest.
The company — which was rescued by the German government last year after the energy crisis put it on the brink of collapse — said it may continue to face high gas replacement costs in the next years, according to an earnings report released on Friday. The financial aid from the state to support liquidity needs “will be phasing out over time.”
“We must be aware that in future quarters, too, Uniper’s earnings will depend to a significant extent on the amount of gas replacement procurement costs. These costs, in turn, depend largely on the price of gas,” said Chief Financial Officer Tiina Tuomela, without offering details on the company’s strategy to handle contracts with Russia’s Gazprom.
Once Germany’s largest importer of Russian gas, Uniper was among the companies hardest-hit by the war in Ukraine, requiring a mammoth rescue package from the government that led to its nationalisation late last year.
Yet a mostly mild winter and strong inflows from other countries lowered gas prices by more than 80% from their peaks last summer. That has helped Uniper reduce the cost of replacing curtailed Russian supplies, and more than halved its expected losses.
Europe still faces the prospect of gas shortages this year unless it further curbs demand, the International Energy Agency warned earlier this week, while other energy giants are preparing for higher gas prices to linger.
The company provided only a vague outlook for 2023 given the market uncertainties. Continuing high volatility in gas prices makes it “very uncertain” to define if there will be a need for additional equity injection, Tuomela said.
Uniper said it expects an increase in adjusted earnings before interests and taxes this year compared to 2022. The company’s power generation should benefit from “fundamentally higher prices,” said Tuomela. It recorded an adjusted loss before interests and taxes of €10.9 billion for 2022.
The utility is in the midst of a management shakeup, and the new executives will have to carry out a series of asset sales to comply with the conditions imposed by the European Union for the government’s aid deal. Divestments are expected to end by the end of 2026, Uniper said in a presentation.
Uniper has closed a deal with a Russian buyer for its unit Unipro, but the likelihood of winning Russian government consent is uncertain. The company decided to deconsolidate the Russian business, which has led to a loss of €4.4 billion.
One of the key challenges Uniper faces is to develop a more diversified business strategy. Environmental groups have criticized the company’s fossil-fuel based model that is still reliant on natural gas.

European natural Gas slumps Below €50 for first time in 17 months
European natural gas futures slumped below €50 for the first time in 17 months as the region’s worst energy crisis in decades recedes, but with signs that further price declines are unlikely.
Prices have plunged by more than 80% from their August peak when Russia’s gas cuts hit Europe with about $1 trillion in costs, hammering the region’s economy and pushing inflation to the highest in decades.
However, analysts question whether the decline in prices will persist much further. With the end of winter approaching and heating demand receding, lower prices could make gas more economical for power generation in Europe than alternatives such as coal.
“Gas prices have fallen into the fuel switching range suggesting that it is now more profitable to run the highest efficiency gas plants in comparison to the lowest efficiency coal plants,” Stefan Ulrich, an analyst at BloombergNEF, said.
Demand is also picking up from India to China. Prices could also rise if there is extended cold weather before the end of winter or if there are supply disruptions.