Germany’s Uniper does not get enough gas from Russia, and it has to buy gas at high prices for its customers. The company loses nearly a billion kroner a day.
The money flows from the German energy company Uniper, of which the Finnish Fortum is the largest owner.
The company is now losing more than 100 million euros (974 million kronor) per day, according to a source message Monday.
The main reason is that the company is forced to buy gas at high prices for its customers, because Russia does not deliver the promised volumes.
“Since June 14, Uniper has only received parts of its contracted gas shipments from Russia. The loss of deliveries now corresponds to 80 percent,” Uniper wrote in the report.
“To ensure security of supply to customers, Uniper purchases missing quantities from the market at significantly higher prices,” the company wrote.
In recent days, the price of gas (TTF) has been around 300 euros per megawatt-hour, which corresponds to an oil price of about $500 per barrel. It’s six times higher than the price level a year ago, Uniper notes.
Uniper has so far borne the high purchase costs alone, and now it is accumulating a deficit of more than 100 million euros per day, according to the company.
Ordinary consumers and industry are also suffering from high prices. A number of fertilizer producers have reduced or closed capacity, including Yara, which has reduced ammonia production capacity in Europe by 65 percent.
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Gas must be bought at a high price
Russia has reduced its gas shipments since this summer, and Uniper CEO Klaus-Dieter Möbach notes that total losses now amount to five billion euros, or roughly NOK 49 billion.
The systemic nature of energy markets means that as long as energy prices continue to rise in Europe, the need for liquidity will also rise, Maubach says, according to the report.
– When Russia does not fulfill the delivery contracts, we have to buy this gas at a high market price. Uniper has taken the losses almost on its own since deliveries were cut back from June of this year. As of mid-August, the total amounted to more than five billion euros, and it has continued to increase since then, he said.
Struggling with turmoil in the market
Uniper has now benefited from €2 billion of a credit facility that the company has with state bank KfW, thus utilizing the entire €9 billion framework. Now Uniper has asked for an increased limit of four billion euros.
“This is intended to secure the company’s liquidity in the short term,” Uniper wrote.
Uniper notes that the company has to provide security for a large proportion of its gas and electricity sales, and these requirements to provide security have increased sharply due to the turmoil in the energy market.
“Even if these cash payments are only temporary (Uniper will return deposits at the time of delivery), this severely affects Uniper’s liquidity,” the company wrote.
The company has proposed a set of measures that could solve the crisis, and this is being discussed with the German government and the main owner of Fortum. Any crisis assistance must be approved by the European Commission and the company’s shareholders.
– Work at full speed
The Uniper director says that the company is very important as a supplier of gas to domestic energy companies and industrial companies in Germany.
We are working as quickly as possible with the German government to find a permanent solution to this emergency, otherwise Uniper will not be able to perform its systemic function in Germany and Europe, says Maubach.
He notes that the extension of credit requested by Uniper will help secure energy for customers and stabilize energy markets.
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