Uniper secures €10bn of credit as gas prices surge

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Uniper, one of Germany’s biggest utilities, has been forced to seek €10bn of financing to avoid a cash crunch after gas supplies from Russia to Europe slowed, causing prices to surge.

The company said it had secured €8bn of credit from its majority shareholder Fortum, a Finnish power company, and €2bn from state bank KfW after last month’s rise in gas and electricity prices triggered demands for cash to cover derivative positions used to hedge contracts with customers.

In the run-up to Christmas, Europe’s wholesale natural gas price surged almost 100 per cent to a record above €180 per megawatt hour as buyers rushed to secure supplies. This fed into higher power prices across the continent.

It is the second time in less than six months that Uniper has been forced to seek additional financing, underlining the fallout that soaring energy costs are having on utilities and commodity traders, which have also been hurrying to secure additional liquidity.

Uniper said it had secured the credit line, part of which has already been used, from Fortum on December 22 and had agreed further financing from KfW on January 4 as a “back-up facility in case of further extreme commodity market developments”.

KfW said it had granted Uniper the credit line to secure “liquidity in this special situation on the government’s request”.

A German government official said that if the KfW loan was used, a “bonus waiver by the board of management has been agreed with the company”.

That has not happened but the company has fully drawn down on an existing €1.8bn credit facility provided by its core group of lenders.

“Higher commodity prices lead to temporarily higher margining requirements,” Uniper said. “At the same time, higher commodity prices increase the value of Uniper’s underlying gas and power assets. Therefore, Uniper’s structural earnings prospects are not adversely impacted by higher prices.”

Düsseldorf-based Uniper, which has about 11,7000 employees, was established in 2016 as a spin-off of the fossil fuel assets from the German energy company Eon under state pressure to decarbonise power sources.

It is one of Europe’s largest electricity generators with 34 gigawatts of capacity and is also a major trader of gas and power. The company provides natural gas and power supplies to about 600 clients in Germany and neighbouring countries, ranging from industrial customers and municipalities to regional distributors.

It was one of the five companies to back Nord Stream 2, the $11bn pipeline across the Baltic Sea that will allow Russia’s Gazprom to send 55bn cubic metres of gas to Europe a year, bypassing Ukraine.

The company is dependent on gas deliveries from Russia to supply its customers. Like its competitors, Uniper uses derivatives to hedge against price swings in commodity markets and lock in margins. This typically involves selling futures contracts linked to European gas and power prices.

As prices have soared, the losses on these contracts have increased, requiring Uniper to make margin payments to brokers and exchanges.

In November, the company reported a loss of almost €4.8bn for the first nine months of 2021 because of mark-to-market losses on derivative contracts. At the time, the company said it had hedged 90 per cent of its German power for 2022 at €49 per megawatt hour and 90 per cent for 2023 at €51.

Shares in Uniper, which hit a record high at the end of last month, eased 2.3 per cent to €41 on Wednesday.

Commodity bankers said Uniper was not the only company trying to secure additional liquidity in the face of unprecedented volatility in natural gas prices, which have swung violently since Christmas.

With European gas storage levels 20 per cent below seasonal norms, the market remains fragile and exposed to further shocks, according to analysts.

Fortum, which owns 76 per cent of Uniper, described the new credit facilities as “precautionary measures to secure additional liquidity and financial flexibility primarily for the winter season”.

“During 2021, European gas prices have risen up to 1,000 per cent and have, together with power prices, been at unprecedented levels in December. Under these market conditions, Uniper’s focus remains on securing reliable deliveries to its customers and honouring its commitments,” it said.

The Federal Ministry for Economic Affairs and Climate Protection said the KfW credit was a “hedging measure” and that loans from the state bank “serve precisely this purpose of providing companies with additional liquidity and are generally available to all sectors”.

Additional reporting by Olaf Storbeck in Frankfurt

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Fonte Notícia