German company Uniper SE said it will overcome the problems caused by gas cuts in Russia by 2024 at the latest.
The company, which was bailed out by the German government last year after the energy crisis brought it to the brink of collapse, said it could continue to face high gas replacement costs in the coming years. The company also took a 4.4 billion euro ($4.7 billion) hit from the deconsolidation of its Russian business, according to its earnings report.
“We must be aware that in the coming quarters, too, Uniper’s earnings will depend to a large extent on the amount of gas replacement acquisition costs. These costs, in turn, depend to a large extent on the price of gas ,” said CFO Tiina Tuomela, without offering details on the company’s strategy for managing contracts with Russia’s Gazprom.
Once Germany’s biggest importer of Russian gas, Uniper was one of the companies hardest hit by the war in Ukraine, requiring a huge government bailout that led to its nationalization at the end of the year past
However, a mostly mild winter and strong inflows from other countries sent gas prices down more than 80% from last summer’s highs. This has helped Uniper reduce the cost of replacing reduced Russian supplies and more than halve expected losses.
Europe still faces the prospect of gas shortages this year unless it curbs demand further, the International Energy Agency warned earlier this week, as other energy giants prepare for the gas prices extend.
Sale of assets
The company is in the midst of a management review, and the new managers will have to carry out a series of asset sales to meet the conditions imposed by the European Union for the government aid agreement. The divestments are expected to be completed by the end of 2026, Uniper said in a filing.
Uniper has closed a deal with a Russian buyer for its Unipro unit, but the likelihood of winning Russian government consent is uncertain, Tuomela said on a call with analysts, without disclosing the valuation of the sale.
The company only provided a vague forecast for 2023 given market uncertainties. Continued high volatility in gas prices makes it “highly uncertain” whether an additional capital injection will be needed, Tuomela said on a call with analysts.
Uniper said it expects adjusted earnings before interest and taxes to rise this year compared with 2022. The company’s power generation should benefit from “fundamentally higher prices,” Tuomela said. It posted an adjusted loss before interest and tax of 10.9 billion euros for 2022.
One of the main challenges facing Uniper is developing a more diversified business strategy. Environmental groups have criticized the company’s fossil fuel-based model that still relies on natural gas.
