OMV, Verbund Near Austrian Gas Contract Solution

Austrian energy firms OMV and Verbund are very close to ending a two-year dispute over a gas contract, Verbund said August 24, obliged to make an announcement as the solution will have a material impact on its earnings. The gas was supplied by OMV subsidiary Econgas to a plant at Mellach owned by the power plant operating subsidiary, Verbund Thermal Power GmbH & Co KG in Liqu. 

Verbund said the company had to raise the pre-tax earnings outlook for the second half of 2016 from a forecast €840mn to about €960mn; and a group result of about €370mn (previous forecast: €270mn), assuming normal wind and hydro levels. The 2016 adjusted group result will remain unchanged at about €290m as it is defined as a one-off measure, it said.

The gas supply contract was uneconomic from Verbund's point of view as the price of electricity was too low. Details of the solution that the two sides have privately reached are not public.

But announcing that the dispute was virtually over they also said they would work more closely together on facing the new energy future – a recognition that the old ways of working would not fit in with today's lower-carbon economy. The cooperation will focus on supplying power, innovative energy services, more flexible concepts for producing electricity and meeting power demand, along with joint activities in the hydrogen sector.

They said: "at the heart of the co-operation will be supplying electricity to OMV sites, innovative energy services such as more flexible concepts for producing electricity and meeting demand, as well as the joint evaluation of concepts for producing and distributing hydrogen."

Mellach power plant (Credit: Verbund)

French Engie and Germany's E.ON and RWE are among Europe's bigger utilities that have restructured in order to better address decentralised generation, renewables and the smarter distribution of energy, separately from their fossil-fuel production and conventional power-generation businesses. Grid access rules in a number of countries prioritise green electricity at the expense of conventional generation, which is correspondingly under-used, while the project lenders still expect repayments.

William Powell